Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Illinois Tool Works Inc. (NYSE:ITW)

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

Beginner level

Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.

Two-Component Disaggregation of ROE

Illinois Tool Works Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = ROA × Financial Leverage
Dec 31, 2019 83.31% = 16.73% × 4.98
Dec 31, 2018 78.76% = 17.24% × 4.57
Dec 31, 2017 36.79% = 10.05% × 3.66
Dec 31, 2016 47.84% = 13.39% × 3.57
Dec 31, 2015 36.35% = 12.07% × 3.01

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in financial leverage ratio.

Three-Component Disaggregation of ROE

Illinois Tool Works Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Dec 31, 2019 83.31% = 17.87% × 0.94 × 4.98
Dec 31, 2018 78.76% = 17.36% × 0.99 × 4.57
Dec 31, 2017 36.79% = 11.79% × 0.85 × 3.66
Dec 31, 2016 47.84% = 14.96% × 0.89 × 3.57
Dec 31, 2015 36.35% = 14.17% × 0.85 × 3.01

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in financial leverage ratio.

Five-Component Disaggregation of ROE

Illinois Tool Works Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Dec 31, 2019 83.31% = 0.77 × 0.94 × 24.87% × 0.94 × 4.98
Dec 31, 2018 78.76% = 0.76 × 0.93 × 24.72% × 0.99 × 4.57
Dec 31, 2017 36.79% = 0.52 × 0.93 × 24.66% × 0.85 × 3.66
Dec 31, 2016 47.84% = 0.70 × 0.92 × 23.13% × 0.89 × 3.57
Dec 31, 2015 36.35% = 0.70 × 0.92 × 21.97% × 0.85 × 3.01

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the increase in return on equity ratio (ROE) over 2019 year is the increase in financial leverage ratio.

Two-Component Disaggregation of ROA

Illinois Tool Works Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Net Profit Margin × Asset Turnover
Dec 31, 2019 16.73% = 17.87% × 0.94
Dec 31, 2018 17.24% = 17.36% × 0.99
Dec 31, 2017 10.05% = 11.79% × 0.85
Dec 31, 2016 13.39% = 14.96% × 0.89
Dec 31, 2015 12.07% = 14.17% × 0.85

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the decrease in return on assets ratio (ROA) over 2019 year is the decrease in asset turnover ratio.

Four-Component Disaggregation of ROA

Illinois Tool Works Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Dec 31, 2019 16.73% = 0.77 × 0.94 × 24.87% × 0.94
Dec 31, 2018 17.24% = 0.76 × 0.93 × 24.72% × 0.99
Dec 31, 2017 10.05% = 0.52 × 0.93 × 24.66% × 0.85
Dec 31, 2016 13.39% = 0.70 × 0.92 × 23.13% × 0.89
Dec 31, 2015 12.07% = 0.70 × 0.92 × 21.97% × 0.85

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the decrease in return on assets ratio (ROA) over 2019 year is the decrease in efficiency measured by asset turnover ratio.

Disaggregation of Net Profit Margin

Illinois Tool Works Inc., decomposition of net profit margin ratio

Microsoft Excel LibreOffice Calc
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Dec 31, 2019 17.87% = 0.77 × 0.94 × 24.87%
Dec 31, 2018 17.36% = 0.76 × 0.93 × 24.72%
Dec 31, 2017 11.79% = 0.52 × 0.93 × 24.66%
Dec 31, 2016 14.96% = 0.70 × 0.92 × 23.13%
Dec 31, 2015 14.17% = 0.70 × 0.92 × 21.97%

Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).

The primary reason for the increase in net profit margin ratio over 2019 year is the increase in effect of taxes measured by tax burden ratio.