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.
Two-Component Disaggregation of ROE
Nike Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-11-30), 10-Q (reporting date: 2025-08-31), 10-K (reporting date: 2025-05-31), 10-Q (reporting date: 2025-02-28), 10-Q (reporting date: 2024-11-30), 10-Q (reporting date: 2024-08-31), 10-K (reporting date: 2024-05-31), 10-Q (reporting date: 2024-02-29), 10-Q (reporting date: 2023-11-30), 10-Q (reporting date: 2023-08-31), 10-K (reporting date: 2023-05-31), 10-Q (reporting date: 2023-02-28), 10-Q (reporting date: 2022-11-30), 10-Q (reporting date: 2022-08-31), 10-K (reporting date: 2022-05-31), 10-Q (reporting date: 2022-02-28), 10-Q (reporting date: 2021-11-30), 10-Q (reporting date: 2021-08-31), 10-K (reporting date: 2021-05-31), 10-Q (reporting date: 2021-02-28), 10-Q (reporting date: 2020-11-30), 10-Q (reporting date: 2020-08-31).
The analysis reveals a dynamic relationship between Return on Assets (ROA) and Financial Leverage in determining Return on Equity (ROE) over the observed period. ROE demonstrates significant fluctuation, largely influenced by shifts in ROA, while Financial Leverage exhibits relative stability.
- Return on Equity (ROE)
- ROE began at 29.16% in August 2020, decreased to 26.56% by November 2020, and then experienced a substantial increase, peaking at 44.86% in May 2021. Following this peak, ROE generally trended downwards, reaching 35.65% in August 2022. A slight recovery occurred through November 2023 (37.46%), before declining significantly to 17.92% in May 2024 and further to 6.68% in May 2025. This suggests a weakening in the company’s ability to generate profits from shareholder investments in the latter part of the period.
- Return on Assets (ROA)
- ROA showed a modest increase from 8.09% in August 2020 to 9.47% in February 2021. A substantial surge followed, reaching 15.17% in May 2021, and continued to 16.04% in August 2021. ROA then plateaued around the 15% mark through February 2022, before initiating a consistent decline. By May 2025, ROA had fallen to 6.68%, indicating a decreasing efficiency in utilizing assets to generate earnings. The decline in ROA appears to be the primary driver of the ROE decrease observed in the later periods.
- Financial Leverage
- Financial Leverage remained relatively stable throughout the period, fluctuating within a narrow range of 2.60 to 3.61. It began at 3.61 in August 2020, gradually decreasing to 2.61 by November 2021. It then hovered around 2.6 to 2.7 for most of the subsequent period, with a slight increase to 2.77 in May 2025. This indicates a consistent use of debt financing, without significant changes in the company’s capital structure. The stability of this component suggests that changes in ROE are primarily attributable to variations in ROA.
The observed trends suggest that while the company maintained a consistent level of financial leverage, its ability to generate profits from its assets has diminished over time, leading to a substantial decrease in overall return to equity holders. The significant drop in ROA from May 2024 to May 2025 is particularly noteworthy and warrants further investigation.
Three-Component Disaggregation of ROE
Nike Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-11-30), 10-Q (reporting date: 2025-08-31), 10-K (reporting date: 2025-05-31), 10-Q (reporting date: 2025-02-28), 10-Q (reporting date: 2024-11-30), 10-Q (reporting date: 2024-08-31), 10-K (reporting date: 2024-05-31), 10-Q (reporting date: 2024-02-29), 10-Q (reporting date: 2023-11-30), 10-Q (reporting date: 2023-08-31), 10-K (reporting date: 2023-05-31), 10-Q (reporting date: 2023-02-28), 10-Q (reporting date: 2022-11-30), 10-Q (reporting date: 2022-08-31), 10-K (reporting date: 2022-05-31), 10-Q (reporting date: 2022-02-28), 10-Q (reporting date: 2021-11-30), 10-Q (reporting date: 2021-08-31), 10-K (reporting date: 2021-05-31), 10-Q (reporting date: 2021-02-28), 10-Q (reporting date: 2020-11-30), 10-Q (reporting date: 2020-08-31).
The analysis of the provided financial metrics reveals fluctuating performance over the observed period. Return on Equity (ROE) demonstrates significant variability, influenced by changes in Net Profit Margin, Asset Turnover, and Financial Leverage. A general trend of declining profitability and efficiency is apparent in the later periods, though leverage remains relatively stable.
- Net Profit Margin
- The Net Profit Margin exhibited an increasing trend from August 2020 to May 2021, peaking at 12.86%. Subsequently, a gradual decline is observed, reaching 5.43% by August 2025. This suggests increasing cost pressures or decreasing pricing power over time. The most substantial decrease occurred between May 2025 and August 2025.
- Asset Turnover
- Asset Turnover generally increased from 1.12 in August 2020 to a high of 1.40 in August 2021, indicating improved efficiency in utilizing assets to generate sales. However, this efficiency decreased over the subsequent periods, falling to 1.23 by August 2025. This suggests a potential slowdown in sales growth relative to asset investment. A slight recovery is seen in November 2025.
- Financial Leverage
- Financial Leverage remained relatively stable throughout the period, fluctuating between 2.60 and 3.61. A decreasing trend was observed from August 2020 to August 2021, followed by a period of relative stability. The leverage ratio shows a slight increase towards the end of the period, peaking at 2.77 in February 2025 and May 2025, before decreasing slightly to 2.68 in August 2025 and remaining stable through November 2025.
- Return on Equity (ROE)
- ROE initially fluctuated, peaking significantly at 44.86% in May 2021, driven by improvements in both Net Profit Margin and Asset Turnover. Following this peak, ROE generally declined, reaching 17.92% by August 2025. This decline correlates with the decreasing trends in Net Profit Margin and Asset Turnover, despite the relatively stable Financial Leverage. The most significant drop in ROE occurred between February 2024 and August 2025.
The combined effect of declining profitability and efficiency, as reflected in the Net Profit Margin and Asset Turnover ratios, significantly impacted ROE. While Financial Leverage provided some amplification, it was insufficient to offset the negative trends in the other two components of the DuPont analysis. The observed patterns suggest a need for strategies to improve both operational efficiency and profitability to sustain shareholder returns.
Two-Component Disaggregation of ROA
Nike Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2025-11-30), 10-Q (reporting date: 2025-08-31), 10-K (reporting date: 2025-05-31), 10-Q (reporting date: 2025-02-28), 10-Q (reporting date: 2024-11-30), 10-Q (reporting date: 2024-08-31), 10-K (reporting date: 2024-05-31), 10-Q (reporting date: 2024-02-29), 10-Q (reporting date: 2023-11-30), 10-Q (reporting date: 2023-08-31), 10-K (reporting date: 2023-05-31), 10-Q (reporting date: 2023-02-28), 10-Q (reporting date: 2022-11-30), 10-Q (reporting date: 2022-08-31), 10-K (reporting date: 2022-05-31), 10-Q (reporting date: 2022-02-28), 10-Q (reporting date: 2021-11-30), 10-Q (reporting date: 2021-08-31), 10-K (reporting date: 2021-05-31), 10-Q (reporting date: 2021-02-28), 10-Q (reporting date: 2020-11-30), 10-Q (reporting date: 2020-08-31).
The financial performance, as indicated by the two-component disaggregation of Return on Assets (ROA), reveals distinct trends over the observed period. Net Profit Margin and Asset Turnover both contribute to ROA, and their individual trajectories significantly influence overall profitability. A general observation is a period of improvement followed by a more recent decline in key metrics.
- Net Profit Margin
- The Net Profit Margin demonstrates an increasing trend from August 2020 through May 2021, rising from 7.20% to a peak of 12.86%. This suggests improving profitability during that timeframe. Following this peak, the margin experienced a gradual decline, reaching 9.98% by November 2024, before continuing to decrease to 5.43% by August 2025. This recent decline indicates potential pressures on profitability, possibly due to increased costs or decreased pricing power.
- Asset Turnover
- Asset Turnover exhibits more stability than the Net Profit Margin, generally fluctuating between 1.06 and 1.40. An upward trend is noticeable from February 2021 to August 2023, peaking at 1.40, indicating increasing efficiency in utilizing assets to generate sales. However, a subsequent downward trend emerges, with the ratio decreasing to 1.23 by August 2025. This suggests a potential decrease in the efficiency of asset utilization.
- Return on Assets (ROA)
- ROA mirrors the combined effect of the Net Profit Margin and Asset Turnover. It increased significantly from 8.09% in August 2020 to a high of 16.04% in August 2021. Subsequently, ROA has generally trended downwards, reaching 6.68% in August 2025. The decline in ROA is attributable to the combined effect of the decreasing Net Profit Margin and the more recent decline in Asset Turnover. The most substantial decrease in ROA occurs in the latter portion of the observed period, coinciding with the sharper declines in both contributing factors.
The period between August 2020 and August 2021 represents a period of strong performance, with improvements in both profitability and asset utilization. However, the subsequent period demonstrates a weakening of both these key performance indicators, resulting in a decline in overall ROA. The recent trends suggest a need for investigation into the factors driving the decreased profitability and asset efficiency.