Johnson & Johnson (NYSE:JNJ)

The analysis of the quarterly financial data reveals several notable trends across key profitability and leverage metrics.

Return on Assets (ROA)

The ROA demonstrates a generally upward trend from the period starting December 31, 2020, through to the end of 2021, increasing from 8.41% to a peak of approximately 11.47% in April 2022. This suggests improving efficiency in asset utilization over this timeframe. Following this peak, there is a decline noted, with ROA falling to a low of 6.49% by April 2023. Subsequently, a significant surge occurs, with ROA reaching an exceptional level of over 20% at the end of 2023 and continuing at similarly high levels into the first half of 2024. However, this is followed by another decrease in the last three quarters of 2024, dropping back closer to the mid-teens, before mildly rising again to 11.26% in the first quarter of 2025.

Financial Leverage

Financial leverage ratios remain relatively stable throughout the entire period, fluctuating modestly between approximately 2.33 and 2.77. There is a slight downward trend from early 2021 to mid-2022, indicating a marginal reduction in reliance on debt. The ratio spikes near the end of 2022 and early 2023 but returns to previous levels thereafter. Overall, financial leverage does not exhibit extreme volatility, suggesting steady capital structure management.

Return on Equity (ROE)

ROE mirrors in part the volatility seen in ROA but generally remains at higher levels, reflecting the influence of financial leverage. Starting around 23.25% at the end of 2020, ROE increases through 2021 and early 2022, peaking at around 28.2% in April 2022. Thereafter, a decline is evident, descending to below 20% by mid-2023. A pronounced surge follows this trough, with ROE reaching extraordinary levels exceeding 50% by late 2023 and maintaining elevated figures into mid-2024. Comparable to ROA, ROE then experiences a decline toward the end of 2024 and into early 2025, although still remaining above 19%.

In summary, profitability metrics show periods of improvement interspersed with significant fluctuations, notably dramatic increases in late 2023 and early 2024. Meanwhile, financial leverage remains generally consistent, indicating that changes in ROE are primarily driven by operational performance rather than shifts in capital structure. The notable spikes in ROA and ROE during late 2023 suggest exceptional operational performance or accounting effects during this timeframe, which may warrant further investigation to understand underlying causes.

Net Profit Margin

The net profit margin exhibits significant variability over the analyzed periods. Starting with values around 17.8% in late 2020, the margin generally increased through 2021, peaking at 22.26% in early 2022. Following this peak, a moderate decline occurred until mid-2023, with a notable surge reaching 44.92% in late 2023 and maintaining high levels in early 2024. However, a sharp decrease is observed again in the first quarter of 2025, falling to 15.84%, before rebounding to 24.41% by the end of March 2025. This pattern indicates periods of high profitability interspersed with volatility.

Asset Turnover

Asset turnover shows a generally stable pattern with slight fluctuations across the periods. Values are in a narrow range between 0.46 and 0.55, with a gradual upward trend from approximately 0.47 in early 2021 to a peak of 0.55 by the end of 2022. Afterward, there is a slight downward movement observed towards mid and late 2024, ending near 0.46 by March 2025. This suggests a consistent ability to generate revenue from assets with minor variations over time.

Financial Leverage

The financial leverage ratio demonstrates moderate fluctuations during the periods under review. The initial values in early 2020 average around 2.5 to 2.7, with a slight downward trend through 2021 and 2022 reaching lows near 2.33. Subsequently, leverage ratios increase briefly in early to mid-2023 before declining once again towards early 2025. Overall, the leverage remains within a relatively narrow band between 2.33 and 2.77, indicating a stable, moderate use of debt financing.

Return on Equity (ROE)

The return on equity shows a dynamic trend with marked increases and decreases. Beginning with values around 23%-25% in late 2020 and early 2021, ROE climbs steadily to peak above 28% in early 2022 before declining into mid-2023. A sharp increase is then observed, reaching nearly 55% by late 2023 and early 2024. Following this peak, ROE experiences a significant drop back to around 20% by early 2025, with a slight recovery to approximately 28% at the close of the period. The pattern suggests periods of strong equity profitability with notable volatility, possibly linked to the fluctuations in net profit margin and leverage.

Tax Burden

The tax burden ratio shows some fluctuation over the observed periods, with values generally staying within a range from 0.82 to 0.95. It peaked around late 2023 and early 2024 at approximately 0.95, indicating a relatively lower effective tax impact during this period. However, toward the later periods into 2025, it declined to about 0.82, suggesting an increase in the effective tax rate or other tax-related costs.

Interest Burden

The interest burden ratio remained quite stable throughout, mostly hovering close to 0.99, indicating minimal impact from interest expenses on operating income. A slight dip to around 0.96-0.97 was noted in the later periods (2023-2025), which could reflect a minor increase in interest expenses or changes in debt levels.

EBIT Margin

The EBIT margin displayed notable variability across the quarters. Initially, it moved between approximately 16.75% and 24.48%, but there was a significant spike during late 2023 and early 2024, reaching levels above 40%, peaking near 49.25%. This suggests a period of exceptional operating profitability. However, this was followed by a return to lower values around 19.64% to 30.68% by subsequent quarters, indicating the spike might be attributed to one-time factors or seasonal effects.

Asset Turnover

Asset turnover showed a slight upward trend in the early periods, increasing from about 0.47 to 0.55 by the end of 2021, reflecting more efficient use of assets to generate revenue. Following this peak, the ratio fluctuated modestly between 0.46 and 0.53, indicating relatively stable asset utilization without significant efficiency changes in later quarters.

Financial Leverage

Financial leverage ratios fluctuated moderately, starting around 2.53 and moving through a downward and upward pattern. The lowest point was near 2.33 in several periods spread between 2022 and 2023, suggesting somewhat reduced reliance on debt financing during that time. The ratio again increased slightly to around 2.54 by mid-2024 before decreasing again towards 2.48 by early 2025, indicating ongoing adjustments in capital structure.

Return on Equity (ROE)

The ROE showed pronounced volatility, closely mirroring EBIT margin trends. Initial values ranged around 17.37% to 28.2%, increasing markedly in late 2023 and early 2024 to levels exceeding 50%, signaling significantly enhanced profitability and shareholder returns during these quarters. Subsequently, the ROE decreased again to values between approximately 19.68% and 27.92%, suggesting the earlier spikes were likely influenced by exceptional or non-recurring events.

Net Profit Margin

Over the observed periods, net profit margin shows a generally volatile pattern with notable fluctuations. Beginning around 17.82% in the early 2020 period, it increases to a peak near 22.26% by April 2022 before undergoing a decline to approximately 13.77% by April 2023. Subsequently, a sharp rise occurs, reaching a significant apex at 44.92% in October 2023. This elevated level persists through December 2023 with slight variation, followed by a substantial drop to around 16.74% by March 2025. The data indicate periods of strong profitability improvements interspersed with notable contractions.

Asset Turnover

Asset turnover demonstrates a relatively stable trend with minor fluctuations across the timeline. Starting at 0.47 in early 2020, the ratio moderately improves to the range of 0.52 to 0.55 between April 2021 and December 2022, reflecting a consistent ability to generate sales from assets. Post this period, a gradual decline is observed, falling back to approximately 0.46 by March 2025. Overall, the turnover reflects moderate efficiency in asset utilization without extreme volatility.

Return on Assets (ROA)

The ROA metric follows a pattern somewhat mirroring net profit margin, yet with less pronounced extremes. Initially around 8.41% in early 2020, it peaks near 11.47% in April 2022, then declines to a low of about 6.49% by April 2023. Subsequently, there is a marked increase, reaching a high of 22.37% by October 2023, where it remains elevated through December 2023. Following this peak, ROA diminishes to roughly 7.81% by March 2025. These movements indicate cycles in asset profitability with notable improvements and declines.

Tax Burden

The tax burden ratio demonstrates a generally declining trend over the periods observed. Starting from approximately 0.89 in early 2020, it fluctuates slightly but experiences a notable decrease toward the end of the timeline, reaching around 0.82 by the first quarter of 2025. This overall reduction suggests a possible improvement in tax efficiency or changes in tax strategy impacting the company's net profitability.

Interest Burden

The interest burden ratio remains remarkably stable throughout the time frame, generally hovering around 0.99 with only minor deviations. In the later periods, slight dips to 0.96-0.97 occur, indicating a marginal decrease in interest expenses relative to earnings before interest and taxes. This stability implies consistent debt management and interest expense control.

EBIT Margin

The EBIT margin shows considerable variability with an initial moderate level of around 20-24% up until 2022. A sharp increase is observed starting in late 2022, peaking near 49% in late 2023, followed by a significant decline back to mid-20% levels by early 2025. This volatility may reflect one-time operational impacts, extraordinary items, or changes in cost structure and pricing strategies influencing operational profitability in the short term.

Asset Turnover

Asset turnover exhibits a modest upward trend early in the period, rising from about 0.47 to 0.55 by late 2021, showing marginal improvements in how efficiently assets generate revenue. Subsequently, it declines slightly to around 0.46 by early 2025, indicating a small reduction in asset utilization efficiency in the most recent periods.

Return on Assets (ROA)

ROA follows a pattern somewhat akin to the EBIT margin. Initial gradual improvement is seen through early periods, moving from around 8% to above 11%. A pronounced spike occurs around late 2023, with the ROA reaching above 22%, before declining again to roughly 11% towards 2025. These fluctuations suggest episodic factors influencing net income relative to assets, which could be linked to the exceptional operational profitability noted in EBIT margin during the same timeframe.

The analysis of the financial ratios over the observed quarterly periods reveals several key trends in the company's profitability and operational efficiency.

Tax Burden Ratio

The tax burden ratio shows a generally declining trend after peaking around the periods between December 2020 and July 2022, where values mostly ranged from 0.83 to 0.93. From July 2022 onwards, the ratio decreased gradually from 0.85 to 0.82 by March 2025. This decline indicates a slightly increasing tax expense relative to pre-tax income over the most recent quarters.

Interest Burden Ratio

The interest burden ratio remained consistently high, very close to 1.00, throughout the periods where data is available. It started near 0.99 from December 2020 and maintained this level until July 2022, with a slight decline to approximately 0.96–0.98 in subsequent quarters. This stability suggests minimal changes in interest expenses relative to earnings before interest and taxes, reflecting consistent interest cost management.

EBIT Margin (%)

The EBIT margin exhibited notable volatility across the quarters. Initially, from December 2020 to July 2022, the margin fluctuated moderately between approximately 16.75% and 24.48%. A significant spike is observed from October 2022 to September 2024, where margins surged dramatically reaching peaks above 40%, even hitting 49.25% in some quarters. This spike may point to extraordinary items, operational improvements, or changes in accounting. However, the margin sharply retraced to around 20.88% and 19.64% in the latest reported quarters before rising again to 30.68%. This pattern indicates periods of exceptional profitability followed by normalization with intermittent rebounds.

Net Profit Margin (%)

Net profit margin trends closely mirror those of the EBIT margin, experiencing elevated fluctuations. Margins moved between roughly 13.77% and 22.26% until mid-2022, followed by pronounced increases where net margins reached almost 45% in some quarters. Similar to the EBIT margin, these peaks are likely driven by exceptional gains or efficiency improvements. The margins then fell back to the mid-to-high teens in the most recent quarters before rising again toward 24.41%. The pattern suggests episodic boosts to net profitability with subsequent corrections.

Overall, the financial ratios indicate that while interest expenses remained stable, tax burden increased slightly over time. Profitability margins have shown substantial volatility, with episodic spikes in both operating and net margins. These swings imply occasional extraordinary influences or structural changes affecting the company's earnings quality and operational performance.