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
Hershey Co., profitability ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The profitability profile demonstrates relative stability in core operational returns alongside a significant shift in equity efficiency over the five-year period ending December 31, 2022.
- Gross Profit Margin
- A gradual decline is observed, with the margin contracting from 45.89% in 2018 to 43.18% in 2022. The most pronounced decrease occurred between 2021 and 2022, indicating a potential rise in the cost of goods sold or pricing pressures during that period.
- Operating and Net Profit Margins
- Both metrics exhibited similar trajectories, characterized by a slight dip in 2019 followed by a period of expansion that peaked in 2021 at 22.78% for operating margin and 16.47% for net margin. A moderate correction occurred in 2022, yet both margins remained above their 2019 levels, suggesting that operational efficiencies helped mitigate the impact of declining gross margins.
- Return on Equity (ROE)
- A consistent and significant downward trend is evident, with ROE falling from 84.19% in 2018 to 49.85% in 2022. This represents a substantial reduction in the returns generated on shareholder equity over the analyzed timeframe.
- Return on Assets (ROA)
- ROA remained remarkably stable, fluctuating within a narrow range between 14.00% and 15.29%. The divergence between the stable ROA and the sharply declining ROE suggests that the change in equity returns is primarily driven by alterations in the capital structure, such as a reduction in financial leverage, rather than a decline in the productivity of the asset base.
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Gross Profit Margin
Hershey Co., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 4,498,785) | 4,048,598) | 3,701,269) | 3,622,478) | 3,575,325) | |
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 43.18% | 45.13% | 45.42% | 45.36% | 45.89% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | 58.14% | 60.27% | — | — | — | |
| Mondelēz International Inc. | 35.92% | 39.19% | — | — | — | |
| PepsiCo Inc. | 53.03% | 53.35% | — | — | — | |
| Philip Morris International Inc. | 64.10% | 68.06% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Gross profit margin = 100 × Gross profit ÷ Net sales
= 100 × 4,498,785 ÷ 10,419,294 = 43.18%
2 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by consistent growth in absolute revenue and profit figures, contrasted by a contraction in profit margins during the final year of the period.
- Revenue and Absolute Profit Trends
- Net sales exhibited a continuous upward trajectory, growing from US$ 7.79 billion in 2018 to US$ 10.42 billion in 2022. This growth in top-line revenue was accompanied by a steady increase in gross profit, which rose from US$ 3.58 billion to US$ 4.50 billion over the same period.
- Gross Profit Margin Analysis
- The gross profit margin remained relatively stable between 2018 and 2021, maintaining a range between 45.13% and 45.89%. However, a notable decline occurred in 2022, with the margin falling to 43.18%. This indicates a compression of profitability, as the growth in the cost of goods sold outpaced the growth in net sales during that fiscal year.
- Comparative Growth Dynamics
- While the company achieved record levels of both net sales and gross profit in 2022, the decrease in the margin percentage suggests increased pressure on production costs or pricing challenges. The transition from a stable 45% margin range to 43.18% represents the most significant deviation in profitability efficiency over the five-year period analyzed.
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Operating Profit Margin
Hershey Co., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Operating profit | 2,260,787) | 2,043,722) | 1,782,698) | 1,595,952) | 1,623,664) | |
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 21.70% | 22.78% | 21.87% | 19.98% | 20.84% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | 25.37% | 26.67% | — | — | — | |
| Mondelēz International Inc. | 11.22% | 16.20% | — | — | — | |
| PepsiCo Inc. | 13.33% | 14.04% | — | — | — | |
| Philip Morris International Inc. | 38.56% | 41.32% | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Food, Beverage & Tobacco | 19.83% | 21.93% | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Consumer Staples | 8.44% | 8.48% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating profit margin = 100 × Operating profit ÷ Net sales
= 100 × 2,260,787 ÷ 10,419,294 = 21.70%
2 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a consistent expansion in top-line revenue and a general upward trajectory in absolute operating profit. Net sales demonstrated steady growth, rising from approximately $7.79 billion in 2018 to $10.42 billion by 2022, indicating a sustained increase in scale.
- Operating Profit Performance
- Operating profit remained relatively stable between 2018 and 2019 before entering a period of accelerated growth. From 2020 to 2022, operating profit rose from $1.78 billion to $2.26 billion, reflecting an improved ability to generate absolute profit from core operations over the latter half of the period.
- Operating Profit Margin Fluctuations
- The operating profit margin exhibited a fluctuating pattern, ranging from a low of 19.98% in 2019 to a peak of 22.78% in 2021. A subsequent decline to 21.70% was observed in 2022, which reveals a marginal decrease in operational efficiency as the growth in net sales was outpaced by the growth in operating expenses during that specific fiscal year.
- Efficiency and Scalability Trends
- While a positive correlation exists between the increase in net sales and the overall rise in operating profit, the margin contraction in 2022 suggests that economies of scale were partially offset by rising operational costs. Despite this recent dip, the margin remained higher in 2022 than in 2018 and 2019, indicating a net improvement in baseline profitability over the five-year horizon.
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Net Profit Margin
Hershey Co., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to The Hershey Company | 1,644,817) | 1,477,512) | 1,278,708) | 1,149,692) | 1,177,562) | |
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 15.79% | 16.47% | 15.69% | 14.40% | 15.11% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | 22.19% | 25.28% | — | — | — | |
| Mondelēz International Inc. | 8.63% | 14.97% | — | — | — | |
| PepsiCo Inc. | 10.31% | 9.59% | — | — | — | |
| Philip Morris International Inc. | 28.49% | 29.00% | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Food, Beverage & Tobacco | 15.68% | 17.28% | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Consumer Staples | 6.11% | 6.21% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net profit margin = 100 × Net income attributable to The Hershey Company ÷ Net sales
= 100 × 1,644,817 ÷ 10,419,294 = 15.79%
2 Click competitor name to see calculations.
An analysis of the financial performance from 2018 to 2022 reveals a consistent growth trajectory in both top-line revenue and bottom-line earnings. While net sales and net income demonstrated a steady upward trend over the five-year period, the net profit margin exhibited more volatility, indicating fluctuations in operational efficiency and cost management.
- Net Sales Growth
- A continuous increase in net sales is observed, rising from 7.79 billion US dollars in 2018 to 10.42 billion US dollars in 2022. This represents a sustained expansion of revenue streams throughout the analyzed period.
- Net Income Trends
- Net income attributable to the company followed a generally positive trajectory, despite a marginal contraction in 2019. Total earnings grew from 1.18 billion US dollars in 2018 to 1.64 billion US dollars in 2022, confirming a strong capacity for absolute profit growth.
- Net Profit Margin Performance
- The net profit margin experienced intermittent fluctuations, starting at 15.11% in 2018 and dipping to a period low of 14.40% in 2019. A recovery phase followed, with the margin peaking at 16.47% in 2021. By 2022, the margin moderated to 15.79%. The decrease in margin during 2022, occurring simultaneously with record sales and net income, suggests that the growth in expenses slightly outpaced the growth in revenue during that fiscal year.
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Return on Equity (ROE)
Hershey Co., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to The Hershey Company | 1,644,817) | 1,477,512) | 1,278,708) | 1,149,692) | 1,177,562) | |
| Total The Hershey Company stockholders’ equity | 3,299,544) | 2,757,229) | 2,234,352) | 1,739,222) | 1,398,721) | |
| Profitability Ratio | ||||||
| ROE1 | 49.85% | 53.59% | 57.23% | 66.10% | 84.19% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Coca-Cola Co. | 39.59% | 42.48% | — | — | — | |
| Mondelēz International Inc. | 10.11% | 15.21% | — | — | — | |
| PepsiCo Inc. | 51.96% | 47.48% | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
| ROE, Sector | ||||||
| Food, Beverage & Tobacco | 51.06% | 53.84% | — | — | — | |
| ROE, Industry | ||||||
| Consumer Staples | 32.10% | 31.40% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROE = 100 × Net income attributable to The Hershey Company ÷ Total The Hershey Company stockholders’ equity
= 100 × 1,644,817 ÷ 3,299,544 = 49.85%
2 Click competitor name to see calculations.
Between 2018 and 2022, a divergence is observed between absolute profitability growth and the efficiency of equity utilization. While net income attributable to the company grew steadily, the rate of increase in stockholders' equity significantly outpaced earnings growth, leading to a consistent compression of the return on equity (ROE).
- Net Income Trajectory
- Annual net income demonstrated a consistent upward trend, increasing from 1,177,562 thousand US dollars in 2018 to 1,644,817 thousand US dollars in 2022. This represents a steady expansion of bottom-line profitability over the five-year period.
- Stockholders' Equity Growth
- Total stockholders' equity experienced substantial growth, rising from 1,398,721 thousand US dollars in 2018 to 3,299,544 thousand US dollars by the end of 2022. This rapid accumulation of equity indicates a significant increase in the company's capital base.
- Return on Equity (ROE) Analysis
- A sustained downward trend in ROE is evident, with the ratio falling from 84.19% in 2018 to 49.85% in 2022. This decline is a direct result of the growth in total equity far exceeding the growth in net income. Consequently, while absolute profitability has increased, the efficiency of generating profit relative to the invested equity has diminished throughout the analyzed period.
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Return on Assets (ROA)
Hershey Co., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to The Hershey Company | 1,644,817) | 1,477,512) | 1,278,708) | 1,149,692) | 1,177,562) | |
| Total assets | 10,948,820) | 10,412,231) | 9,131,845) | 8,140,395) | 7,703,020) | |
| Profitability Ratio | ||||||
| ROA1 | 15.02% | 14.19% | 14.00% | 14.12% | 15.29% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Coca-Cola Co. | 10.29% | 10.36% | — | — | — | |
| Mondelēz International Inc. | 3.82% | 6.41% | — | — | — | |
| PepsiCo Inc. | 9.67% | 8.25% | — | — | — | |
| Philip Morris International Inc. | 14.67% | 22.06% | — | — | — | |
| ROA, Sector | ||||||
| Food, Beverage & Tobacco | 9.51% | 10.44% | — | — | — | |
| ROA, Industry | ||||||
| Consumer Staples | 8.95% | 8.75% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROA = 100 × Net income attributable to The Hershey Company ÷ Total assets
= 100 × 1,644,817 ÷ 10,948,820 = 15.02%
2 Click competitor name to see calculations.
Between 2018 and 2022, a consistent growth trajectory is observed in both net income and total asset accumulation. While net income experienced a minor decrease in 2019, it rose steadily thereafter, reaching US$ 1,644,817 thousand by the end of 2022. Concurrently, total assets expanded from US$ 7,703,020 thousand to US$ 10,948,820 thousand over the same five-year period.
- Return on Assets (ROA) Trend
- The ROA exhibited a slight U-shaped pattern, starting at 15.29% in 2018, declining to a low of 14.00% in 2020, and recovering to 15.02% by 2022. This indicates that the efficiency of asset utilization remained relatively stable, fluctuating within a narrow range of approximately 1.3 percentage points.
- Asset Expansion and Profitability Correlation
- The initial decline in ROA between 2018 and 2020 suggests that the growth in the asset base outpaced the growth in net income during that interval. However, the subsequent increase in ROA during 2021 and 2022 demonstrates that net income growth accelerated more rapidly than asset expansion in the latter period, restoring the asset-to-profit efficiency to near-2018 levels.
- Net Income Growth Performance
- Net income grew by approximately 39.6% from 2018 to 2022, while total assets grew by approximately 42.2% in the same timeframe. The close alignment between these growth rates explains the relative stability of the ROA, suggesting a disciplined approach to scaling operations.
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