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
Zoetis Inc., decomposition of ROE (quarterly data)
Based on: 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).
The analysis of the quarterly financial data reveals several notable trends in profitability and capital structure metrics over the examined period.
- Return on Assets (ROA)
- The ROA displayed a generally increasing trend across the quarters. Beginning at 13.97% in the first quarter of 2020, it experienced a mild decline during the remainder of 2020 before commencing a steady upward trajectory from early 2021 through to the first quarter of 2024. By March 31, 2024, ROA reached 16.66%, indicating an overall improvement in the efficiency with which assets generate earnings over time.
- Financial Leverage
- Financial leverage demonstrated a decreasing pattern initially, dropping from 4.19 in March 2020 to a low near 2.78 in the third quarter of 2023. This suggests a gradual reduction in the use of debt relative to equity during much of the observed period. However, some fluctuations occurred from late 2022 onwards, indicating minor adjustments in capital structure, yet leverage remained below levels seen at the start of the period, standing at 2.84 by March 2024.
- Return on Equity (ROE)
- ROE showed more variability but remained within a relatively high range throughout. It started at 58.52% in March 2020, declined to approximately 43-44% during parts of 2020 and 2021, and exhibited oscillations thereafter. Despite fluctuations, ROE maintained strong profitability levels, ending at 47.27% in March 2024. The moderate decrease from the initial peak may reflect changes in leverage or operational performance, though overall shareholder returns remained robust.
In summary, the company improved its asset efficiency as reflected by rising ROA, while simultaneously reducing financial leverage, indicating a conservative shift in capital structure. Despite these changes, ROE remained strong throughout, suggesting the company effectively balanced profitability and risk to sustain shareholder returns over the period.
Three-Component Disaggregation of ROE
Zoetis Inc., decomposition of ROE (quarterly data)
Based on: 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).
- Net Profit Margin
- The net profit margin displayed a generally stable and slightly increasing trend over the reported periods. Starting at 25.41% in the first quarter of 2020, it fluctuated moderately, maintaining a level above 25% for almost all quarters. Noticeable increases were observed from mid-2023, where it rose from approximately 25.59% to reach 27.43% at the end of 2023, peaking at 27.43%. The margin slightly decreased to 27.38% in the first quarter of 2024, indicating a relatively strong and consistent profitability.
- Asset Turnover
- Asset turnover exhibited a gradual upward trend over the entire timeframe. Initially, in the first quarter of 2020, the ratio was at 0.55 and declined slightly through 2020, reaching a low around 0.48-0.49. However, from early 2021 onwards, the ratio steadily increased, reaching 0.61 by the first quarter of 2024. This pattern suggests improving efficiency in using assets to generate revenue, particularly noticeable in 2022 and 2023 where the ratio consistently stayed around or above 0.59.
- Financial Leverage
- Financial leverage showed a declining trend from the start of 2020 up until the end of 2022, decreasing from 4.19 to below 3.0. This decline indicates a reduction in reliance on debt or external financing relative to equity. However, there were some fluctuations in the latter part of the period, with a peak around 3.39 in late 2022, followed by a decrease to approximately 2.84 by the first quarter of 2024. Overall, the trend suggests a more conservative capital structure with reduced leverage over time.
- Return on Equity (ROE)
- ROE experienced a downward correction from a peak above 58% in early 2020 to the mid-40% range throughout the subsequent periods. From mid-2020 through 2021, ROE settled between approximately 42% and 44%, then showed relative stability with minor oscillations in the mid-40% range through 2022 and into 2024. The slight recovery to near 47% in the latter quarters suggests improved profitability relative to shareholder equity, despite the reduction in financial leverage over the same period.
Five-Component Disaggregation of ROE
Zoetis Inc., decomposition of ROE (quarterly data)
Based on: 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).
- Tax Burden
- The tax burden demonstrated a gradual decline from around 0.84 in early 2020 to approximately 0.79-0.80 in early 2024. This indicates a slight reduction in the proportion of income paid as tax over the observed period.
- Interest Burden
- The interest burden showed a steady but modest increase, moving from 0.90 in the first quarter of 2020 to 0.93 by the first quarter of 2024. This suggests a small increase in interest expenses relative to earnings before interest and taxes.
- EBIT Margin
- The EBIT margin exhibited a generally upward trend. Starting from around 33.7% in the first quarter of 2020, it rose to a peak near 37.3% in late 2023, later settling slightly lower just under 37% in early 2024. This reflects an improvement in operating profitability over the timeframe.
- Asset Turnover
- Asset turnover ratios initially declined from 0.55 in early 2020 to 0.48-0.49 mid-2020, then consistently increased, reaching 0.61 by the first quarter of 2024. This indicates an increasing efficiency in using assets to generate revenue.
- Financial Leverage
- Financial leverage decreased markedly from a high of over 4.3 in the second quarter of 2020 to below 3.0 by late 2021. Though some fluctuations occurred thereafter, leverage remained lower compared to the early period, ending at about 2.8 in early 2024. This reduction denotes a moderate deleveraging trend.
- Return on Equity (ROE)
- Return on equity showed a downward trend from a peak of approximately 58.5% in the first quarter of 2020, stabilizing around the mid-40% range thereafter. There were fluctuations, but the ROE remained between 43% and 48% during 2021 through early 2024, indicating a stabilization of equity returns at a high level.
Two-Component Disaggregation of ROA
Zoetis Inc., decomposition of ROA (quarterly data)
Based on: 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).
- Net Profit Margin
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The net profit margin has exhibited a generally upward trend over the observed periods. Starting at 25.41% in the first quarter of 2020, the margin remained relatively stable through 2020, fluctuating slightly around the mid-25% range. From 2021 onward, there is a noticeable gradual increase, reaching a peak of 27.43% in the fourth quarter of 2023 and slightly tapering to 27.38% by the first quarter of 2024. This indicates an improvement in profitability, with the company managing to retain a greater proportion of revenue as profit over time.
- Asset Turnover
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Asset turnover demonstrated mild fluctuations in the early quarters of the period, declining from 0.55 in the first quarter of 2020 to a low of 0.48 by the third quarter of 2020. However, a gradual recovery follows, with a steady increase from 0.49 at the end of 2020 to 0.61 in the first quarter of 2024. This rising trend reflects enhanced efficiency in utilizing assets to generate revenue. Notably, there is a slight dip observed in the last quarter of 2022 before resuming its ascent in 2023.
- Return on Assets (ROA)
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The return on assets shows a positive progression over the entire timeframe. Initially, the ROA was 13.97% in early 2020, followed by a decrease to approximately 12.04% by the end of 2020. From 2021 onwards, the metric steadily improved, climbing to 16.66% in the first quarter of 2024. This upward movement indicates stronger overall profitability relative to the asset base, suggesting more effective asset utilization and improved operational performance.
- Overall Insights
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The analysis reveals a consistent enhancement in profitability and operational efficiency. The growth in net profit margin alongside rises in asset turnover and return on assets suggests that the company has been able to not only increase profit retention but also optimize asset use to support revenue growth. Despite minor short-term fluctuations, the underlying trend points to stronger financial health and effective management strategies over the selected periods.
Four-Component Disaggregation of ROA
Zoetis Inc., decomposition of ROA (quarterly data)
Based on: 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).
- Tax Burden
- The tax burden ratio has shown a gradual decline from 0.84 in the first quarter of 2020 to roughly 0.80 by the first quarter of 2024. This indicates a modest reduction in effective tax rates relative to pre-tax earnings over the analyzed period, suggesting slightly improved tax efficiency or changes in tax regulations affecting the company.
- Interest Burden
- The interest burden ratio has remained relatively stable with a slight upward trend, increasing from 0.90 in early 2020 to about 0.93 by the first quarter of 2024. This suggests a minor reduction in interest expense relative to earnings before interest and taxes, reflecting either a decrease in interest costs or stable debt levels supporting earnings.
- EBIT Margin
- The EBIT margin has generally improved over the period, rising from approximately 33.7% in the first quarter of 2020 to peak around 37.3% in the last quarters of 2023, followed by a slight dip to 36.9% in the first quarter of 2024. This progression indicates enhanced operating efficiency or stronger pricing power, leading to higher profitability before interest and taxes.
- Asset Turnover
- Asset turnover has exhibited a positive trend, increasing from 0.55 in early 2020 to around 0.61 by the first quarter of 2024. This upward movement demonstrates improved utilization of assets in generating revenue, reflecting better operational management or growth in sales relative to asset base.
- Return on Assets (ROA)
- ROA has experienced a consistent increase from about 14.0% in the first quarter of 2020 to 16.7% by the first quarter of 2024. The rise in ROA is supported by improvements in both EBIT margin and asset turnover, indicating stronger overall profitability and efficient asset usage fueling higher returns.
Disaggregation of Net Profit Margin
Zoetis Inc., decomposition of net profit margin ratio (quarterly data)
Based on: 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).
- Tax Burden Ratio
- The tax burden ratio has shown a gradual decline over the observed periods, moving from 0.84 at the beginning to a more stabilized level around 0.8 in recent quarters. This indicates a slight reduction in the proportion of earnings paid in taxes, which may contribute positively to net income.
- Interest Burden Ratio
- The interest burden ratio has experienced a modest upward trend, increasing from 0.9 to approximately 0.93 over the analyzed timeframe. This suggests a slight improvement in operating income after interest expenses, possibly reflecting more efficient debt management or lower interest costs relative to earnings.
- EBIT Margin
- The EBIT margin has generally increased across the quarters, starting from around 33.7% and reaching near 37% in the later periods. This improvement signals enhanced operational profitability, likely due to better cost control, higher revenues, or a combination of both factors.
- Net Profit Margin
- The net profit margin shows a consistent upward trajectory, rising from approximately 25.4% to around 27.4% by the most recent quarter. This growth reflects effectively managed expenses, including tax and interest burdens, and indicates strengthening overall profitability at the net income level.