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.
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- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Price to Sales (P/S) since 2012
- Analysis of Revenues
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Two-Component Disaggregation of ROE
ServiceNow Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-09-30), 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: 2024-03-31), 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).
- Return on Assets (ROA)
- The return on assets demonstrates an overall upward trend from March 2021 to September 2025. Initial values fluctuate moderately around the 2% range until the end of 2022. Starting from 2023, there is a marked increase, peaking significantly in mid-2023 with values surpassing 10%. Post this peak, the ROA stabilizes at a slightly lower rate but remains substantially higher than earlier years, consistently staying above 6%, indicating improved efficiency in asset utilization over the medium term.
- Financial Leverage
- Financial leverage shows a gradual decline from a high of 2.9 in early 2021 down to below 2 in the forecasted periods of 2025. This downward trajectory suggests a decreasing reliance on debt financing relative to equity, implying a reduction in financial risk. The decline is steady with minor fluctuations, reflecting a strategic move towards a more conservative capital structure over time.
- Return on Equity (ROE)
- The return on equity exhibits a pattern of initial moderate growth, starting near 5% in early 2021 and experiencing some volatility. There is a notable surge from early 2023 onwards, reaching above 22% and peaking close to 24% before moderating to around 15% in the forecasted periods. Despite the decrease from the peak, the ROE remains significantly above the earlier years' levels, indicating enhanced profitability and value generation for shareholders sustained in the longer term.
Three-Component Disaggregation of ROE
ServiceNow Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2025-09-30), 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: 2024-03-31), 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).
- Net Profit Margin
- The net profit margin exhibited a generally positive trend over the analyzed periods, starting at 3.15% in the first quarter of 2021 and rising gradually to exceed 20% by the end of 2023. There was a notable peak in profitability around the middle of 2023, reaching close to 20.34%. Following this peak, the margin experienced some decline but stabilized above 11%, maintaining a range between 11% and 14% through to the first quarter of 2025.
- Asset Turnover
- Asset turnover ratios demonstrated relative stability, with values fluctuating mildly between 0.52 and 0.62. Initially starting at 0.55 in early 2021, the ratio experienced minor rises and falls without a clear directional trend, maintaining around the mid-0.50s to high 0.50s. This indicates a fairly consistent efficiency in using assets to generate revenue across the examined quarters.
- Financial Leverage
- Financial leverage showed a declining trend over the periods observed. Beginning at a leverage ratio of 2.9 in early 2021, it decreased steadily, reaching a low of approximately 1.93 by early 2025. This downward movement suggests a gradual reduction in reliance on debt financing or a relative increase in equity financing over time, leading to a potentially lower risk financial structure.
- Return on Equity (ROE)
- Return on equity reflected a significant increase during the time frame, moving from around 5% at the start of 2021 to a peak above 23% at the end of 2023. Subsequently, there was a decrease, but ROE remained strong, stabilizing around 13% to 15% through to early 2025. This pattern suggests improved profitability and capital efficiency up to 2023, followed by a moderation phase while maintaining a solid return for shareholders.
- Summary
- Overall, financial performance indicated improved profitability and shareholder returns, particularly notable during the period ending in 2023. The company’s asset utilization remained steady, reflecting consistent operational efficiency. The reduction in financial leverage points to a conservative approach towards debt, which might provide financial stability amidst fluctuating profit margins and returns. The combination of rising profit margins and ROE until 2023, followed by a period of stabilization, highlights a phase of growth succeeded by consolidation.
Two-Component Disaggregation of ROA
ServiceNow Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2025-09-30), 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: 2024-03-31), 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).
- Net Profit Margin
- The net profit margin demonstrated a generally positive trajectory with some fluctuations over the observed periods. Initially, it showed a moderate increment, moving from 3.15% in early 2021 to nearly 4.5% by the end of 2022. A significant surge is observable in the first half of 2023, peaking around 19.3% to 20.34%. This sharp increase suggests a marked improvement in profitability, possibly due to better cost management or enhanced revenue quality. Following this peak, there was a decline stabilizing around 12.77% to 13.78% towards early 2025, indicating a normalization but maintaining higher profitability levels compared to the earlier years.
- Asset Turnover
- The asset turnover ratio exhibited relative stability throughout the period, fluctuating narrowly between 0.52 and 0.62. Initial values hovered in the mid-0.5 range, with a slight upward trend in late 2021 and early 2022 reaching approximately 0.62. However, this was followed by a modest decline and revenant oscillations without a clear trend, ending slightly higher at 0.58 in early 2025. This pattern suggests consistent efficiency in generating sales from assets, with no substantial shifts in operational efficiency or asset utilization.
- Return on Assets (ROA)
- Return on assets exhibited a progressive upward trend from 1.73% in the first quarter of 2021 to a marked peak of over 10% during 2023, aligning with the spike observed in net profit margin. This indicates enhanced profitability relative to asset base, reflecting improved earnings quality or efficiency. Following the peak, ROA declined to around 7% by early 2025 but remained substantially higher than the initial period. The fluctuations in ROA correspond closely with changes in net profit margin, reinforcing the inference of variation in profit generation rather than asset base changes alone.