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.
Two-Component Disaggregation of ROE
Texas Pacific Land Corp., decomposition of ROE (quarterly data)
Based on: 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), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The financial data reveals notable trends in profitability and leverage ratios over the periods analyzed. The Return on Assets (ROA) showed a strong starting point at 53.28% in March 2020, followed by a general decline through December 2021, reaching a low of 27.48% in June 2021. After this period, ROA experienced a recovery, climbing to a peak near 51.35% in June 2022. Thereafter, a gradual decreasing trend is observed again, with ROA falling to a low point of 34.02% by the end of 2023 before slightly improving to 38.17% by September 2024.
Financial leverage remained relatively stable throughout the entire timeline, fluctuating slightly between 1.09 and 1.22 ratios. There is a subtle downward trend in leverage starting from around mid-2022, continuing through to the latest period in September 2024, where the leverage is recorded at 1.12, indicating modest deleveraging over time.
The Return on Equity (ROE) exhibits a pattern generally consistent with ROA but at higher percentage levels, indicative of the effects of financial leverage on equity returns. ROE peaked at 62.23% in March 2020 and tracked downward to 32.83% by June 2021. Following this, ROE rebounded strongly to reach near 59.03% in June 2022, mirroring the ROA recovery. Subsequently, ROE again followed a descending trajectory, bottoming at 37.11% in March 2024 before rebounding to 42.65% by September 2024.
In summary, the data suggests a period of initial strong profitability and returns on assets and equity, followed by a decline into mid-2021, a pronounced recovery during 2022, and subsequent moderation through 2023 and into 2024. Financial leverage remains stable with a slight downward trend, indicating a cautiously reduced reliance on debt financing. The observed changes in ROE relative to ROA reflect consistent leverage effects on shareholder returns throughout the periods considered.
Three-Component Disaggregation of ROE
Texas Pacific Land Corp., decomposition of ROE (quarterly data)
Based on: 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), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
- Net Profit Margin
- The net profit margin data is available from March 31, 2020, onward. It generally shows strong profitability, consistently remaining above 58%. Starting at 64.98% in March 2020, the margin exhibits slight fluctuations but maintains an upward trend over the four-year span, peaking at 66.88% in September 2022. The margin demonstrates stability, ending at a high of 65.34% by September 2024, indicating effective cost management and revenue generation relative to sales.
- Asset Turnover
- The asset turnover ratio begins from March 31, 2020, and displays a declining trend through December 2020, decreasing from 0.82 to 0.56. It continues to dip until June 2021, reflecting less efficient use of assets to generate sales. However, from September 2021 through June 2022, the ratio improves considerably, rising to 0.8. Post-mid 2022, the asset turnover progressively declines again, reaching 0.51 by September 2024. This overall pattern suggests fluctuating asset utilization efficiency, with periods of recuperation followed by gradual declines.
- Financial Leverage
- The financial leverage ratio is recorded for the entire period starting March 31, 2019. The ratio remains relatively stable, fluctuating slightly around a narrow range between 1.07 and 1.22. The highest values occur near the beginning of the period and around mid-2022, but there is a gradual downward drift to approximately 1.09 by June 2024. This consistent and low level of leverage implies conservative use of debt, minimizing financial risk.
- Return on Equity (ROE)
- Data on ROE is available from March 31, 2020. Initially, ROE experiences a significant decline from 62.23% at the start to a low of 32.83% by June 2021, indicating a reduction in profitability for shareholders during this period. Following this low point, ROE gradually improves, reaching approximately 59.03% by June 2022. Afterwards, the ratio declines again, falling to a trough of 37.11% in September 2024. The fluctuations in ROE suggest variations in net income relative to shareholder equity, reflecting changes in operational performance and possibly capital structure strategies over time.
Two-Component Disaggregation of ROA
Texas Pacific Land Corp., decomposition of ROA (quarterly data)
Based on: 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), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The analysis of the provided quarterly financial data reveals several notable trends across key performance metrics over the examined periods.
- Net Profit Margin
- The net profit margin shows consistent and strong performance starting from the first available data in March 2020. It begins at approximately 64.98% and generally fluctuates moderately within the high 50s to mid-60s percentile range throughout the reported periods. There is a slight upward trend observed from March 2022 through September 2024, peaking near 66.88%, indicating effective cost management or high profitability relative to revenue. This stability suggests sustained profit-generating efficiency over time.
- Asset Turnover
- Asset turnover starts relatively high at 0.82 in March 2020 but demonstrates a declining trend through the end of 2020, reaching as low as 0.47 by mid-2021. Subsequently, a recovery phase is observable with ratios rising back above 0.7 by mid-2022, though this rebound is not fully sustained as values trend downward again towards late 2023. The ratio ends at 0.58 in the latest quarter, reflecting somewhat improved asset utilization compared to the low points, but still below the initial high. This movement indicates varying efficiency in generating revenue from assets, with some periods of reduced activity or investment impact.
- Return on Assets (ROA)
- ROA data follows a pattern consistent with the asset turnover metric but adjusted in scale. Starting at a high 53.28% in early 2020, there is a steady decline until mid-2021, where it reaches a low of around 27.48%. From this point, ROA experiences recovery, peaking close to 51.35% by mid-2022 and maintaining relatively elevated levels thereafter, albeit with some volatility. By late 2024, the ROA stands near 38.17%. This trend indicates periods of fluctuating operational efficiency in converting assets into net income, influenced by both profitability and asset utilization changes seen in the other metrics.
Overall, the data reflects a company maintaining strong profitability margins despite fluctuating asset utilization. The fluctuations in asset turnover and ROA suggest adjustment phases possibly related to strategic shifts, asset management, or external economic factors. The generally stable and high net profit margins indicate robust control over expenses or pricing power, counterbalancing periods of lower asset efficiency.