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.
Two-Component Disaggregation of ROE
Target Corp., decomposition of ROE
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Return on Assets (ROA)
- The ROA exhibited a fluctuating trend over the observed periods. Initially, it increased from 7.67% in early 2020 to a peak of 12.91% by January 2022. This was followed by a notable decline to 5.21% in January 2023. Subsequently, the ROA demonstrated a recovery, rising to 7.48% in early 2024 before slightly decreasing to 7.08% in early 2025. Overall, the ROA illustrates volatility with a significant peak around 2022 and a stabilization near the 7% range in the later periods.
- Financial Leverage
- The financial leverage ratio displayed fluctuations across the time frame. It started at 3.62 in February 2020 and slightly decreased to 3.55 by January 2021. A marked increase occurred afterward, reaching a maximum of 4.75 in January 2023. Post this peak, the leverage ratio declined steadily to 4.12 in early 2024 and further to 3.94 by early 2025. This trend indicates a period of increased debt utilization or asset financing around 2022-2023, followed by a reduction in leverage levels in the subsequent years.
- Return on Equity (ROE)
- The ROE exhibited considerable variability throughout the periods. It started at 27.73% in early 2020 and rose to 30.25% by early 2021. A substantial increase was observed, culminating in a peak of 54.15% in early 2022. This sharp increase was followed by a significant drop to 24.75% in January 2023. The ratio then improved, reaching 30.81% in early 2024, before slightly declining to 27.89% in early 2025. The ROE trend mirrors the patterns observed in ROA and financial leverage, suggesting an intertwined relationship between these metrics influencing equity returns.
Three-Component Disaggregation of ROE
Target Corp., decomposition of ROE
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Net Profit Margin
- The net profit margin exhibited variability over the analyzed periods. It initially increased from 4.2% in early 2020 to a peak of 6.55% in early 2022. Subsequently, it declined sharply to 2.55% in early 2023, followed by a moderate recovery to approximately 3.85% in early 2024, maintaining a similar level into 2025. This trend suggests fluctuating profitability with a significant drop in 2023 before stabilizing.
- Asset Turnover
- Asset turnover showed an overall increasing trend until early 2023, moving from 1.83 in 2020 and 2021 to a peak of 2.05 in 2023. After this peak, it gradually declined to 1.94 in early 2024 and further to 1.84 in 2025. This pattern indicates improving efficiency in asset utilization up to 2023, followed by a reduction in turnover efficiency in subsequent years.
- Financial Leverage
- Financial leverage increased from 3.62 in early 2020 to a high of 4.75 in 2023, indicating a growing reliance on debt or other liabilities relative to equity during this period. After 2023, leverage decreased to 4.12 in 2024 and further to 3.94 in 2025, suggesting a de-leveraging trend or reduced financial risk exposure in recent years.
- Return on Equity (ROE)
- ROE followed a highly fluctuating pattern. It rose from 27.73% in 2020 to a significant peak of 54.15% in 2022, coinciding with the peak in net profit margin. However, it then declined sharply to 24.75% in 2023. Subsequently, ROE increased again to around 30.81% in 2024 and slightly declined to 27.89% in 2025. These fluctuations correspond to variations in profitability, leverage, and asset efficiency over the years.
Five-Component Disaggregation of ROE
Target Corp., decomposition of ROE
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Tax Burden
- The tax burden ratio remained relatively stable over the analyzed periods, fluctuating slightly around 0.78 to 0.81. This consistency suggests a stable effective tax rate with minor variations that do not indicate significant changes in tax management or policy impact.
- Interest Burden
- The interest burden showed some variability, starting at 0.90 in 2020, dipping to a low of 0.85 in 2021, then increasing to a peak of 0.95 in 2022 before moderately stabilizing around 0.88 to 0.93 in the subsequent years. This pattern could imply changes in interest expenses relative to earnings before interest and taxes, with 2022 reflecting the most efficient period in managing interest costs.
- EBIT Margin
- The EBIT margin exhibited notable fluctuations throughout the periods. It increased steadily from 5.99% in 2020 to a high of 8.8% in 2022, indicating improved operational profitability. However, there was a sharp decline in 2023 to 3.57%, followed by partial recovery to about 5.4% and 5.32% in the last two periods. This volatility suggests operational challenges or changes in cost structure that impacted profitability significantly in 2023.
- Asset Turnover
- Asset turnover increased from 1.83 in 2020 to a peak of 2.05 in 2023, indicating improving efficiency in utilizing assets to generate sales. However, this was followed by a decline to 1.94 and 1.84 in the subsequent years, suggesting a slight reduction in asset utilization efficiency after 2023, though still close to the initial values.
- Financial Leverage
- Financial leverage trended upward from 3.62 in 2020, reaching its maximum at 4.75 in 2023, before declining to 4.12 and 3.94 in the last two periods. This implies an increasing use of debt or equity leverage up to 2023, with a subsequent reduction, potentially reflecting efforts to deleverage or optimize capital structure.
- Return on Equity (ROE)
- ROE showed significant volatility, rising from 27.73% in 2020 to an exceptional 54.15% in 2022, which coincided with the peak in EBIT margin and increasing financial leverage. However, this returned to a more normalized level of 24.75% in 2023 before improving again to about 30% in 2024 and dropping slightly to 27.89% in 2025. The fluctuations in ROE are reflective of operational profitability changes combined with varying leverage levels.
Two-Component Disaggregation of ROA
Target Corp., decomposition of ROA
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Net Profit Margin
- The net profit margin exhibits fluctuations across the observed periods. It started at 4.2% in 2020 and increased to a peak of 6.55% in 2022. Subsequently, it dropped sharply to 2.55% in 2023, before recovering moderately to approximately 3.85% in the following years 2024 and 2025. This pattern suggests variability in profitability relative to sales, with a notable decline after 2022 and only partial recovery thereafter.
- Asset Turnover
- This ratio showed an initial stability between 2020 and 2021 at 1.83, followed by a gradual increase, reaching its highest point at 2.05 in 2023. However, it declined in the subsequent years to 1.94 in 2024 and further to 1.84 in 2025. The trend reflects an improvement in the efficiency of asset utilization until 2023, after which the efficiency diminished somewhat but remained close to the initial values.
- Return on Assets (ROA)
- The ROA demonstrated an overall upward trend from 7.67% in 2020 to a peak of 12.91% in 2022, indicating enhanced profitability relative to total assets. However, this was followed by a pronounced decrease to 5.21% in 2023. Over the next two years, ROA showed a recovery trend, rising to 7.48% in 2024 and slightly declining to 7.08% in 2025. These variations suggest that the company’s ability to generate earnings from its assets was highly variable, with a substantial dip after 2022 and partial but inconsistent recovery thereafter.
Four-Component Disaggregation of ROA
Target Corp., decomposition of ROA
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Tax Burden
- The tax burden ratio remained relatively stable over the observed period, fluctuating within a narrow range between 0.78 and 0.81. This indicates consistent effective tax rates applied by the company across these years without significant changes in tax-related expenses or benefits.
- Interest Burden
- The interest burden ratio showed moderate variation, declining from 0.90 to a low of 0.85 in early 2021, then increasing steadily to reach 0.93 by early 2025. This pattern suggests some fluctuations in interest expenses relative to earnings before interest and taxes, with a general trend towards higher interest burden in the most recent years.
- EBIT Margin
- EBIT margins exhibited notable volatility, starting at 5.99%, peaking at 8.8% in early 2022, then sharply declining to 3.57% by early 2023. Following this decline, a recovery trend was observed, with margins improving to above 5% in the latest years, though not returning to the previous peak levels. This indicates variability in operating profitability possibly tied to changes in operational efficiency or cost structure.
- Asset Turnover
- Asset turnover ratios demonstrated a gradual upward trend until 2023, increasing from 1.83 to a peak of 2.05, reflecting improved efficiency in generating sales from assets. However, this was followed by a decline to 1.84 in early 2025, indicating a recent reduction in asset utilization effectiveness.
- Return on Assets (ROA)
- ROA closely mirrored the patterns observed in EBIT margin and asset turnover, rising from 7.67% in 2020 to a high of 12.91% in 2022, then dropping significantly to 5.21% by 2023. Subsequent partial recovery brought ROA back to around 7% in the latest period. These fluctuations suggest sensitivity of overall profitability to both operational performance and asset efficiency.
Disaggregation of Net Profit Margin
Target Corp., decomposition of net profit margin ratio
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Tax Burden
- The tax burden ratio has remained relatively stable over the analyzed periods, fluctuating slightly around 0.78 to 0.81. This indicates consistent tax effects on the company's earnings before taxes across the years, with minimal variability in the proportion of earnings retained after taxes.
- Interest Burden
- The interest burden ratio demonstrates some variability over the periods, starting at 0.90 in 2020, decreasing to 0.85 in 2021, and subsequently increasing again to values around 0.91 to 0.93 in the most recent years. This pattern suggests changes in interest expenses relative to earnings before interest and taxes, potentially reflecting fluctuations in debt levels or interest costs.
- EBIT Margin
- The EBIT margin exhibited a general upward trend from 5.99% in 2020 to a peak of 8.8% in 2022, indicating improved operating profitability during this interval. However, there was a sharp decline to 3.57% in 2023, followed by a partial recovery to approximately 5.3-5.4% in the subsequent years. This volatility suggests periods of operational challenges or increased costs impacting earnings before interest and taxes.
- Net Profit Margin
- The net profit margin follows a trajectory similar to the EBIT margin. It increased from 4.2% in 2020 to 6.55% in 2022, representing enhanced overall profitability. Subsequently, it decreased significantly to 2.55% in 2023, with a moderate rebound to about 3.8-3.85% in 2024 and 2025. This pattern reflects the company's susceptibility to fluctuating profit levels after accounting for all expenses, including taxes and interest.