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
RTX Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-03), 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 return on assets exhibited a negative trend at the end of 2020, with values of -2.17% for the quarter ending September 30, 2020, and improving slightly to -1.67% by December 31, 2020. Starting in the first quarter of 2021, ROA turned positive and demonstrated a general upward trend through 2023, reaching a peak of 3.43%. However, there was a notable decline in the first quarter of 2024 to 1.96%, followed by fluctuations in 2024 with values varying between 1.4% and 3.68%. The most recent data point at June 30, 2025, shows the ROA at 2.68%, indicating moderate improvement but some volatility in recent quarters.
- Financial Leverage
- Financial leverage showed a declining trend from 3.54 at the end of March 2020 to around 2.19-2.26 during 2021 and early 2022, reflecting a reduction in the company’s use of debt relative to equity. From mid-2023 onwards, leverage began to increase again, peaking at 2.73 in the third quarter of 2024, before slightly stabilizing near 2.68 by mid-2025. Overall, financial leverage moved from relatively high levels in early 2020 to more moderate levels, with a recent mild upward adjustment.
- Return on Equity (ROE)
- The return on equity followed a trend similar to ROA but with more pronounced volatility. ROE was negative at the end of 2020, reaching -4.88% in September and improving to -3.74% by December. Post-2020, ROE turned positive and displayed steady growth through most of 2021 and 2022, reaching above 7% by late 2022 and early 2023. There was a drop back to 4.59% in the first quarter of 2024, followed by fluctuations throughout 2024, with values ranging between 3.83% and 9.85%, and ending at 7.48% in the third quarter of 2025. These patterns indicate improving profitability with some instability in recent quarters.
Three-Component Disaggregation of ROE
RTX Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-03), 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).
The financial metrics presented demonstrate various trends in profitability, efficiency, leverage, and overall return to shareholders over the observed time periods.
- Net Profit Margin (%)
- Initially, the net profit margin was negative, reaching -6.22% at the end of 2020 and slightly improving to -4.44% in the subsequent quarter. Starting from the first quarter of 2021, the margin turned positive, exhibiting a general upward trajectory with occasional minor fluctuations. The margin peaked around 8.08% in mid-2023 before experiencing some volatility, dipping to as low as 3.12% at the end of 2023 and then rebounding again. By the end of the most recent periods, margins regained strength, reaching approximately 7.35%, suggesting an overall improvement in profitability across the span.
- Asset Turnover (ratio)
- Asset turnover started around 0.35 in late 2020 and displayed a steady and gradual increase over time. The ratio rose consistently with small increments each quarter, reaching 0.50 by mid-2025. This indicates enhanced efficiency in utilizing assets to generate revenue, reflecting improving operational efficiency.
- Financial Leverage (ratio)
- Financial leverage initially showed a sharp decline from 3.54 in the earliest recorded quarter down to approximately 2.25 in late 2020. For much of the subsequent period, leverage remained relatively stable, fluctuating slightly around the 2.2 to 2.3 range. Notably, starting in late 2023, leverage rose more significantly, reaching upwards of 2.7 by mid-2025. This rise suggests an increased reliance on debt or borrowed funds over the most recent quarters compared to previous stability.
- Return on Equity (ROE) (%)
- ROE mirrored the net profit margin trends, initially negative in 2020 with values near -4.88%, indicating unprofitable equity returns. It turned positive by early 2021 and increased steadily to a peak exceeding 7.9% in mid-2025. Some fluctuations are apparent, especially around late 2023 where ROE dipped to just over 3.8%, but the overall trend is clearly positive. The improvements reflect stronger profitability and effective use of shareholder equity.
In summary, the data indicate a company moving from initial unprofitability towards sustained profitability, accompanied by gradually improving asset utilization and a stable then rising leverage profile. Despite some short-term fluctuations, the trends in net profit margin and ROE suggest successful management efforts to enhance earnings capacity and shareholder returns. The increasing asset turnover ratio supports the narrative of improved operational efficiency, while the late increase in financial leverage may warrant attention regarding risk management going forward.
Two-Component Disaggregation of ROA
RTX Corp., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2025-06-30), 10-Q (reporting date: 2025-03-31), 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-03), 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).
The financial data reveals notable trends across the analyzed periods in net profit margin, asset turnover, and return on assets (ROA).
- Net Profit Margin
- The net profit margin shows significant variability initially, with negative values recorded around the end of 2020 (e.g., -6.22% and -4.44%), indicating losses during this phase. Subsequently, there is a consistent positive recovery beginning in early 2021. Margins progressively improve, reaching values exceeding 7% through late 2022 and early 2023, which suggests enhanced profitability. However, from mid-2023 to early 2024, the margin experiences some fluctuations, briefly decreasing but remaining positive overall. The latest quarters show renewed growth, peaking at 7.35%, signaling a strengthening profit position.
- Asset Turnover
- Asset turnover exhibits a stable upward trajectory throughout the time frame. Beginning from around 0.35 in late 2020, the ratio gradually increases, reflecting more efficient use of assets to generate revenue. By early 2023, it stabilizes slightly above 0.4, with minor fluctuations thereafter. The most recent observations in 2025 indicate further gains, achieving a value of 0.5, which is the highest in the period reviewed. This trend points to improved operational efficiency in asset utilization.
- Return on Assets (ROA)
- ROA follows a pattern similar to that of net profit margin, starting with negative returns around the end of 2020 (e.g., -2.17%, -1.67%), indicating net losses in relation to total assets. Post-2020, ROA rises steadily, turning positive from early 2021 onward and reaching a peak just above 3.4% in late 2022 to early 2023. Thereafter, there are minor declines and volatility, with the metric fluctuating between 1.4% and around 3.7%. The peak observed at the end of 2024 through early 2025 reflects improved asset profitability, consistent with the trends in net profit margins and asset turnover.
In summary, the analyzed financial indicators reveal a recovery and strengthening phase after an initial period of losses and inefficiency around 2020. Profitability metrics such as net profit margin and ROA have turned positive and improve overall, although with some short-term variability. Asset turnover has steadily increased, demonstrating enhanced efficiency in asset usage. These trends collectively suggest operational improvements and better financial performance over the reviewed periods.