Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
EOG Resources Inc., profitability ratios
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
Between 2015 and 2019, a significant financial turnaround occurred, characterized by a transition from substantial operational losses to consistent profitability. The most pronounced recovery took place between 2016 and 2017, during which the organization shifted from negative margins and returns to positive performance indicators.
- Gross Profit Margin
- A consistent upward trend is observed, with the margin rising from 75.13% in 2015 to a peak of 85.72% in 2018, before settling at 85.01% in 2019. This steady growth indicates a sustained improvement in the efficiency of direct production costs relative to revenue.
- Operating and Net Profit Margins
- Both metrics exhibit a sharp recovery from deep negative territory. The operating profit margin improved from -76.35% in 2015 to a peak of 25.87% in 2018. Similarly, the net profit margin moved from -51.66% in 2015 to a high of 23.04% in 2017. A slight moderation in these margins occurred in 2019, with operating and net margins ending at 21.28% and 15.74%, respectively.
- Return on Equity (ROE) and Return on Assets (ROA)
- Return metrics mirrored the overall profitability recovery. ROE climbed from -34.96% in 2015 to a peak of 17.66% in 2018, while ROA increased from -16.77% in 2015 to 10.08% in 2018. Both ratios experienced a decline in 2019, with ROE decreasing to 12.64% and ROA to 7.37%, suggesting a reduction in the efficiency of capital and asset utilization toward the end of the period.
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Gross Profit Margin
EOG Resources Inc., gross profit margin calculation
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Gross profit margin = 100 × Gross profit ÷ Operating revenues and other
= 100 × 14,775,578 ÷ 17,379,973 = 85.01%
The financial performance from 2015 to 2019 is characterized by a substantial increase in both absolute profitability and operational efficiency. After a slight contraction in 2016, a strong growth trajectory was established, leading to a significant expansion of the gross profit margin that peaked in 2018 before stabilizing.
- Revenue and Gross Profit Expansion
- Operating revenues grew from 8.76 billion in 2015 to 17.38 billion in 2019. Gross profit followed a similar growth pattern, rising from 6.58 billion in 2015 to 14.78 billion in 2019. The most pronounced acceleration occurred between 2017 and 2018, where gross profit increased by approximately 60% in a single fiscal year.
- Gross Profit Margin Trend
- A consistent improvement in margin efficiency is observed from 2015 through 2018. The gross profit margin rose from 75.13% to 85.72%, reflecting an enhanced ability to convert revenue into gross profit. This upward trend suggests effective cost management or favorable shifts in pricing dynamics during this period.
- Recent Performance Stabilization
- The period ending December 31, 2019, indicates a plateau in growth. Operating revenues remained nearly flat, with a marginal increase to 17.38 billion, and the gross profit margin experienced a slight decrease to 85.01%. This suggests that the aggressive margin expansion observed between 2016 and 2018 had reached a point of stabilization.
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Operating Profit Margin
EOG Resources Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Operating income (loss) | 3,699,011) | 4,469,346) | 926,402) | (1,225,281) | (6,686,079) | |
| Operating revenues and other | 17,379,973) | 17,275,399) | 11,208,320) | 7,650,632) | 8,757,428) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 21.28% | 25.87% | 8.27% | -16.02% | -76.35% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Operating profit margin = 100 × Operating income (loss) ÷ Operating revenues and other
= 100 × 3,699,011 ÷ 17,379,973 = 21.28%
2 Click competitor name to see calculations.
The operational performance between 2015 and 2019 is characterized by a significant financial turnaround, transitioning from deep operating losses to sustained profitability.
- Revenue Trajectory
- Operating revenues experienced a slight decline in 2016 before entering a period of rapid growth. Revenues increased from approximately 7.65 billion US dollars in 2016 to 17.38 billion US dollars by 2019, indicating a substantial expansion of the top line over the analyzed period.
- Operating Income Recovery
- A sharp reversal in operating results is evident, as the company moved from a loss of 6.69 billion US dollars in 2015 to a profit of 3.70 billion US dollars in 2019. Operating income crossed into positive territory in 2017 and reached a peak of 4.47 billion US dollars in 2018, before experiencing a moderate contraction in the final year.
- Operating Profit Margin Analysis
- The operating profit margin reflects a dramatic recovery in operational efficiency. The margin rose from a low of -76.35% in 2015 to a peak of 25.87% in 2018. While the margin contracted to 21.28% in 2019, the overall trend demonstrates a successful transition from high operational deficits to a strong, positive profitability profile.
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Net Profit Margin
EOG Resources Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) | 2,734,910) | 3,419,040) | 2,582,579) | (1,096,686) | (4,524,515) | |
| Operating revenues and other | 17,379,973) | 17,275,399) | 11,208,320) | 7,650,632) | 8,757,428) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 15.74% | 19.79% | 23.04% | -14.33% | -51.66% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Net profit margin = 100 × Net income (loss) ÷ Operating revenues and other
= 100 × 2,734,910 ÷ 17,379,973 = 15.74%
2 Click competitor name to see calculations.
The financial performance from 2015 to 2019 is characterized by a significant recovery from substantial losses to a period of sustained profitability, accompanied by a marked increase in operating scale.
- Profitability Recovery and Transition
- A sharp reversal in profitability is observed between 2015 and 2017. The net profit margin shifted from a deep deficit of -51.66% in 2015 to a positive 23.04% in 2017. This transition coincides with net income moving from a loss of 4.52 billion US dollars to a gain of 2.58 billion US dollars within a two-year window.
- Revenue Expansion
- Operating revenues and other income demonstrated a strong upward trajectory following a dip in 2016. Revenues increased from 7.65 billion US dollars in 2016 to 17.38 billion US dollars by 2019, representing more than a twofold increase in top-line growth over three years.
- Margin Compression Trends
- While the company maintained positive net income through 2019, a downward trend in the net profit margin is evident following the 2017 peak. The margin declined from 23.04% in 2017 to 19.79% in 2018, and further to 15.74% in 2019. This indicates that although revenues continued to rise or stabilize, the rate of net income growth slowed, leading to reduced efficiency in converting revenue into profit.
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Return on Equity (ROE)
EOG Resources Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) | 2,734,910) | 3,419,040) | 2,582,579) | (1,096,686) | (4,524,515) | |
| Stockholders’ equity | 21,640,716) | 19,364,188) | 16,283,273) | 13,981,581) | 12,943,035) | |
| Profitability Ratio | ||||||
| ROE1 | 12.64% | 17.66% | 15.86% | -7.84% | -34.96% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 2,734,910 ÷ 21,640,716 = 12.64%
2 Click competitor name to see calculations.
The financial trajectory between 2015 and 2019 is characterized by a significant recovery from substantial net losses to consistent profitability, which is reflected in the sharp reversal of the return on equity (ROE) metric.
- Return on Equity Trend
- A volatile but generally upward recovery pattern is observed. The ROE started at a significant deficit of -34.96% in 2015, improved to -7.84% in 2016, and transitioned into positive territory by 2017 with a return of 15.86%. The metric peaked in 2018 at 17.66% before experiencing a moderate decline to 12.64% in 2019.
- Net Income Performance
- The shift in ROE is directly correlated with the recovery of net income. Heavy losses of over 4.5 billion USD in 2015 were reduced in 2016, followed by a turnaround in 2017 where net income reached 2.58 billion USD. Profitability peaked in 2018 at 3.42 billion USD before settling at 2.73 billion USD in 2019.
- Equity Base Expansion
- Stockholders' equity exhibited consistent year-over-year growth throughout the five-year period. The equity base increased from 12.94 billion USD in 2015 to 21.64 billion USD by 2019. This steady expansion of the equity denominator suggests a strengthening of the company's capital position, which tempered the ROE percentage in 2019 despite the company remaining profitable.
The data indicates a successful transition from a period of financial distress to a state of operational stability. While the 2019 ROE shows a slight decrease compared to the 2018 peak, the overall trend demonstrates an improved capacity to generate returns on invested capital relative to the mid-decade lows.
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Return on Assets (ROA)
EOG Resources Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income (loss) | 2,734,910) | 3,419,040) | 2,582,579) | (1,096,686) | (4,524,515) | |
| Total assets | 37,124,608) | 33,934,474) | 29,833,078) | 29,459,433) | 26,975,244) | |
| Profitability Ratio | ||||||
| ROA1 | 7.37% | 10.08% | 8.66% | -3.72% | -16.77% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 2,734,910 ÷ 37,124,608 = 7.37%
2 Click competitor name to see calculations.
The financial performance from 2015 to 2019 reflects a significant transition from substantial losses to a period of consistent profitability, coinciding with a steady expansion of the total asset base.
- Net Income Trajectory
- A sharp recovery is observed starting in 2016, where losses were reduced from approximately 4.52 billion USD to 1.10 billion USD. The company achieved positive net income by 2017, reaching a peak of approximately 3.42 billion USD in 2018 before experiencing a moderate contraction to 2.73 billion USD in 2019.
- Asset Base Expansion
- Total assets demonstrated a consistent upward trend throughout the period, growing from 26.98 billion USD in 2015 to 37.12 billion USD by 2019. This indicates a continuous investment in the resource base during the period of operational recovery.
- Return on Assets (ROA) Analysis
- The ROA mirrors the volatility and recovery of net income. A severe negative ROA of -16.77% in 2015 improved to -3.72% in 2016, signaling a reduction in asset inefficiency. Profitability was restored in 2017 with an ROA of 8.66%, which further improved to a peak of 10.08% in 2018. By 2019, the ratio declined to 7.37%, indicating that the growth in the asset base exceeded the growth in net income during that fiscal year.
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