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
Pfizer Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-03-30), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-29), 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: 2023-10-01), 10-Q (reporting date: 2023-07-02), 10-Q (reporting date: 2023-04-02), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-02), 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The financial data reveals dynamic trends in profitability and leverage metrics over the observed periods. A detailed examination highlights significant fluctuations in return measures and a relatively stable yet variable financial leverage ratio.
- Return on Assets (ROA)
- The ROA shows a general upward trend from early 2020, starting at 6.23%, and increasing steadily to peak at 15.91% in the first quarter of 2023. After this peak, there is a notable decline, with ROA dropping sharply to 9.75% and further down to negative territory in the quarters of 2023 and early 2024. This decline bottomed out around -1.2% before beginning a gradual recovery that brings ROA back into positive figures, reaching 3.79% by the first quarter of 2025.
- Financial Leverage
- Financial leverage remained within a narrow range throughout the periods, starting at 2.56 in the first quarter of 2020 and exhibiting minor fluctuations. The trend generally shows a mild decline till early 2023, reaching a nadir of 1.94, before increasing again to 2.54 by the last quarter of 2023. Subsequently, leverage stabilizes around 2.3 to 2.4, suggesting a consistent level of debt relative to equity without significant volatility.
- Return on Equity (ROE)
- The ROE follows a pattern similar to ROA but with more amplified changes, reflecting the impact of financial leverage on shareholder returns. Beginning at 15.21% in early 2020, ROE increases markedly, reaching a high of 33.61% in the fourth quarter of 2022. Post-peak, there is a sharp downturn, with ROE dropping to 10.81% and declining further into negative range around early 2024 (-0.33% to -2.96%). Following the trough, ROE gradually recovers, stabilizing and rising to 8.73% by the first quarter of 2025.
Overall, the data showcases a period of strong profitability gains up to 2022, followed by a considerable contraction in both asset and equity returns in 2023 and early 2024. The decline is accompanied by a temporary reduction in financial leverage followed by a rebound. The recovery in profitability metrics in late 2024 and early 2025 suggests an improvement in operational efficiency or market conditions, though returns have not yet returned to their previous peak levels.
Three-Component Disaggregation of ROE
Pfizer Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-03-30), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-29), 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: 2023-10-01), 10-Q (reporting date: 2023-07-02), 10-Q (reporting date: 2023-04-02), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-02), 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The financial indicators exhibit varying trends over the analyzed periods, reflecting shifts in operational efficiency, profitability, and leverage.
- Net Profit Margin
- The net profit margin showed a positive trend initially, increasing from 22.95% in late 2020 to peak values above 31% during early to mid 2023. This improvement signals enhanced profitability relative to revenues during that timeframe. However, the margin then declined sharply, falling to negative values in late 2023 and early 2024, reaching as low as -4.62%. Following this downturn, there is a recovery trend indicated by a gradual return to positive margins by the first quarter of 2025, reaching approximately 12.62%.
- Asset Turnover
- The asset turnover ratio exhibited a general upward trend from 0.27 in early 2020 through approximately 0.52 by late 2022, suggesting better utilization of assets to generate revenue. This efficiency peaks and sustains slightly above 0.5 for a year but then declines significantly from late 2023 onwards, dropping to around 0.25. Toward the end of the forecasted period, a modest rebound is observed, settling near 0.3.
- Financial Leverage
- Financial leverage ratios started relatively high at 2.56 in early 2020, increasing slightly by mid-2020 to around 2.77, before demonstrating a general downward trend through early 2023, reaching a low of about 1.94. This decline indicates reduced reliance on debt. Subsequently, leverage rose again, fluctuating around 2.3 to 2.5 through 2024 and into early 2025, suggesting a moderate increase in financial risk or borrowing relative to equity.
- Return on Equity (ROE)
- ROE experienced growth from approximately 15.2% in late 2020 to a peak exceeding 33% in late 2022, indicating strong profitability relative to shareholder equity during this period. Following this peak, ROE contracted sharply, falling into negative territory in late 2023 and early 2024, mirroring trends observed in net profit margin. In the latter part of the timeline, ROE shows a recovery trend back to positive values around 8.7% by early 2025, though it does not return to previous high levels.
In summary, the company's financial performance showed significant improvement in profitability and operational efficiency through 2022, accompanied by decreasing leverage. This was followed by a marked deterioration in profitability and asset utilization in late 2023 and early 2024, a period during which both net profit margin and ROE turned negative. Financial leverage increased modestly during this downturn. A recovery phase is evident towards the end of the period analyzed, with profitability and efficiency metrics improving though not reaching prior peak levels.
Two-Component Disaggregation of ROA
Pfizer Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2025-03-30), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-29), 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: 2023-10-01), 10-Q (reporting date: 2023-07-02), 10-Q (reporting date: 2023-04-02), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-02), 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The analysis of the quarterly financial ratios reveals several notable trends over the observed periods.
- Net Profit Margin (%)
- The net profit margin demonstrates an initial upward trajectory starting at approximately 22.95% in the first available data point, ascending to a peak of around 31.27% in early 2023. This increase suggests improved profitability during this timeframe. However, subsequent quarters show a pronounced decline, dropping sharply to negative territory around December 2023 and early 2024, reaching a low of -4.62%. Following this trough, the margin recovers gradually, returning to positive figures and stabilizing near 12.62% by the end of the observed period.
- Asset Turnover (ratio)
- Asset turnover exhibits a general increasing trend from 0.27 to a peak of 0.52 between early 2020 and late 2022, implying enhanced efficiency in utilizing assets to generate revenue. After peaking, the ratio declines moderately to approximately 0.25 by late 2023, before experiencing a modest recovery to about 0.3 towards the end of the timeline. This suggests fluctuations in asset utilization efficiency, with some weakening followed by partial recuperation.
- Return on Assets (ROA) (%)
- Corresponding with net profit margin trends, ROA shows a gradual increase from 6.23% in 2020 to a maximum around 15.91% in early 2023, indicating improved asset profitability. Thereafter, there is a notable decline, crossing into negative values in late 2023 and early 2024, reaching nearly -1.2%. Similar to net profit margin, ROA recovers slowly thereafter, ending at approximately 3.79% by the last recorded quarter. This pattern highlights a period of reduced asset efficiency followed by recovery efforts.
In summary, the financial ratios reflect a phase of improving profitability and operational efficiency up to early 2023, followed by a marked downturn with negative profitability and decreased asset utilization efficiency around late 2023 and early 2024. The latter part of the data suggests a recovery trajectory, with gradual improvements in profitability margins and asset returns. These shifts may indicate the impact of market, operational, or external factors affecting financial performance during the mid-to-late portions of the period under review.