DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
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Two-Component Disaggregation of ROE
Royal Caribbean Cruises Ltd., decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × | |||
| Dec 31, 2019 | = | × | |||
| Dec 31, 2018 | = | × | |||
| Dec 31, 2017 | = | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Return on Assets (ROA)
- The Return on Assets showed a declining trend from 7.29% in 2017 to 6.2% in 2019, indicating a gradual decrease in asset efficiency. Thereafter, a significant deterioration occurred in 2020 and 2021, with ROA falling sharply to -17.86% and -16.31% respectively, reflecting substantial losses or reduced profitability relative to total assets during this period.
- Financial Leverage
- Financial leverage increased steadily over the period. Starting at a ratio of 2.08 in 2017, it rose to 2.49 by 2018 and remained stable in 2019. A notable increase occurred in 2020, reaching 3.71, and further climbed to 6.34 in 2021. This indicates increased reliance on debt or other liabilities relative to equity, which could imply higher financial risk or capital structure changes.
- Return on Equity (ROE)
- Return on Equity demonstrated a positive but slightly fluctuating performance from 2017 to 2019, ranging between 15.18% and 16.31%. However, from 2020 onward, the ROE exhibited a dramatic decline, plunging to -66.18% in 2020 and further to -103.44% in 2021. These figures suggest severe losses affecting shareholders' returns, coinciding with the increased financial leverage and negative returns on assets.
Three-Component Disaggregation of ROE
Royal Caribbean Cruises Ltd., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Net Profit Margin
- The net profit margin exhibits positive values from 2017 through 2019, ranging from 17.16% to 19.08%, indicating consistent profitability during this period. However, there is a drastic decline in 2020, turning sharply negative to -262.47%, and this negative trend intensifies in 2021, reaching -343.34%. This pronounced deterioration suggests significant losses likely due to extraordinary challenges impacting operational profitability in those years.
- Asset Turnover
- The asset turnover ratio remains relatively stable from 2017 to 2019, fluctuating narrowly between 0.34 and 0.39. In 2020, the ratio declines steeply to 0.07 and further decreases to 0.05 in 2021. This significant reduction signifies a marked decrease in the efficiency with which the company utilizes its assets to generate revenue during the latter periods.
- Financial Leverage
- Financial leverage demonstrates a progressive increase throughout the observed years, starting from 2.08 in 2017 and rising modestly to 2.49 in 2018 and 2019. This upward trend escalates markedly in 2020 to 3.71 and reaches 6.34 in 2021, indicating an increased reliance on debt financing. The substantial rise suggests heightened financial risk potentially undertaken to manage adverse conditions.
- Return on Equity (ROE)
- The return on equity maintains positive values between 15.18% and 16.31% from 2017 to 2019, reflecting sound profitability relative to shareholder investment. However, ROE experiences a severe negative shift in 2020, falling to -66.18%, and further declines to -103.44% in 2021. This negative performance aligns with the downturns in net profit margin and increased leverage, illustrating significant erosion of shareholder value during these years.
Five-Component Disaggregation of ROE
Royal Caribbean Cruises Ltd., decomposition of ROE
Based on: 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), 10-K (reporting date: 2017-12-31).
- Tax Burden
- The tax burden ratio remained stable from 2017 through 2019 at approximately 0.98 to 0.99, indicating consistency in the proportion of earnings retained after taxes during this period. Data for 2020 and 2021 is unavailable, preventing further trend analysis for these years.
- Interest Burden
- Interest burden ratios showed a slight decrease from 0.85 in 2017 and 2018 to 0.82 in 2019. This indicates a marginal decline in earnings before interest charges as a proportion of earnings before interest and taxes over these years. Data from 2020 onward is missing.
- EBIT Margin
- The EBIT margin maintained a positive and relatively steady level between 21.19% and 22.81% from 2017 to 2019. However, a drastic downturn occurred in 2020 and 2021, with EBIT margins plunging to -224.93% and -261.98% respectively, signaling substantial operational losses in these years.
- Asset Turnover
- The asset turnover ratio declined steadily across the five-year period. Starting at 0.39 in 2017, the ratio decreased to 0.34 in 2018, slightly rebounded to 0.36 in 2019, and then sharply dropped to 0.07 and 0.05 in 2020 and 2021, reflecting deteriorated efficiency in utilizing assets to generate revenue during the latter years.
- Financial Leverage
- Financial leverage increased consistently over the period. From a moderate ratio of 2.08 in 2017 to 2.49 in 2018 and 2019, leverage surged to 3.71 in 2020 and further to 6.34 in 2021. This trend suggests a significant increase in reliance on debt financing, potentially heightening financial risk.
- Return on Equity (ROE)
- ROE was positive and relatively stable between 2017 and 2019, ranging from 15.18% to 16.31%. However, ROE turned sharply negative in 2020 and 2021, registering -66.18% and -103.44% respectively, indicative of severe losses eroding shareholder equity during these years.
Two-Component Disaggregation of ROA
Royal Caribbean Cruises Ltd., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × | |||
| Dec 31, 2019 | = | × | |||
| Dec 31, 2018 | = | × | |||
| Dec 31, 2017 | = | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Net Profit Margin
- The net profit margin demonstrated a positive trend from 2017 through 2019, starting at 18.51% in 2017, increasing slightly to 19.08% in 2018, and then declining to 17.16% in 2019. However, there was a significant and sharp decline in 2020 and 2021, with net profit margin turning deeply negative to -262.47% and -343.34%, respectively. This suggests severe losses during the latter two years, indicating a substantial deterioration in profitability.
- Asset Turnover
- The asset turnover ratio showed a downward trend over the period. It began at 0.39 in 2017 and declined to 0.34 in 2018. A minor recovery occurred in 2019 when the ratio increased to 0.36. Nonetheless, a steep decrease followed in 2020 to 0.07 and further down to 0.05 in 2021. This decline reflects a reduced efficiency in using assets to generate revenue, particularly pronounced in the last two years.
- Return on Assets (ROA)
- The return on assets decreased steadily from 7.29% in 2017 to 6.54% in 2018, and then to 6.2% in 2019. A sharp negative shift occurred in 2020, with ROA falling to -17.86%, and remaining negative at -16.31% in 2021. This trend indicates a significant loss in asset profitability, corroborating the negative financial performance seen in the profitability and turnover ratios.
Four-Component Disaggregation of ROA
Royal Caribbean Cruises Ltd., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | × | |||||
| Dec 31, 2020 | = | × | × | × | |||||
| Dec 31, 2019 | = | × | × | × | |||||
| Dec 31, 2018 | = | × | × | × | |||||
| Dec 31, 2017 | = | × | × | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Tax Burden
- The tax burden ratio remained relatively stable at around 0.99 from 2017 to 2019, indicating a consistent level of taxes paid relative to earnings before taxes during this period. Data for subsequent years is unavailable.
- Interest Burden
- The interest burden ratio also showed stability from 2017 to 2019, maintaining a value around 0.82 to 0.85. This suggests that interest expenses remained relatively steady in proportion to earnings before interest and taxes. No data is reported beyond 2019.
- EBIT Margin
- From 2017 to 2019, the EBIT margin demonstrated moderate fluctuations, ranging between 21% and 23%, reflecting consistent operational profitability. However, there was a drastic decline in 2020 and 2021, with margins plunging to -224.93% and -261.98%, respectively, indicating heavy operational losses during these years.
- Asset Turnover
- Asset turnover showed a gradual decrease over the five-year period, declining from 0.39 in 2017 to 0.05 in 2021. This trend suggests a significant reduction in the efficiency with which the company used its assets to generate revenue, particularly marked by a sharp drop from 2019 onwards.
- Return on Assets (ROA)
- ROA decreased progressively from 7.29% in 2017 to 6.2% in 2019, indicating diminishing profitability relative to asset base in this timeframe. In 2020 and 2021, ROA turned sharply negative to -17.86% and -16.31%, respectively, reflecting substantial losses and the inability to generate positive returns on assets during these years.
Disaggregation of Net Profit Margin
Royal Caribbean Cruises Ltd., decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
- Tax Burden
- The tax burden ratio remained relatively stable from 2017 to 2019, with values of 0.99, 0.99, and 0.98 respectively. No data is available for 2020 and 2021, limiting trend analysis for those years.
- Interest Burden
- The interest burden ratio showed a slight decline over the three years recorded, moving from 0.85 in both 2017 and 2018 to 0.82 in 2019. Data for 2020 and 2021 is missing, preventing further assessment.
- EBIT Margin
- The EBIT margin was positive and relatively stable between 2017 and 2019, with percentages of 22.14%, 22.81%, and 21.19% respectively. There was a dramatic decrease in 2020 and 2021, with negative margins of -224.93% and -261.98%, indicating significant operational losses during these years.
- Net Profit Margin
- Similarly, net profit margin exhibited profitability from 2017 to 2019, recording 18.51%, 19.08%, and 17.16%. However, the margin turned sharply negative in 2020 and 2021, with values of -262.47% and -343.34%, reflecting substantial net losses during this period.