Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
Two-Component Disaggregation of ROE
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 reveal significant fluctuations and trends in key performance indicators over the five-year period. The return on assets (ROA) experienced variability, initially increasing from 23.57% in 2018 to a peak of 27.77% in 2019, followed by a notable decline to 19.09% in 2020. Subsequently, ROA showed a recovery, rising to 23.06% in 2021 and further to 25.64% in 2022, indicating improved efficiency in asset utilization after the dip in 2020.
Financial leverage exhibited a generally upward trajectory during the period under review. Starting at a ratio of 4.61 in 2018, the leverage increased steadily each year, with a slight decrease between 2020 and 2021 (from 5.25 to 5.15), before reaching the highest level of 6.15 in 2022. This trend suggests an increasing reliance on borrowed funds to finance assets, which may amplify both potential returns and risk.
Return on equity (ROE) demonstrated marked volatility, mirroring the trends observed in ROA but with greater amplitude. ROE rose sharply from 108.6% in 2018 to 137.76% in 2019, followed by a substantial decline to 100.31% in 2020. The metric then rebounded to 118.8% in 2021 and surged dramatically to 157.67% in 2022, representing the highest level in the series. The pronounced fluctuations in ROE, combined with the rising financial leverage, suggest that changes in leverage have had a significant impact on shareholder returns during this timeframe.
Overall, the data indicates a period of financial performance marked by short-term decreases but long-term improvement in asset efficiency and equity returns, alongside steadily increasing financial leverage. The company’s increasing leverage level, coupled with improving ROE in recent years, suggests an enhanced capacity to generate shareholder value, albeit with potentially elevated financial risk.
Three-Component Disaggregation of ROE
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 reveals several notable trends in the company's profitability, efficiency, and financial structure over the five-year period.
- Net Profit Margin
- The net profit margin experienced some fluctuations, starting at 39.19% in 2018 and peaking at 48.08% in 2019. It then declined to 41.9% in 2020, before recovering to 46% in 2021 and slightly decreasing again to 44.66% in 2022. Overall, the margin remained relatively high throughout, indicating consistent profitability despite some variability.
- Asset Turnover
- The asset turnover ratio showed a downward trend from 0.6 in 2018 to a low of 0.46 in 2020. This suggests a decrease in the efficiency with which the company used its assets to generate revenue during this period. However, there was a partial recovery in 2021 and 2022, reaching 0.57 by the end of 2022, approaching the earlier levels seen in 2018.
- Financial Leverage
- Financial leverage steadily increased from 4.61 in 2018 to 6.15 in 2022, indicating a growing reliance on debt or other liabilities to finance the company’s assets. The increase in leverage each year, except for a slight dip in 2021, could imply greater financial risk or strategic use of debt to enhance returns.
- Return on Equity (ROE)
- The ROE exhibited substantial volatility but maintained an overall upward trajectory. It started at 108.6% in 2018, reached a peak of 137.76% in 2019, dropped to 100.31% in 2020, and then increased again to 118.8% in 2021, culminating in a significant rise to 157.67% in 2022. This pattern suggests the company’s ability to generate high returns on shareholders' equity, potentially driven by the increasing financial leverage combined with relatively stable profit margins.
In summary, the company demonstrated strong profitability and increasingly efficient use of financial leverage to boost shareholder returns. The dip in asset turnover between 2018 and 2020 indicates some operational challenges or asset base expansion not immediately translating into proportional revenue, but the subsequent recovery in asset turnover and continued high net profit margins supported an impressive growth in ROE, particularly in the most recent year.
Five-Component Disaggregation of ROE
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 analysis of the provided financial ratios over the five-year period reveals several notable trends and insights related to profitability, efficiency, leverage, and overall return on equity.
- Tax Burden
- The tax burden ratio shows a gradual increase from 0.81 in 2018 to 0.85 in 2022. This upward trend suggests a slight increase in the effective tax rate over the period, reducing the proportion of pre-tax income retained after tax.
- Interest Burden
- The interest burden ratio remains relatively stable throughout the period, fluctuating between 0.95 and 0.98. This indicates consistent management of interest expenses relative to earnings before interest and taxes, with minimal impact on profitability from interest costs.
- EBIT Margin
- The EBIT margin exhibits some variability, rising from 49.43% in 2018 to a peak of 58.96% in 2019, followed by a decline to 53.2% in 2020. It then recovers slightly to 56.86% in 2021 before decreasing again to 54.88% in 2022. Overall, despite fluctuations, the company maintains a strong operating margin, generally above 49%.
- Asset Turnover
- Asset turnover declines from 0.6 in 2018 to a low of 0.46 in 2020, indicating less efficient use of assets to generate revenues during that year. However, it improves in the subsequent years, reaching 0.57 in 2022, suggesting a recovery in asset utilization efficiency.
- Financial Leverage
- Financial leverage increases steadily over the period, from 4.61 in 2018 to 6.15 in 2022. This indicates a rising reliance on debt or other leveraged financing relative to equity, potentially amplifying returns but also increasing financial risk.
- Return on Equity (ROE)
- ROE shows significant fluctuations, starting at 108.6% in 2018 and increasing to 137.76% in 2019. It then decreases to 100.31% in 2020 before climbing again to 118.8% in 2021 and reaching a peak of 157.67% in 2022. The high levels and variability of ROE are likely influenced by changes in operating efficiency, leverage, and tax and interest burdens. The sharp increase in 2022 aligns with the highest observed financial leverage, suggesting leverage plays a significant role in amplifying equity returns.
In summary, the company demonstrates robust profitability and strong returns on equity throughout the analyzed period, supported by effective control of interest expenses and solid EBIT margins. The temporary dip in asset turnover in 2020 was followed by recovery, while increasing financial leverage appears to have contributed materially to the expansion of ROE, especially in recent years. The gradual increase in tax burden slightly offsets profitability but does not significantly detract from the overall positive financial performance.
Two-Component Disaggregation of ROA
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).
- Net Profit Margin
- The net profit margin exhibited variability throughout the analyzed period. It increased notably from 39.19% in 2018 to a peak of 48.08% in 2019. However, this was followed by a decline to 41.9% in 2020. Subsequently, the margin recovered, reaching 46% in 2021 and then slightly decreased to 44.66% in 2022. Overall, the net profit margin remained strong but showed some fluctuations, indicating periods of improved profitability and some moderation thereafter.
- Asset Turnover
- The asset turnover ratio declined from 0.6 in 2018 to 0.46 in 2020, suggesting a reduction in the efficiency with which assets were used to generate revenue during this period. From 2020 onwards, a recovery trend is observed, with the ratio increasing to 0.5 in 2021 and further to 0.57 in 2022. This upward movement indicates an improvement in asset utilization efficiency after a period of decline.
- Return on Assets (ROA)
- Return on assets showed a similar pattern to net profit margin and asset turnover, starting at 23.57% in 2018 and rising to 27.77% in 2019. It then dropped significantly to 19.09% in 2020, reflecting weaker profitability relative to asset base during that year. Subsequent recovery is observed with increases to 23.06% in 2021 and 25.64% in 2022. This suggests that the company improved its ability to generate profit from its assets after 2020, though ROA did not return to the 2019 peak.
- Overall Analysis
- The financial ratios reveal a period of strong profitability in 2019, followed by a notable downturn in 2020 across all measured indicators. The decreased asset turnover and ROA in 2020 could reflect challenges in operational efficiency and profitability, possibly influenced by external factors affecting that fiscal year. The subsequent years demonstrate a recovery trend, with improvements in asset turnover, net profit margin, and ROA, indicating enhanced operational performance and profitability. Despite fluctuations, the company maintained relatively high profitability margins throughout the period analyzed.
Four-Component Disaggregation of ROA
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).
Analysis of the annual financial ratios reveals several notable trends over the five-year period.
- Tax Burden
- The tax burden ratio has gradually increased from 0.81 in 2018 to 0.85 in 2022. This upward trend suggests a progressively higher effective tax rate relative to pre-tax income, which may affect net profitability.
- Interest Burden
- The interest burden ratio remained relatively stable, fluctuating slightly between 0.95 and 0.98 over the period. This stability indicates consistent levels of interest expense relative to EBIT, reflecting steady financing costs and interest obligations.
- EBIT Margin
- The EBIT margin exhibited some variation, peaking at 58.96% in 2019, then declining to 53.2% in 2020 before partially recovering to around 55% by 2022. This pattern suggests a temporary impact on operational profitability around 2020, potentially linked to external factors, followed by a degree of operational recovery.
- Asset Turnover
- The asset turnover ratio decreased from 0.6 in 2018 to a low of 0.46 in 2020, then showed an increasing trend, reaching 0.57 by 2022. This trend implies that asset efficiency declined during the early part of the period but improved subsequently, indicating better utilization of assets in generating sales towards the end of the timeframe.
- Return on Assets (ROA)
- The ROA followed a fluctuating pattern, rising from 23.57% in 2018 to 27.77% in 2019, dropping sharply to 19.09% in 2020, and then climbing back to 25.64% by 2022. The decline in 2020 aligns with broader market challenges, while the following recovery points to improved profitability and asset utilization.
Overall, the data suggests that although the company faced operational and efficiency challenges around 2020, it demonstrated a capacity to recover profitability and asset use effectiveness in subsequent years. Increases in tax burden may slightly offset net income gains, while stable interest burden indicates controlled financing expenses.
Disaggregation of Net Profit Margin
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 over the five-year period reveals several noteworthy trends in the company's profitability and efficiency ratios.
- Tax Burden
- This ratio demonstrates a gradual increase from 0.81 in 2018 to 0.85 in 2022, indicating a slight rise in the proportion of earnings retained after tax. This consistent upward trend suggests improved tax management or favorable tax conditions over time.
- Interest Burden
- The interest burden ratio remains relatively stable, fluctuating minimally between 0.95 and 0.98. This stability implies consistent interest expenses relative to earnings before interest and taxes, reflecting stable financing costs or debt levels throughout the period.
- EBIT Margin
- The Earnings Before Interest and Taxes (EBIT) margin exhibits some variability, reaching a peak of 58.96% in 2019 and declining to around 54.88% by 2022. Despite these fluctuations, the margin remains robust above 49%, indicating sustained operational efficiency and profitability.
- Net Profit Margin
- The net profit margin shows a pattern similar to the EBIT margin, peaking at 48.08% in 2019 and then settling to 44.66% in 2022. Although there is a decline from the peak, the margin stays relatively high, signaling effective control over overall costs and expenses after interest and tax considerations.
Overall, the data illustrates the company's ability to maintain strong profitability margins, despite minor fluctuations. The steady increase in tax burden ratio alongside stable interest burden suggests effective management of tax liabilities and financing costs. The margins indicate resilience and sound operational performance over the analyzed period.