Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Profitability Ratios (Summary)
HP Inc., profitability ratios
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
- Gross Profit Margin
- The gross profit margin demonstrated a declining trend over the analyzed period. It started at 23.08% in 2013, slightly increased to a peak of 23.96% in 2015, but then experienced a significant drop in 2016 to 18.65%, continuing a modest decline to 18.25% by 2018. This suggests a reduction in the efficiency of production or increased costs relative to revenue.
- Operating Profit Margin
- The operating profit margin showed some variability but remained relatively stable overall. It increased slightly from 6.35% in 2013 to 6.45% in 2014, declined to 5.29% in 2015, then recovered to 7.36% in 2016. The margin experienced minor fluctuations thereafter, ending slightly lower at 6.95% in 2018 compared to the earlier years. This indicates moderate control over operating expenses despite fluctuations in gross profit margins.
- Net Profit Margin
- Net profit margin maintained a fairly steady rate between 4.41% and 5.17% from 2013 through 2017, with a notable increase in 2018 to 9.11%. This considerable improvement in the final period indicates enhanced overall profitability, possibly due to improved cost management, revenue growth, or other financial efficiencies.
- Return on Equity (ROE)
- Return on equity data is only available for the first three years, showing a gradual decrease from 18.75% in 2013 and 2014 to 16.4% in 2015. The absence of data from 2016 onwards prevents further analysis, but early indications suggest a slight weakening in shareholder equity returns during the initial years.
- Return on Assets (ROA)
- Return on assets exhibited a distinct upward trend with some volatility. Initially stable around 4.8% in 2013 and 2014, it dipped to 4.26% in 2015 before sharply rising to 8.6% in 2016. After a marginal decline in 2017 to 7.67%, ROA surged dramatically to 15.39% in 2018. This suggests increasingly effective asset utilization over the period, with significant gains in the latter years.
Return on Sales
Return on Investment
Gross Profit Margin
HP Inc., gross profit margin calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Gross profit | |||||||
| Net revenue | |||||||
| Profitability Ratio | |||||||
| Gross profit margin1 | |||||||
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Cisco Systems Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Gross profit margin = 100 × Gross profit ÷ Net revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data indicates several notable trends over the analyzed periods.
- Gross Profit
- Gross profit shows a generally declining trend from 2013 to 2016, dropping significantly from 25,918 million US dollars in 2013 to 8,998 million US dollars in 2016. This decline is followed by a modest recovery in the subsequent years, reaching 10,669 million US dollars by 2018.
- Net Revenue
- Net revenue similarly declines markedly between 2013 and 2016, falling from 112,298 million US dollars in 2013 to 48,238 million US dollars in 2016. After 2016, net revenue experiences a gradual increase, rising to 58,472 million US dollars by 2018.
- Gross Profit Margin
- The gross profit margin remains relatively stable and slightly increasing from 23.08% in 2013 to a peak of 23.96% in 2015. Starting from 2016, the margin declines notably to 18.65% and continues a slight downward trend to 18.25% in 2018.
Overall, the data reveals a significant downward shift in both gross profit and net revenue during the period from 2013 to 2016, followed by a recovery phase from 2016 to 2018. Despite recovering revenue and gross profit in the latter years, the gross profit margin exhibits a declining trend after 2015, implying that profitability relative to revenue has decreased. This may suggest changes in cost structures, pricing strategies, or market conditions impacting the profitability ratios negatively despite revenue growth.
Operating Profit Margin
HP Inc., operating profit margin calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Earnings from operations | |||||||
| Net revenue | |||||||
| Profitability Ratio | |||||||
| Operating profit margin1 | |||||||
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Cisco Systems Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Operating profit margin = 100 × Earnings from operations ÷ Net revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data over the six-year period reveals several notable trends in the operational performance and revenue generation.
- Earnings from Operations
-
The earnings from operations experienced fluctuations with a downward trend from 2013 to 2016, decreasing from 7,131 million US dollars in 2013 to 3,549 million in 2016. Following this low point, a slight recovery is observed, with earnings increasing to 4,064 million in 2018, though not reaching the levels seen in 2013 and 2014.
- Net Revenue
-
Net revenue shows a declining pattern from 2013 through 2015, dropping from 112,298 million US dollars in 2013 to 103,355 million in 2015. Thereafter, a significant decrease occurs in 2016, with revenue falling sharply to 48,238 million. This is followed by a gradual increase in the subsequent years, reaching 58,472 million by 2018. Despite this recovery, revenue in 2018 still remains well below the early years of the period analyzed.
- Operating Profit Margin
-
The operating profit margin demonstrates relatively stable performance with minor fluctuations. It starts at 6.35% in 2013 and peaks at 7.36% in 2016, indicating improved operational efficiency despite lower absolute earnings and revenue during that year. Post-2016, the margin slightly declines but remains near 7%, finishing at 6.95% in 2018. This suggests a consistent profitability rate in relation to revenue across the later years, despite the variability in revenues and earnings.
Overall, while both earnings from operations and net revenue experienced a significant drop in 2016, the subsequent years indicate a moderate recovery. The operating profit margin's relative stability suggests that the company's operational efficiency was maintained to some extent, even as absolute financial figures fluctuated.
Net Profit Margin
HP Inc., net profit margin calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | |||||||
| Net revenue | |||||||
| Profitability Ratio | |||||||
| Net profit margin1 | |||||||
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Cisco Systems Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Net profit margin = 100 × Net earnings ÷ Net revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data exhibits several notable trends over the examined period.
- Net Earnings
- Net earnings experienced a decline from 2013 to 2016, decreasing from 5,113 million US dollars to 2,496 million US dollars. This represents a substantial reduction in profitability during this timeframe. However, after 2016, net earnings showed a recovery trend, increasing to 2,526 million in 2017 and then surging to 5,327 million in 2018, surpassing the earnings from the initial years.
- Net Revenue
- Net revenue demonstrated a downward trajectory between 2013 and 2016, falling from 112,298 million US dollars to 48,238 million US dollars. This indicates a significant contraction in sales or service income. Subsequently, there was a gradual recovery, with revenues climbing to 52,056 million in 2017 and further to 58,472 million in 2018, yet still remaining well below the earlier levels.
- Net Profit Margin
- The net profit margin exhibited relative stability around 4.5% during 2013 to 2015, with values slightly decreasing from 4.55% to 4.41%. In 2016, the margin reached a peak of 5.17%, signaling an improvement in profitability efficiency despite the reduced net revenue. The margin then slightly declined to 4.85% in 2017 but experienced a marked increase to 9.11% in 2018, indicating enhanced profitability performance relative to revenue.
Overall, the data suggests that while the company faced a period of shrinking revenue and earnings from 2013 through 2016, it managed to improve its profitability margins and recover both revenue and net earnings strongly by 2018. The significant increase in net profit margin in 2018 points to improved cost control or operational efficiency contributing to higher overall profitability.
Return on Equity (ROE)
HP Inc., ROE calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | |||||||
| Total HP stockholders’ equity (deficit) | |||||||
| Profitability Ratio | |||||||
| ROE1 | |||||||
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Cisco Systems Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
ROE = 100 × Net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data presents several noteworthy trends over the period from 2013 to 2018. Net earnings experienced fluctuations, initially declining from 5113 million US dollars in 2013 to 2496 million in 2016, before recovering to 5327 million in 2018. This suggests a period of reduced profitability in the middle years, followed by a substantial rebound.
In contrast, total stockholders’ equity showed a declining trajectory with a significant shift to negative values beginning in 2016. Equity decreased slightly from 27269 million in 2013 to 27768 million in 2015, followed by a steep decline to a deficit of 3889 million in 2016, which persisted through 2018, though with some improvement in the deficit magnitude.
The return on equity (ROE) values were consistent at 18.75% in 2013 and 2014 but decreased to 16.4% in 2015. No ROE data is provided for the subsequent years, which may indicate measurement challenges or structural changes affecting this ratio.
- Net Earnings Trend
- A declining trend from 2013 to 2016 was observed, followed by a recovery exceeding initial levels by 2018.
- Total Stockholders’ Equity Trend
- Equity remained positive until 2015 but turned negative sharply in 2016, indicating possible significant liabilities or losses impacting the balance sheet.
- Return on Equity (ROE)
- Stable and relatively high in the early years, with a slight downturn before discontinuation of reported values, which limits analysis for later periods.
Overall, the data reflects a period of operational and financial challenges around 2016, with proactive recovery efforts that led to improved earnings but sustained balance sheet pressures reflected in continued equity deficits. The absence of ROE data in later years may warrant closer examination of changes in company structure or reporting practices.
Return on Assets (ROA)
HP Inc., ROA calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | |||||||
| Total assets | |||||||
| Profitability Ratio | |||||||
| ROA1 | |||||||
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Cisco Systems Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Earnings
- The net earnings demonstrated a general decline from 2013 to 2016, decreasing from 5,113 million US dollars in 2013 to a low of 2,496 million US dollars in 2016. After this decline, the earnings stabilized somewhat in 2017 at 2,526 million US dollars, followed by a significant recovery in 2018, reaching 5,327 million US dollars, which represents the highest value in the observed period.
- Total Assets
- Total assets showed a relatively stable pattern from 2013 to 2015, fluctuating slightly around 105,000 to 107,000 million US dollars. However, there was a notable decrease starting in 2016, with total assets dropping sharply to 29,010 million US dollars, and thereafter showing modest growth through 2017 and 2018, reaching 34,622 million US dollars. This significant reduction beginning in 2016 suggests structural changes, potentially due to asset disposals or accounting adjustments.
- Return on Assets (ROA)
- The return on assets measured as a percentage, exhibited a relatively consistent decrease from 4.84% in 2013 to 4.26% in 2015. Subsequently, there was a marked increase in 2016 to 8.60%, which slightly decreased to 7.67% in 2017 but then rose sharply in 2018 to 15.39%. This increase in ROA from 2016 onwards, despite significantly lower total assets, implies improved efficiency in asset utilization or increased profitability relative to asset base during that period.
- Overall Assessment
- The period analyzed shows a notable shift starting in 2016, with a steep decline in total assets paired with significant fluctuations in net earnings and a pronounced increase in ROA in later years. The sharp reduction in total assets simplified the asset base, possibly improving operational efficiency, as reflected in the rising ROA. Net earnings recovered strongly after a trough in 2016, indicating a turnaround in financial performance. These trends together suggest a strategic repositioning or restructuring impacting financial outcomes and asset management.