DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Analysis of Debt
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Two-Component Disaggregation of ROE
Marathon Oil Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
- Return on Assets (ROA)
- The ROA exhibited substantial volatility over the analyzed quarters. Initial data shows a significantly negative return of -26% at the end of 2017, improving slightly to hover around zero and positive territory through 2018 and early 2019. It peaked at 5.57% in the first quarter of 2021, and further increased notably to 16.97% by the middle of 2022. The trend indicates a recovery from negative asset returns in late 2017 to consistent and growing positive returns into mid-2022, despite intermittent declines such as the negative values observed in late 2020.
- Financial Leverage
- Financial leverage demonstrated a gradual declining trend over the periods. Starting near 1.95 in early 2017, it decreased steadily to approximately 1.59 by mid-2022. The reduction in financial leverage suggests a moderate deleveraging strategy or improved equity base relative to debt levels, resulting in a more conservative capital structure over time.
- Return on Equity (ROE)
- The ROE mirrored the pattern of ROA but with greater amplitude. The earliest available data point in late 2017 showed a markedly negative return of -48.88%. Subsequently, ROE improved into positive territory throughout 2018 and 2019, reaching peaks of 8-9%. Like ROA, ROE experienced a downturn in 2020, with values dropping to below -13%. However, from 2021 onwards, ROE recovered sharply, climbing to a significant 26.91% by mid-2022. This trajectory indicates considerable volatility in shareholder returns but ultimately reflects a strong rebound and improved profitability on equity invested in recent quarters.
- Overall Insights
- The financial metrics suggest a company that faced profitability challenges around 2017-2018 and experienced negative returns on assets and equity. Over time, gradual improvements in asset utilization and earnings power are evident. The persistent decline in financial leverage may have contributed to strengthening equity returns. The significant turnaround in ROE and ROA by 2022 highlights effective operational recovery and enhanced financial performance, despite periods of setback during 2020. These trends underline resilient management efforts to improve returns and optimize capital structure.
Three-Component Disaggregation of ROE
Marathon Oil Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
- Net Profit Margin
- The net profit margin displays a highly volatile trend over the periods analyzed. Initially, it was deeply negative at -130.87% in the fourth quarter of 2017, improving substantially over the course of 2018 to reach positive territory with a peak of 18.57% in the fourth quarter. It remained relatively strong through 2019, although there was a decline during 2020 where negative figures reappeared, reaching a low of -46.85% in the third quarter, coinciding with broader market or operational challenges. From the first quarter of 2021 onward, a meaningful recovery is observed, with margins climbing steadily to 43.71% by mid-2022, indicating improved profitability and operational efficiency.
- Asset Turnover
- Asset turnover ratios show a gradual upward trend overall, signifying improved efficiency in using assets to generate sales or revenue. Starting at 0.20 in the first quarter of 2018, the ratio increased steadily with some fluctuations, reaching 0.28 by the first quarter of 2019. After a slight dip in 2020, likely reflective of operational or market disturbances, the ratio resumed growth from 2021 onwards, peaking at 0.39 by mid-2022, suggesting enhanced asset utilization.
- Financial Leverage
- Financial leverage remained relatively stable throughout the period, with minor variations. Beginning at 1.95 in early 2017, it trended downward moderately over time, reaching a low of around 1.58-1.59 between 2021 and 2022. This decline suggests a cautious approach to debt and risk management, maintaining moderate leverage levels without substantial increases.
- Return on Equity (ROE)
- ROE exhibits a pattern closely aligned with net profit margin performance, marked by considerable volatility. It was severely negative in late 2017 reaching -48.88%, but improved through 2018, turning positive in the latter part of the year and maintaining modest gains in 2019. The year 2020 saw a return to negative territory, hitting approximately -13.74% in the fourth quarter. From 2021 onward, there is a clear and sustained recovery, with ROE increasing from slight negative values to a strong 26.91% by mid-2022, indicating better profitability from shareholders' equity.
Two-Component Disaggregation of ROA
Marathon Oil Corp., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31).
The financial analysis over the observed quarters reveals several notable trends in profitability, efficiency, and asset utilization.
- Net Profit Margin
- The net profit margin exhibited significant volatility. Starting from deeply negative values around late 2017, with the margin reaching -130.87%, it gradually improved into positive territory by late 2017 and continued to increase through 2018, peaking above 18%. The margin then declined sharply in 2020, coinciding with challenging market conditions, reaching a nadir at -46.85% in the fourth quarter of 2020. From 2021 onward, there was a strong recovery trend, culminating in a high margin of 43.71% by mid-2022, indicating a substantial enhancement in profitability.
- Asset Turnover
- Asset turnover showed a generally consistent upward movement, albeit at a modest base level. Starting at 0.2 in early 2018, this ratio experienced gradual increases with minor fluctuations, dipping slightly in late 2020 and early 2021. From 2021 onwards, there was a notable acceleration, reaching 0.39 by mid-2022. This suggests improving efficiency in generating revenue from assets over time.
- Return on Assets (ROA)
- Return on assets mirrored the volatility of net profit margin but with less extreme variability. Initially, ROA was significantly negative at -26% around late 2017, reflecting poor overall asset performance during that period. Gradual improvement ensued, with positive returns recorded through 2018 and early 2019. However, a downturn occurred in 2020, where ROA again turned negative, reaching -8.08% in the fourth quarter. Starting in 2021, ROA turned positive and increased steadily, achieving 16.97% by mid-2022, consistent with the improvement in profitability and asset utilization highlighted earlier.
Overall, the data indicates a period of substantial financial distress around 2017 and again in 2020, followed by a recovery phase marked by improving profit margins, enhanced asset turnover, and rising returns on assets. The strong upward trends since early 2021 point to a robust recuperation in operational efficiency and profitability.