Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Price to Book Value (P/BV) since 2005
- Aggregate Accruals
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Profitability Ratios (Summary)
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 financial data presents key profitability and efficiency ratios over a five-year period. The analysis below summarizes the significant trends and changes identified.
- Gross Profit Margin
- The gross profit margin exhibited a gradual decline from 45.89% in 2018 to 43.18% in 2022. This trend suggests a slight erosion in the company's ability to manage production or procurement costs relative to sales revenue over the period.
- Operating Profit Margin
- Operating profit margin showed some fluctuations but maintained a relatively stable range. It decreased from 20.84% in 2018 to 19.98% in 2019, then increased to a peak of 22.78% in 2021, followed by a decline to 21.7% in 2022. This indicates operational efficiency improved overall, despite minor setbacks, especially notable in 2021.
- Net Profit Margin
- The net profit margin followed a pattern similar to the operating margin, decreasing slightly from 15.11% in 2018 to 14.4% in 2019, then rising steadily to 16.47% in 2021 before dipping to 15.79% in 2022. This reflects improved bottom-line profitability over most of the period, with slight softness in the latest year.
- Return on Equity (ROE)
- Return on equity displayed a consistent downward trend, decreasing from a high 84.19% in 2018 to 49.85% in 2022. This significant decline indicates the company’s efficiency at generating profits from shareholders’ equity diminished markedly, potentially reflecting increased equity, lower net income, or both.
- Return on Assets (ROA)
- The return on assets maintained a relatively stable profile, starting at 15.29% in 2018, dipping slightly in subsequent years, and rising again to 15.02% in 2022. This stability suggests consistent asset utilization efficiency throughout the period.
Return on Sales
Return on Investment
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 | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
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 × ÷ =
2 Click competitor name to see calculations.
- Gross Profit
- The gross profit exhibited a consistent upward trend over the analyzed period. Starting at $3,575,325 thousand in 2018, it increased each year, reaching $4,498,785 thousand by 2022. This represents a notable growth, highlighting an improvement in the company's ability to generate profit from its core operations.
- Net Sales
- Net sales also showed a steady increase throughout the five-year period. From $7,791,069 thousand in 2018, net sales rose to $10,419,294 thousand by 2022. This upward movement indicates a growth in revenue, suggesting expanding market presence or enhanced sales performance during these years.
- Gross Profit Margin
- The gross profit margin displayed a slight declining trend over the period. It started at 45.89% in 2018 and gradually decreased to 43.18% by 2022. Although the margin remained relatively stable with minor fluctuations in the initial years, a more pronounced decline is observed in the last year. This suggests that while gross profit and net sales increased, the cost of goods sold likely grew at a faster pace, impacting profitability ratios negatively.
Operating Profit Margin
Hershey Co., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Operating profit | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
| Operating Profit Margin, Sector | ||||||
| Food, Beverage & Tobacco | ||||||
| Operating Profit Margin, Industry | ||||||
| Consumer Staples | ||||||
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 Click competitor name to see calculations.
- Operating Profit
- The operating profit shows a generally upward trend over the five-year period. It increased from approximately 1.62 billion US dollars in 2018 to around 2.26 billion US dollars in 2022. Notable growth occurred between 2019 and 2022, reflecting a strengthening profit generation capability.
- Net Sales
- Net sales steadily increased across the years, rising from approximately 7.79 billion US dollars in 2018 to about 10.42 billion US dollars in 2022. This consistent growth indicates expanding revenue streams and possibly increasing market demand or successful sales strategies.
- Operating Profit Margin
- The operating profit margin experienced some fluctuations during the period. It started at 20.84% in 2018, dipped slightly to 19.98% in 2019, then gradually rose to its peak at 22.78% in 2021 before declining somewhat to 21.7% in 2022. Despite minor variability, the margin remained relatively stable, generally maintaining above 20%, which suggests effective cost management relative to revenue.
- Summary of Trends
- Overall, the data indicates a positive financial performance trajectory, characterized by increasing sales and operating profit levels. The operating profit margin's stability reflects efficient operational control amid growth. The peak margin in 2021 followed by a slight decline in 2022 may warrant further investigation into cost structure changes or pricing pressures in that final year.
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 | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
| Net Profit Margin, Sector | ||||||
| Food, Beverage & Tobacco | ||||||
| Net Profit Margin, Industry | ||||||
| Consumer Staples | ||||||
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 × ÷ =
2 Click competitor name to see calculations.
- Net Income Trend
- The net income attributable to the company demonstrated a consistent upward trend from 2018 to 2022. The figure increased from approximately 1.18 billion US dollars in 2018 to about 1.64 billion US dollars in 2022, indicating positive growth in profitability.
- Net Sales Trend
- Net sales showed steady growth over the five-year period, rising from roughly 7.79 billion US dollars in 2018 to over 10.42 billion US dollars in 2022. This indicates expansion in the company's sales volume or pricing power, contributing to overall revenue growth.
- Net Profit Margin Analysis
- The net profit margin displayed some variability but remained relatively stable overall. It started at 15.11% in 2018, experienced a slight dip in 2019 to 14.4%, then rose to its highest point at 16.47% in 2021 before declining slightly to 15.79% in 2022. This pattern suggests effective cost management and profitability enhancements especially noticeable between 2019 and 2021, although there was a marginal decrease in profit margin in the last year observed.
- Overall Insights
- The data reflects a company that has been successful in increasing both its revenues and net income steadily over the period analyzed. While profit margins showed minor fluctuations, they stayed within a narrow range, signifying stable profitability. The growth in net sales outpaced the growth in net income proportionally, as net income increased by approximately 39.7% over the five years, compared to a 33.7% rise in net sales. This suggests improvements in operational efficiency or other profitability factors contributing to enhanced earnings beyond simply increasing sales volumes.
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 | ||||||
| Total The Hershey Company stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
| ROE, Sector | ||||||
| Food, Beverage & Tobacco | ||||||
| ROE, Industry | ||||||
| Consumer Staples | ||||||
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 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals several key trends regarding profitability and equity over the five-year period ending in 2022.
- Net Income
- The net income attributable to the company shows a consistent upward trajectory, increasing from $1,177,562 thousand in 2018 to $1,644,817 thousand in 2022. This reflects a steady growth in profitability, with a notable acceleration after 2019. The increase from 2021 to 2022 is particularly significant, suggesting enhanced operational performance or market conditions favorable to income generation.
- Total Stockholders’ Equity
- Stockholders' equity exhibits strong growth, rising from $1,398,721 thousand in 2018 to $3,299,544 thousand in 2022. This substantial increase indicates ongoing capitalization and accumulation of retained earnings, potentially supporting expansion initiatives or increased asset base. The growth rate appears to be accelerating each year, pointing to a strengthening equity position.
- Return on Equity (ROE)
- The ROE shows a decreasing trend over the period, falling from 84.19% in 2018 to 49.85% in 2022. Despite the decline, the values remain relatively high, suggesting that the company continues to generate significant returns on shareholders' equity. The reduction can be interpreted as a dilution effect caused by the rapid increase in equity base outpacing net income growth, or changes in profit margins and operational efficiency.
Overall, the data indicates robust profitability growth alongside a strong and rapidly growing equity base. The decline in ROE, while notable, still reflects efficient use of capital, albeit with some moderation. These patterns suggest that the company is expanding and investing in its equity while maintaining healthy income levels.
Return on Assets (ROA)
Hershey Co., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to The Hershey Company | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
| ROA, Sector | ||||||
| Food, Beverage & Tobacco | ||||||
| ROA, Industry | ||||||
| Consumer Staples | ||||||
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 × ÷ =
2 Click competitor name to see calculations.
The analysis of the financial data over the five-year period reveals several key trends in profitability and asset base of the company.
- Net Income Attributable to The Hershey Company (US$ in thousands)
- The net income shows a generally positive trend, increasing steadily from 1,177,562 thousand USD in 2018 to 1,644,817 thousand USD in 2022. There was a slight dip in 2019 compared to 2018, but the following years exhibited consistent growth, particularly notable from 2020 onwards. This indicates improving profitability over the period.
- Total Assets (US$ in thousands)
- Total assets increased each year, rising from 7,703,020 thousand USD in 2018 to 10,948,820 thousand USD in 2022. The growth rate of total assets appears to accelerate after 2019, reflecting a significant expansion or investment in asset base, which may support increased operational capacity or strategic growth initiatives.
- Return on Assets (ROA, %)
- The ROA showed a slight declining trend initially, decreasing from 15.29% in 2018 to 14% in 2020, before stabilizing and recovering slightly to 15.02% in 2022. This indicates that the efficient use of assets to generate profits dipped in the early years but improved later, nearly reaching the level observed at the start of the period. The overall ROA values suggest a consistently strong profitability relative to assets.
In summary, the company demonstrated growth in net income and an expanding asset base over the five-year span. Although ROA experienced minor fluctuations, the company maintained a relatively high return on assets, signifying sustained operational efficiency and profitability through the period under review.