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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- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2011
- Debt to Equity since 2011
- Analysis of Revenues
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Two-Component Disaggregation of ROE
Marathon Petroleum Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 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).
- Return on Assets (ROA)
- The ROA exhibited a significant negative trend at the start, declining from -7.63% in March 2020 to -11.54% by December 2020. This reflects a period of considerable asset underperformance. Subsequently, there was a sharp turnaround beginning in March 2021, with ROA rising to a positive 8.13%, reaching a peak of 18.84% at the end of 2022. After this peak, ROA showed a gradual declining trend through 2023 and into 2024, falling to 5.67% by September 2024. Overall, the data indicate an initial phase of losses followed by a strong recovery and stabilization at positive but decreasing returns.
- Financial Leverage
- Financial leverage remained relatively stable, fluctuating mildly between 3.56 and 4.22 throughout the period. From March 2020 through early 2021, leverage values hovered around 3.5 to 4.0, showing no abrupt changes. In the last periods up to September 2024, there was a slight gradual increase from 3.73 to 4.22, indicating a moderate rise in the use of debt relative to equity. This suggests a consistent capital structure with a modest inclination towards more leverage in recent quarters.
- Return on Equity (ROE)
- ROE demonstrated a dramatic negative performance during 2020, falling from -27.36% in March to a low of -44.26% in December. This indicates significant equity value destruction during this period. A strong recovery commenced in early 2021, with ROE surging to positive territory by March 2021 and peaking impressively at 61.04% in the first quarter of 2023. Following this peak, ROE declined steadily through 2023 and into 2024, reaching 23.9% by September 2024. The trend reveals a cycle of sharp initial losses, robust recovery, and a gradual moderation of profitability metrics.
Three-Component Disaggregation of ROE
Marathon Petroleum Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 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).
- Net Profit Margin
- The net profit margin showed significant volatility over the analyzed period. Initially, it was negative in 2020, reaching its lowest point of -14.08% at the end of that year. Starting in early 2021, the margin transitioned to positive territory, peaking around 9.41% in the first quarter of 2023. However, from that peak, a gradual declining trend is observed, dropping to 3.19% by the third quarter of 2024, indicating reduced profitability relative to sales in the most recent periods.
- Asset Turnover
- Asset turnover experienced a decline in early 2020, reaching a low of 0.82 in the fourth quarter. It then improved consistently through 2022 and early 2023, peaking at 2.00 in the first quarter of 2023. Following this peak, asset turnover slightly decreased but remained relatively stable around the 1.7 to 1.8 range in 2024. This suggests an overall improvement in the company’s efficiency in using assets to generate revenue, with some stabilization in recent quarters.
- Financial Leverage
- Financial leverage fluctuated moderately over the period. It started around 3.58 in early 2020, rose steadily to a high of 4.01 by the first quarter of 2021, then decreased to a trough near 3.24 in late 2022 and early 2023. After this period, leverage increased again, reaching 4.22 by the third quarter of 2024. This pattern indicates changing reliance on debt financing, with a general increase in leverage during the latest quarters, which may raise financial risk concerns.
- Return on Equity (ROE)
- ROE mirrored net profit margin trends but with wider fluctuations due to leverage effects. It was deeply negative throughout 2020, hitting a low of -44.26% in the fourth quarter. Starting in the first quarter of 2021, ROE improved sharply, reaching an exceptionally high peak of 61.04% in early 2023. Subsequently, ROE declined steadily, falling to 23.9% by the third quarter of 2024. Despite the decline, the return on equity remained positive and substantially better than the initial period, reflecting improved profitability combined with financial leverage impact.
Two-Component Disaggregation of ROA
Marathon Petroleum Corp., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 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).
- Net Profit Margin
- The net profit margin exhibited a significant decline during 2020, starting at -5.59% in the first quarter and steadily decreasing to -14.08% by the fourth quarter. This negative trend reversed beginning in early 2021, with the margin improving markedly to positive territory by the second quarter, reaching 8.74%. Throughout 2021 and into 2023, the margin remained positive and demonstrated moderate fluctuations, peaking at 9.41% in the first quarter of 2023. However, post-Q1 2023, a downward trend is observed, with margins weakening progressively to 3.19% by the third quarter of 2024, indicating a reduction in profitability margins over the most recent periods.
- Asset Turnover
- Asset turnover followed a declining trajectory throughout 2020, dropping from 1.37 to 0.82 from the first to fourth quarter, indicating reduced efficiency in using assets to generate revenue. In 2021, a recovery phase is evident, with the ratio increasing steadily to 1.41 by year-end. This positive trend continued into 2022, peaking at 2.00 in the first quarter, highlighting improved asset utilization. Subsequent quarters show some variability but generally maintain elevated levels above 1.6, signaling sustained efficiency in asset use relative to earlier periods. By the third quarter of 2024, asset turnover reached 1.78, reflecting a stable and effective turnover ratio after prior gains.
- Return on Assets (ROA)
- Return on assets mirrored the pattern seen in net profit margin, with severe negative returns throughout 2020, declining from -7.63% to -11.54%. A recovery commenced in 2021, turning positive by Q2 and increasing sharply to 11.41% by year-end, which denotes improved profitability relative to asset base. The upward momentum persisted into early 2023, peaking at a notably high 18.84% in Q1. Subsequently, there has been a gradual decline in ROA, decreasing to 5.67% by Q3 2024, yet remaining positive and substantially improved compared to the negative levels observed during the pandemic-impacted year of 2020.