SLB N.V. (NYSE:SLB)

The analysis of the two-component DuPont disaggregation reveals three distinct phases in the return on equity (ROE) profile: a period of expansion, a period of stabilization, and a subsequent period of contraction.

Return on Assets (ROA)

ROA exhibited a consistent upward trajectory from March 2022 (4.98%), peaking at 9.12% in December 2024. This trend suggests a significant improvement in operational efficiency and asset utilization throughout this window. However, a reversal occurred starting in early 2025, with ROA declining to 5.58% by June 2026, indicating a deterioration in the capacity to generate earnings from the asset base.

Financial Leverage

Financial leverage showed a general trend of reduction, moving from 2.73 in March 2022 to a low of 2.08 in March 2026. The leverage ratio remained relatively stable, fluctuating between 2.31 and 2.43 from March 2023 through March 2025. The overall decrease in this ratio indicates a shift toward a more conservative capital structure and a reduced reliance on debt to amplify equity returns.

Return on Equity (ROE)

ROE increased from 13.63% in early 2022 to a plateau of approximately 21% maintained between March 2023 and March 2025. This initial growth was primarily driven by the expansion of ROA, which more than offset the modest decline in financial leverage. In the final period of analysis, ROE experienced a sharp contraction to 11.89% by June 2026. This decline was the result of a dual negative impact: a simultaneous drop in asset profitability and further deleveraging of the balance sheet.

The Return on Equity (ROE) exhibited a period of significant expansion followed by a sharp contraction. From March 31, 2022, to March 31, 2025, ROE rose from 13.63% to a peak of 21.47%. However, a marked decline followed, with the ratio falling to 11.89% by June 30, 2026, indicating a deterioration in the overall return generated on shareholder equity.

Net Profit Margin

Profitability showed an initial strong upward trajectory, increasing from 8.84% in March 2022 to a peak of 12.94% in March 2023. This margin remained relatively stable, fluctuating between 12.2% and 13.0% through the end of 2024. Starting in early 2025, a consistent downward trend emerged, with the margin compressing to 8.53% by June 2026, representing a primary driver of the decline in ROE.

Asset Turnover

Asset efficiency improved steadily during the first three years of the period. The ratio increased from 0.56 in March 2022 to a high of 0.74 between December 2024 and March 2025. This growth indicates a more efficient utilization of assets to generate revenue. However, this efficiency peaked in early 2025, subsequently declining to 0.65 by June 2026.

Financial Leverage

A general trend of deleveraging is observed throughout the majority of the period. Leverage decreased from 2.73 in March 2022 to 2.31 by September 2024. Despite a brief spike to 2.51 in March 2025, the ratio continued to trend downward, ending at 2.13 in June 2026. The reduction in financial leverage acted as a slight drag on ROE, as the company relied less on debt to amplify returns.

The analysis indicates that the growth in ROE through early 2025 was driven by simultaneous expansions in profit margins and asset turnover, which more than offset the reduction in financial leverage. Conversely, the collapse in ROE during 2025 and 2026 was the result of a synchronized decline in all three DuPont components: shrinking profit margins, reduced asset efficiency, and continued deleveraging.

The Return on Equity (ROE) exhibits a distinct bell-shaped trajectory over the analyzed period, characterized by a multi-year expansion followed by a sharp contraction. ROE rose from 13.63% in March 2022 to a peak of 21.47% in March 2025, before declining significantly to 11.89% by June 2026.

Operating Profitability (EBIT Margin)

A period of operational expansion occurred between March 2022 and September 2023, with the EBIT margin increasing from 13.13% to 17.60%. Following this peak, a consistent downward trend emerged, with margins compressing to 12.05% by June 2026. This deterioration in operating profitability is a primary driver of the overall decline in ROE during the latter half of the period.

Asset Efficiency (Asset Turnover)

Asset turnover showed steady improvement from 0.56 in early 2022 to a peak of 0.74 in December 2024, indicating enhanced efficiency in utilizing assets to generate revenue. However, this efficiency gain reversed starting in 2025, with the ratio falling to 0.65 by June 2026.

Financial Leverage

A general trend of deleveraging is evident, as the financial leverage ratio declined from 2.73 in March 2022 to 2.13 in June 2026. While the reduction in leverage indicates a more conservative capital structure and lower financial risk, it also contributed to the downward pressure on ROE by reducing the multiplier effect on earnings.

Interest and Tax Burdens

The tax burden remained highly stable, fluctuating within a narrow range between 0.79 and 0.82. The interest burden improved from 0.83 in March 2022 to a peak of 0.92 in late 2024, suggesting a reduction in the relative impact of interest expenses on operating income. A slight softening of the interest burden to 0.88 occurred toward the end of the period.

In summary, the initial growth in ROE was driven by simultaneous improvements in EBIT margins and asset turnover, which more than offset the impact of a declining leverage ratio. The subsequent decline in ROE was the result of a synchronized contraction in operating margins and asset efficiency, combined with continued deleveraging.

The analysis of the two-component disaggregation of Return on Assets (ROA) reveals a cyclical performance pattern characterized by an expansion phase followed by a period of contraction.

Net Profit Margin

A consistent upward trajectory is observed from March 2022, where the margin stood at 8.84%, peaking at 12.97% in September 2023. Following this peak, a gradual decline began, accelerating after March 2024, and eventually receding to 8.53% by June 2026. This sequence indicates a period of increasing profitability per unit of revenue that later transitioned into a sustained margin compression.

Asset Turnover

Asset efficiency improved steadily from a ratio of 0.56 in March 2022 to a peak of 0.74 in December 2024 and March 2025. This trend reflects an enhanced capacity to generate revenue from the asset base. However, a contraction occurred starting in mid-2025, with the ratio falling to 0.65 by June 2026, signaling a reduction in asset utilization efficiency.

Return on Assets (ROA)

The overall ROA reflects the compounded impact of both profit margins and asset turnover. ROA increased from 4.98% in March 2022 to a maximum of 9.12% in December 2023. The subsequent decline to 5.58% by June 2026 was primarily driven by the erosion of net profit margins, although the decline was further accelerated by the deterioration in asset turnover observed in 2025.

The peak of operational performance was achieved between late 2023 and early 2024. The subsequent downward trend in ROA is attributed to the simultaneous deterioration of both components, with profit margin volatility serving as the primary catalyst for the decline in overall asset productivity.

The Return on Assets (ROA) exhibited a cyclical trajectory over the analyzed period, rising from 4.98% in March 2022 to a peak of 9.12% in December 2024, before declining to 5.58% by June 2026. This overall trend suggests a period of strong operational scaling and efficiency gains that were subsequently offset by compressing margins and reduced asset productivity.

Operating Profitability

The EBIT margin served as a primary driver of the initial ROA expansion, increasing from 13.13% in March 2022 to a peak of 17.50% in March 2023. A period of relative stability followed, with margins hovering around 17% through early 2024. However, a sustained contraction began in late 2024, with the margin falling to 12.05% by June 2026, indicating a significant reduction in operating efficiency.

Asset Utilization Efficiency

Asset turnover showed a consistent upward trend for the first half of the period, improving from 0.56 in March 2022 to a high of 0.74 in December 2024. This indicates an increased capability to generate revenue from the asset base. A sharp reversal occurred in September 2025, when the ratio dropped to 0.64, remaining depressed through June 2026 and contributing to the overall decline in ROA.

Financial Burden Ratios

The tax burden remained largely static, fluctuating marginally between 0.79 and 0.82, suggesting a consistent effective tax environment. The interest burden showed a positive trend from 0.83 in March 2022 to a peak of 0.92 in late 2024, which indicates that interest expenses consumed a smaller portion of operating income during the growth phase. This ratio declined slightly toward the end of the period, reaching 0.88 by June 2026.

The synthesis of these components reveals that the peak in ROA during late 2024 was the result of a simultaneous optimization of both operating margins and asset turnover. The subsequent decline in ROA was not driven by tax or interest burdens, but rather by the dual deterioration of the EBIT margin and asset utilization efficiency starting in 2025.

The analysis of the net profit margin disaggregation reveals a cyclical trend in profitability, characterized by an initial expansion phase followed by a gradual contraction. Net profit margins rose from 8.84% in March 2022 to a peak of 12.97% in September 2023, before trending downward to 8.53% by June 2026. This trajectory is primarily dictated by movements in operational efficiency rather than financing or tax fluctuations.

EBIT Margin

Operational profitability served as the primary driver of net margin volatility. The EBIT margin experienced significant growth from 13.13% in March 2022, reaching a peak of 17.50% in March 2023. Following this peak, a sustained downward trend is observed, with the margin declining to 12.05% by June 2026, suggesting a long-term compression in operating margins.

Interest Burden

The interest burden ratio improved steadily from 0.83 in March 2022 to a plateau of 0.92 between June 2024 and December 2024, indicating that interest expenses consumed a smaller proportion of operating income during this period. However, a slight deterioration occurred in the final quarters, with the ratio receding to 0.88 by June 2026.

Tax Burden

The tax burden remained remarkably stable throughout the analyzed timeframe, oscillating within a tight range between 0.79 and 0.82. The lack of significant variance in this ratio indicates that changes in the net profit margin were not influenced by shifts in the effective tax rate.

In summary, while improvements in the interest burden provided some support to the bottom line through 2024, these gains were offset by the persistent decline in the EBIT margin starting in early 2023. The convergence of a falling EBIT margin and a slightly declining interest burden in the final periods contributed to the overall reduction in net profit margins toward the end of the projection period.