Parker-Hannifin Corp. (NYSE:PH)

Return on Assets (ROA)

The ROA demonstrates a fluctuating pattern over the analyzed periods. Initially, it increased from 6.35% in 2017 to a peak of 8.6% in 2019, indicating improved efficiency in utilizing assets to generate profits. However, it declined to 6.11% in 2020, rebounded to 8.58% in 2021, and then dropped significantly to 5.07% in 2022. This variability suggests inconsistency in asset profitability, with a notable downward trend in the most recent year.

Financial Leverage

Financial leverage ratios fluctuated within a moderate range. Starting at 2.94 in 2017, it decreased to 2.61 in 2018, then rose again to 2.95 in 2019. It further increased to a peak of 3.23 in 2020, indicating a higher reliance on debt financing during that year. Subsequently, it declined to 2.42 in 2021 before rising again to 2.93 in 2022. This pattern suggests varying debt levels relative to equity, with no consistent trend but some increases during periods of lower ROA.

Return on Equity (ROE)

The ROE exhibits significant volatility across the years. After a slight decrease from 18.69% in 2017 to 18.1% in 2018, it sharply increased to 25.37% in 2019, reflecting enhanced profitability and potentially efficient use of shareholders' equity. However, it declined to 19.73% in 2020, slightly increased to 20.79% in 2021, and then fell markedly to 14.87% in 2022. The decline in the most recent year aligns with the reduction in ROA and may indicate challenges in maintaining equity returns.

Net Profit Margin

The net profit margin exhibited fluctuations over the six-year period. Beginning at 8.18% in 2017, it experienced a slight decline to 7.42% in 2018, followed by a notable increase to 10.56% in 2019. This was succeeded by a decrease to 8.81% in 2020, then a peak at 12.17% in 2021, and a significant decline to 8.29% in 2022. The trend indicates volatility in profitability with an overall moderate net profit margin.

Asset Turnover

The asset turnover ratio showed a generally decreasing trend throughout the period. Starting at 0.78 in 2017, it rose to 0.93 in 2018, indicating improved efficiency, but then steadily declined to 0.81 in 2019, 0.69 in 2020, 0.71 in 2021, and further down to 0.61 in 2022. This suggests a diminishing ability to generate sales from assets over the years following 2018.

Financial Leverage

Financial leverage fluctuated within a relatively narrow range. It started at 2.94 in 2017, decreased to 2.61 in 2018, then increased to 2.95 in 2019 and further to 3.23 in 2020. The ratio then declined to 2.42 in 2021 before rising again to 2.93 in 2022. These variations indicate periodic adjustments in the company's use of debt relative to equity, without a clear upward or downward trend.

Return on Equity (ROE)

Return on equity showed variability over the years. It began at 18.69% in 2017 and slightly decreased to 18.10% in 2018. The ROE then surged to 25.37% in 2019, before declining to 19.73% in 2020. It increased slightly to 20.79% in 2021, followed by a substantial drop to 14.87% in 2022. Overall, the ROE trajectory reflects significant fluctuations in profitability relative to shareholders' equity, with a marked decline in the most recent year analyzed.

Tax Burden

The tax burden ratio demonstrated variability over the years, starting at 0.74 in 2017, dipping to the lowest point of 0.62 in 2018, then generally increasing to reach 0.82 by 2022. This suggests fluctuations in the company’s effective tax rate, with a tendency toward higher tax expenses relative to pretax income in recent years.

Interest Burden

The interest burden ratio remained relatively stable, ranging from 0.83 to 0.91 throughout the period. It showed a slight decline from 0.89 in 2017 to 0.83 in 2020, followed by a modest recovery to 0.86 in 2022. This stability indicates consistent management of interest expenses relative to operating earnings.

EBIT Margin

The EBIT margin exhibited an overall upward trend from 2017 through 2021, rising from 12.39% to a peak of 17.4% in 2021. However, it declined sharply to 11.78% in 2022. This pattern reflects improving operating profitability until 2021, followed by a significant downturn in the latest fiscal year.

Asset Turnover

Asset turnover showed a declining trend over the analyzed period, starting at 0.78 in 2017, peaking briefly at 0.93 in 2018, then declining consistently to 0.61 by 2022. This indicates a decreasing efficiency in using assets to generate sales over time.

Financial Leverage

Financial leverage fluctuated throughout the period without a clear linear trend. It started at 2.94 in 2017, decreased to a low of 2.42 in 2021, before rising again to 2.93 in 2022. These variations reflect changes in the company’s use of debt relative to equity financing within the timeframe.

Return on Equity (ROE)

ROE experienced notable volatility, beginning at 18.69% in 2017, slightly declining to 18.1% in 2018, and then rising substantially to 25.37% in 2019. Thereafter, it declined to 19.73% in 2020 and remained in the 20% range in 2021 before dropping to 14.87% in 2022. This trend suggests fluctuations in overall shareholder returns, with a significant decrease in the most recent year, potentially driven by lower profitability and asset efficiency.

The analysis of the annual financial ratios reveals several significant trends over the six-year period ending June 30, 2022.

Net Profit Margin

The net profit margin exhibited fluctuations throughout the period. It started at 8.18% in 2017 and declined slightly to 7.42% in 2018. A notable increase occurred in 2019, reaching 10.56%, followed by a decline to 8.81% in 2020. In 2021, the margin peaked at 12.17%, indicating strong profitability, but then it decreased significantly to 8.29% in 2022. Overall, the margin shows volatility, with the highest profitability observed in 2021.

Asset Turnover

The asset turnover ratio demonstrated a general downward trend over the period. Beginning at 0.78 in 2017, it increased to 0.93 in 2018, suggesting improved efficiency in using assets to generate revenue. However, from 2019 onwards, the ratio steadily declined: 0.81 in 2019, 0.69 in 2020, 0.71 in 2021, and further declined to 0.61 in 2022. This trend indicates a gradual reduction in asset utilization efficiency, which may impact overall operational performance.

Return on Assets (ROA)

Return on assets mirrored the observed volatility in net profit margin, starting at 6.35% in 2017 and increasing to 6.92% in 2018. A more significant rise to 8.6% occurred in 2019, followed by a decline to 6.11% in 2020. It rebounded to 8.58% in 2021, coinciding with the peak in net profit margin, but then decreased sharply to 5.07% in 2022. The ROA trend suggests fluctuations in the company's ability to generate profits from its asset base, with 2022 marking the lowest return within the period considered.

The analysis of the financial ratios over the six-year period reveals several observable trends and shifts in performance metrics.

Tax Burden

The tax burden ratio exhibited fluctuations, with an initial decline from 0.74 in 2017 to 0.62 in 2018, followed by an upward trend, reaching 0.82 in 2022. This indicates a general increase in the proportion of earnings retained after taxes over recent years, despite intermediate variations.

Interest Burden

The interest burden ratio remained relatively stable within a tight range from 0.83 to 0.91, indicating a consistent level of earnings retained after interest expenses. The ratio dipped slightly in 2020 to 0.83, potentially reflecting impacts from external economic factors, before partially recovering to 0.86 in 2022.

EBIT Margin

The EBIT margin percentage showed growth from 12.39% in 2017 to a peak of 17.4% in 2021, illustrating improving operational profitability. However, in 2022, the margin declined sharply to 11.78%, signaling a significant reduction in earnings before interest and taxes relative to revenue.

Asset Turnover

Asset turnover ratios decreased notably from a high of 0.93 in 2018 to 0.61 in 2022, reflecting a diminishing efficiency in utilizing assets to generate revenue over the period. This consistent decline suggests potential challenges in asset management or reduced sales relative to asset base.

Return on Assets (ROA)

Return on assets followed a somewhat volatile pattern, rising from 6.35% in 2017 to 8.6% in 2019, then dropping to 6.11% in 2020. It rebounded to 8.58% in 2021 before decreasing sharply to 5.07% in 2022. This volatility corresponds with the fluctuations in both profitability margins and asset turnover efficiency.

Overall, the data suggests that while operational profitability reached its peak in 2021, challenges in asset utilization and a recent decline in profitability have exerted downward pressure on returns. The increasing tax burden and slight fluctuations in interest expenses further influenced net profitability. The significant decline in EBIT margin and ROA in 2022 merits close attention, indicating potential areas for management focus to improve efficiency and profitability.

The financial data indicates several noteworthy trends over the six-year period ending June 30, 2022.

Tax Burden

The tax burden ratio exhibits fluctuations with an overall increase from 0.74 in 2017 to 0.82 in 2022. The lowest point occurs in 2018 at 0.62, followed by a recovery and relative stability around 0.78 to 0.82 in subsequent years. This suggests varying effective tax rates, with recent years reflecting a somewhat higher tax burden.

Interest Burden

The interest burden ratio remains fairly stable, oscillating narrowly between 0.83 and 0.91. This consistency indicates a relatively stable proportion of earnings retained after interest expenses, although there is a slight downward trend observed in 2020 and 2022 where the ratio dipped to 0.83 and 0.86 respectively.

EBIT Margin

The EBIT margin shows growth from 12.39% in 2017, peaking at 17.4% in 2021 before declining significantly to 11.78% in 2022. This pattern reveals an improving operational efficiency up to 2021, which was subsequently affected by a notable reduction in operating profitability in the final year examined.

Net Profit Margin

The net profit margin follows a broadly similar trajectory to EBIT margin, starting at 8.18% in 2017 and increasing to a high of 12.17% in 2021. Thereafter, it declines to 8.29% in 2022. This variability highlights sensitivity in bottom-line profitability, reflecting impacts from both operational performance and tax/interest expenses.

In summary, operational profitability improved steadily until 2021 but faced a setback in the subsequent year. The gradual increase in tax burden and the slight decrease in interest burden contribute to the fluctuations seen in net profit margin. Overall, the data suggests that the company experienced enhanced profitability and efficiency prior to 2022, followed by a period of reduced profitability possibly due to increasing tax obligations and other operational factors.