Trane Technologies plc (NYSE:TT)

Return on Assets (ROA)

The Return on Assets shows a fluctuating trend over the quarters. Initially, there is a gradual decline from 7.16% in March 2019 to a low of 4.71% by December 2020. This period indicates a reduction in asset efficiency. Subsequently, from March 2021 onwards, a steady recovery is observed, culminating in a value of 10.08% by March 2023. This upward movement suggests improving asset utilization and operational efficiency over the latest periods.

Financial Leverage

Financial leverage remains relatively stable throughout the entire period, fluctuating within a narrow range between approximately 2.81 and 3.09. There is a minor increase observed around mid-2022, reaching 3.09, followed by a slight decline to 2.97 by March 2023. This stability indicates a consistent capital structure with moderate use of debt relative to equity, without significant leverage shifts.

Return on Equity (ROE)

Return on Equity displays a moderate downward movement during 2019 and 2020, declining from 20.58% to a trough of 13.34% at the end of 2020, indicating challenges impacting shareholder returns during that interval. From early 2021, a pronounced recovery trend is visible, with ROE ascending steadily to reach 29.88% by March 2023. This substantial improvement reflects enhanced profitability and efficiency in generating returns for equity holders in recent quarters.

Summary

Across the reviewed intervals, the company demonstrates a resilience in financial performance metrics. After a period of decline in both ROA and ROE during the pandemic-impacted quarters, there is a clear and sustained improvement in profitability ratios starting from 2021. Financial leverage remains mostly stable, suggesting consistent risk management concerning debt levels. Overall, the upward trends in ROA and ROE indicate strengthening operational effectiveness and shareholder value creation in recent periods.

Net Profit Margin

The net profit margin demonstrates a generally positive trend over the analyzed period. It started at 8.94% in early 2019, experienced a decline reaching a low of 6.75% in the third quarter of 2020, coinciding with the period affected by global economic disruptions. Since then, the margin has steadily improved, surpassing pre-decline levels and reaching 11.06% by the first quarter of 2023. This indicates enhanced profitability and operational efficiency over time.

Asset Turnover

Asset turnover showed moderate fluctuations throughout the period. It remained relatively stable around 0.8 in 2019, increased to a peak of 0.89 in early 2020, and then declined to its lowest point at 0.69 by the end of 2020. Following this decline, there is a clear recovery trend, with asset turnover improving steadily to reach 0.91 in the first quarter of 2023, indicating more effective use of assets to generate sales.

Financial Leverage

Financial leverage ratios fluctuated within a narrow range across the timeframe. Starting at approximately 2.87 in early 2019, the ratio slightly increased to above 3.0 around mid-2020 and mid-2022, reflecting modestly higher reliance on debt financing in these periods. The leverage ratio settled around 2.97 in early 2023, suggesting relatively stable capital structure management with limited risk escalation from leverage.

Return on Equity (ROE)

Return on equity experienced notable variability but overall manifested an upward trajectory. It declined from 20.58% in early 2019 to a low of 13.34% at the end of 2020, mirroring the trends in net profit margin and asset turnover during challenging economic conditions. Subsequently, ROE showed significant recovery and growth, reaching 29.88% by the first quarter of 2023. This reflects improved profitability, efficient asset use, and controlled leverage contributing to enhanced returns for shareholders.

Tax Burden

The tax burden ratio showed relative stability over the observed periods, fluctuating narrowly between 0.74 and 0.83. A slight decline is seen moving through 2019 and 2020, reaching its lowest point around the end of 2020, then remaining consistent around 0.81-0.82 subsequently. This suggests stable tax efficiency with only minor variations affecting the proportion of earnings retained after taxes.

Interest Burden

Interest burden exhibited a gradual decline from early 2019 through late 2020, moving from 0.90 to 0.82, indicating a slight increase in interest expenses relative to earnings before interest and taxes. From 2021 onwards, there is an observable recovery, with the ratio climbing back to around 0.91 by the first quarter of 2023, reflecting improved management or reductions in interest costs over that period.

EBIT Margin

The EBIT margin experienced a downward trend during 2019 and 2020, decreasing from approximately 12% to around 10.78% in mid-2020. From early 2021, a marked improvement is seen, with the margin climbing steadily, reaching nearly 14.82% by the first quarter of 2023. This indicates enhanced operational profitability and efficiency in recent periods.

Asset Turnover

Asset turnover showed variability, beginning near 0.8 in 2019, increasing to 0.89 in the first quarter of 2020 before declining significantly to 0.69 by the end of 2020. After this low point, a consistent upward trend occurred through 2021 and into early 2023, culminating at 0.91. This pattern reflects an initial decrease in the efficiency of asset utilization post-2020, followed by notable recovery and improvement.

Financial Leverage

Financial leverage fluctuated moderately within a range of approximately 2.8 to 3.1 across the timeline. It increased during early 2020, peaked in mid-2022 around 3.09, then showed a slight decline toward 2.97 by the latest quarter. This suggests some variability in the company’s reliance on debt financing but overall maintains a stable leverage position.

Return on Equity (ROE)

The ROE demonstrated significant fluctuation, decreasing from roughly 20.58% at the beginning of 2019 to a low near 13.34% by the end of 2020. Following this, a strong recovery and steady increase ensued, with ROE rising sharply to 29.88% by the first quarter of 2023. This indicates improved profitability and effectiveness in generating shareholder returns in the later periods after a challenging phase.

The financial data reveals distinct trends in the company's profitability and efficiency metrics over multiple quarters from March 2019 to March 2023.

Net Profit Margin

The net profit margin displayed a declining trend throughout 2019, dropping from 8.94% in the first quarter to 8.5% by the fourth quarter. This downward trajectory intensified in 2020, reaching a low of 6.75% in the third quarter before modestly improving to 6.86% at the end of the year. Starting in 2021, a strong recovery was evident, with margins increasing steadily each quarter, reaching 10.07% by December 2021 and continuing upward to 11.06% by March 2023. This improvement indicates enhanced cost control or pricing power contributing to higher profitability.

Asset Turnover

The asset turnover ratio exhibited a somewhat volatile pattern. It began near 0.8 in early 2019 but decreased gradually through 2020, reaching a low of 0.69 in the last quarter of 2020, which signifies reduced efficiency in using assets to generate revenue during that period. A recovery phase began in 2021 with incremental increases each quarter, culminating at 0.91 in March 2023, the highest point observed. This improvement suggests better asset utilization and potentially higher sales relative to the asset base.

Return on Assets (ROA)

The ROA followed a similar progression to the net profit margin, declining from 7.16% at the start of 2019 to 4.71% by the end of 2020, reflecting a period of reduced overall profitability relative to the asset base. From 2021 onward, the company demonstrated a marked rebound, with ROA growing consistently each quarter and reaching 10.08% by March 2023. This trend indicates an increasing ability to generate earnings from total assets, aligned with the improvements seen in profitability and asset turnover.

Overall, the data illustrates a period of performance decline culminating around 2020, followed by a sustained recovery and improvement in key financial efficiency and profitability measures through early 2023. This pattern suggests effective strategic or operational adjustments made post-2020, enhancing both profitability and asset utilization.

Tax Burden

The tax burden ratio remained relatively stable throughout the observed periods, fluctuating slightly between approximately 0.74 and 0.83. There was a modest decline from early 2019 through 2020, followed by a gradual increase from 2021 onwards, reaching around 0.82 in the most recent quarter. This suggests consistent tax efficiency with minor variations influenced likely by external fiscal conditions.

Interest Burden

The interest burden ratio demonstrated a gradual decline during 2019 and 2020, decreasing from 0.9 to 0.82, indicating an increasing impact of interest expenses relative to earnings before interest and taxes. However, from early 2021 onwards, the ratio improved steadily, reaching 0.91 by the first quarter of 2023, suggesting enhanced financial management or reduced interest expenses over time.

EBIT Margin

The EBIT margin remained relatively stable near 12% during 2019 but experienced a noticeable dip in 2020, dropping to a low of around 10.78%. Starting in 2021, the margin improved significantly, consistently rising and peaking at approximately 14.82% in the first quarter of 2023. This upward trend reflects improved operational efficiency or pricing power post-2020.

Asset Turnover

The asset turnover ratio showed some volatility, increasing from 0.8 in early 2019 to a peak of 0.89 by the first quarter of 2020, then declining sharply during the rest of 2020 to a low of 0.69. From 2021 forward, there was a steady recovery, with the ratio rising gradually to 0.91 by the latest quarter. This indicates fluctuations in the company's asset utilization efficiency, with recovery and improvement evident after 2020.

Return on Assets (ROA)

The return on assets displayed a downward trend during 2019 and 2020, dropping from 7.16% to 4.71%, reflecting reduced profitability in relation to asset base during that period. Beginning in 2021, ROA showed a consistent and strong upward trajectory, rising to over 10% by the first quarter of 2023. This trend suggests improved overall effectiveness in generating profit from assets, complementing the increased EBIT margin and recovering asset turnover.

The financial data reveals several notable trends in the company's profitability and financial burden ratios across the periods analyzed.

Tax Burden

The tax burden ratio remained relatively stable throughout the periods, fluctuating slightly around the range of 0.74 to 0.83. There was a mild decline during the 2020 quarters, coinciding with broader economic disruptions, followed by a gradual increase back to around 0.82 by the end of the data timeline.

Interest Burden

The interest burden ratio shows a gradual improvement from 0.9 in early 2019 to a low point of 0.82 at the end of 2020, indicating a reduction in interest expenses relative to earnings before interest and taxes during this time. Subsequently, there is a steady increase approaching 0.91 by the first quarter of 2023, suggesting rising relative interest impact in recent periods.

EBIT Margin

The EBIT margin percentage exhibited some volatility, starting at approximately 12% in early 2019 and dipping to around 10.78% to 11.24% in mid to late 2020. This decline may reflect operational challenges during that timeframe. Post-2020, there was a clear upward trend, with margins improving steadily to nearly 14.82% by early 2023, indicative of enhanced operational efficiency and profitability before interest and taxes.

Net Profit Margin

The net profit margin mirrored the EBIT margin pattern, starting near 9% in early 2019 and declining to a low of around 6.75% to 6.86% during 2020. Following this trough, the net profit margin demonstrated a consistent recovery and improvement, reaching over 11% by the first quarter of 2023, reflecting overall enhanced profitability and effective cost or burden management beyond operational earnings.

Overall, the data suggests that the company faced profit margin pressures in 2020, possibly due to external economic conditions, but has since progressively regained and improved profitability levels. The improvement in EBIT and net profit margins is significant, while the tax burden has remained relatively stable, and the interest burden, after improvement during 2020, has somewhat increased in the more recent periods.