Profitability Analysis
Difficulty level: Basic
Profitability ratios measure the company's ability to generate profitable sales from its resources (assets).
Ratios (Summary)
Target Corp., profitability ratios
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Return on Sales | |||||||
| Gross profit margin | 29.53% | 29.73% | 30.10% | 30.49% | 30.54% | 29.78% | |
| Operating profit margin | 5.83% | 7.46% | 7.77% | 7.98% | 7.37% | 7.00% | |
| Net profit margin | 2.72% | 4.17% | 4.28% | 4.44% | 3.92% | 3.52% | |
| Return on Investment | |||||||
| Return on equity (ROE) | 12.14% | 18.11% | 18.51% | 18.85% | 16.21% | 16.15% | |
| Return on assets (ROA) | 4.42% | 6.23% | 6.28% | 6.68% | 5.59% | 5.02% | |
Source: Based on data from Target Corp. Annual Reports
| Ratio | Description | The company |
|---|---|---|
| Gross profit margin | Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. | Target Corp.'s gross profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
| Operating profit margin | A profitability ratio calculated as operating income divided by revenue. | Target Corp.'s operating profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
| Net profit margin | An indicator of profitability, calculated as net income divided by revenue. | Target Corp.'s net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
| ROE | A profitability ratio calculated as net income divided by shareholders' equity. | Target Corp.'s ROE deteriorated from 2012 to 2013 and from 2013 to 2014. |
| ROA | A profitability ratio calculated as net income divided by total assets. | Target Corp.'s ROA deteriorated from 2012 to 2013 and from 2013 to 2014. |
Gross Profit Margin
Target Corp., gross profit margin calculation
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | |||||||
| Gross margin | 21,436 | 21,392 | 20,606 | 20,061 | 19,373 | 18,727 | |
| Sales | 72,596 | 71,960 | 68,466 | 65,786 | 63,435 | 62,884 | |
| Ratio | |||||||
| Gross profit margin1 | 29.53% | 29.73% | 30.10% | 30.49% | 30.54% | 29.78% | |
Source: Based on data from Target Corp. Annual Reports
2014 Calculations
1 Gross profit margin = 100 × Gross margin ÷ Sales
= 100 × 21,436 ÷ 72,596 = 29.53%
| Ratio | Description | The company |
|---|---|---|
| Gross profit margin | Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. | Target Corp.'s gross profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
Operating Profit Margin
Target Corp., operating profit margin calculation, comparison to benchmarks
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | |||||||
| Earnings before interest expense and income taxes | 4,229 | 5,371 | 5,322 | 5,252 | 4,673 | 4,402 | |
| Sales | 72,596 | 71,960 | 68,466 | 65,786 | 63,435 | 62,884 | |
| Ratio | |||||||
| Operating profit margin1 | 5.83% | 7.46% | 7.77% | 7.98% | 7.37% | 7.00% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors | |||||||
| Amazon.com Inc. | 0.20% | 1.00% | 1.11% | 1.79% | 4.11% | –% | |
| Wal-Mart Stores Inc. | 5.68% | 5.96% | 5.98% | 6.10% | 5.91% | 5.68% | |
| Operating Profit Margin, Sector | |||||||
| Broadline Retailers | –% | 5.54% | 5.68% | 5.94% | 5.97% | –% | |
| Operating Profit Margin, Industry | |||||||
| Consumer Services | –% | 8.05% | 7.78% | 8.02% | 7.66% | –% | |
Source: Based on data from Target Corp. Annual Reports
2014 Calculations
1 Operating profit margin = 100 × Earnings before interest expense and income taxes ÷ Sales
= 100 × 4,229 ÷ 72,596 = 5.83%
| Ratio | Description | The company |
|---|---|---|
| Operating profit margin | A profitability ratio calculated as operating income divided by revenue. | Target Corp.'s operating profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
Net Profit Margin
Target Corp., net profit margin calculation, comparison to benchmarks
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | |||||||
| Net earnings | 1,971 | 2,999 | 2,929 | 2,920 | 2,488 | 2,214 | |
| Sales | 72,596 | 71,960 | 68,466 | 65,786 | 63,435 | 62,884 | |
| Ratio | |||||||
| Net profit margin1 | 2.72% | 4.17% | 4.28% | 4.44% | 3.92% | 3.52% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors | |||||||
| Amazon.com Inc. | -0.27% | 0.37% | -0.06% | 1.31% | 3.37% | –% | |
| Wal-Mart Stores Inc. | 3.39% | 3.65% | 3.54% | 3.91% | 3.54% | 3.34% | |
| Net Profit Margin, Sector | |||||||
| Broadline Retailers | –% | 3.31% | 3.24% | 3.74% | 3.58% | –% | |
| Net Profit Margin, Industry | |||||||
| Consumer Services | –% | 5.14% | 4.59% | 4.87% | 4.54% | –% | |
Source: Based on data from Target Corp. Annual Reports
2014 Calculations
1 Net profit margin = 100 × Net earnings ÷ Sales
= 100 × 1,971 ÷ 72,596 = 2.72%
| Ratio | Description | The company |
|---|---|---|
| Net profit margin | An indicator of profitability, calculated as net income divided by revenue. | Target Corp.'s net profit margin deteriorated from 2012 to 2013 and from 2013 to 2014. |
Return on Equity (ROE)
Target Corp., ROE calculation, comparison to benchmarks
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | |||||||
| Net earnings | 1,971 | 2,999 | 2,929 | 2,920 | 2,488 | 2,214 | |
| Shareholders' investment | 16,231 | 16,558 | 15,821 | 15,487 | 15,347 | 13,712 | |
| Ratio | |||||||
| ROE1 | 12.14% | 18.11% | 18.51% | 18.85% | 16.21% | 16.15% | |
| Benchmarks | |||||||
| ROE, Competitors | |||||||
| Amazon.com Inc. | -2.24% | 2.81% | -0.48% | 8.13% | 16.78% | –% | |
| Wal-Mart Stores Inc. | 21.01% | 22.27% | 22.01% | 23.91% | 20.26% | 20.53% | |
| ROE, Sector | |||||||
| Broadline Retailers | –% | 19.75% | 19.50% | 21.72% | 19.34% | –% | |
| ROE, Industry | |||||||
| Consumer Services | –% | 17.83% | 15.66% | 15.82% | 13.88% | –% | |
Source: Based on data from Target Corp. Annual Reports
2014 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders' investment
= 100 × 1,971 ÷ 16,231 = 12.14%
| Ratio | Description | The company |
|---|---|---|
| ROE | A profitability ratio calculated as net income divided by shareholders' equity. | Target Corp.'s ROE deteriorated from 2012 to 2013 and from 2013 to 2014. |
Return on Assets (ROA)
Target Corp., ROA calculation, comparison to benchmarks
| Feb 1, 2014 | Feb 2, 2013 | Jan 28, 2012 | Jan 29, 2011 | Jan 30, 2010 | Jan 31, 2009 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | |||||||
| Net earnings | 1,971 | 2,999 | 2,929 | 2,920 | 2,488 | 2,214 | |
| Total assets | 44,553 | 48,163 | 46,630 | 43,705 | 44,533 | 44,106 | |
| Ratio | |||||||
| ROA1 | 4.42% | 6.23% | 6.28% | 6.68% | 5.59% | 5.02% | |
| Benchmarks | |||||||
| ROA, Competitors | |||||||
| Amazon.com Inc. | -0.44% | 0.68% | -0.12% | 2.50% | 6.13% | –% | |
| Wal-Mart Stores Inc. | 7.83% | 8.37% | 8.12% | 9.07% | 8.40% | 8.20% | |
| ROA, Sector | |||||||
| Broadline Retailers | –% | 6.96% | 6.82% | 7.99% | 7.68% | –% | |
| ROA, Industry | |||||||
| Consumer Services | –% | 7.20% | 6.41% | 6.69% | 6.35% | –% | |
Source: Based on data from Target Corp. Annual Reports
2014 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × 1,971 ÷ 44,553 = 4.42%
| Ratio | Description | The company |
|---|---|---|
| ROA | A profitability ratio calculated as net income divided by total assets. | Target Corp.'s ROA deteriorated from 2012 to 2013 and from 2013 to 2014. |