Intuitive Surgical Inc. (NASDAQ:ISRG)

The period under review demonstrates fluctuations in profitability and financial leverage. Return on Assets (ROA) initially decreased before exhibiting a positive trend, while Financial Leverage remained relatively stable. These movements directly influenced Return on Equity (ROE), which mirrored the ROA trend.

Return on Assets (ROA)

ROA experienced a decline from 12.58% in 2021 to 10.19% in 2022. Subsequently, ROA showed improvement, increasing to 11.64% in 2023 and further to 12.39% in 2024. This positive momentum continued into 2025, with ROA reaching 13.96%. This suggests improving efficiency in asset utilization over the later years of the period.

Financial Leverage

Financial Leverage remained consistently around 1.14 to 1.17 throughout the observed period. A slight increase was noted from 1.14 in 2021 to 1.17 in 2022, followed by a decrease to 1.16 in 2023 and back to 1.14 in 2024. It then rose slightly to 1.15 in 2025. This indicates a stable capital structure and consistent use of debt financing relative to equity.

Return on Equity (ROE)

ROE followed a similar pattern to ROA. It decreased from 14.32% in 2021 to 11.98% in 2022, coinciding with the ROA decline. ROE then increased to 13.51% in 2023 and 14.13% in 2024, mirroring the ROA improvement. The most substantial increase occurred in 2025, with ROE reaching 16.02%. The consistent relationship between ROA and ROE, coupled with stable financial leverage, suggests that changes in ROE are primarily driven by operational efficiency as measured by ROA.

The observed trends indicate a recovery in profitability following a dip in 2022. The stable financial leverage suggests that the improvements in ROE are largely attributable to enhanced asset utilization and operational performance rather than changes in the company’s capital structure.

The period under review demonstrates fluctuations in the key components contributing to overall Return on Equity (ROE). A three-component DuPont analysis reveals shifts in profitability, efficiency, and financial leverage. Overall, ROE experienced volatility, concluding with an upward trend in the most recent periods.

Net Profit Margin

The Net Profit Margin exhibited a notable decrease from 29.85% in 2021 to 21.25% in 2022. A recovery was then observed, with the margin increasing to 25.24% in 2023 and further to 27.81% in 2024. This positive trend continued into 2025, reaching 28.38%. This suggests improving profitability in the later years of the analyzed period.

Asset Turnover

Asset Turnover showed an initial increase from 0.42 in 2021 to 0.48 in 2022, indicating improved efficiency in utilizing assets to generate sales. However, this was followed by a slight decline to 0.46 in 2023 and 0.45 in 2024. A subsequent increase to 0.49 in 2025 suggests a renewed improvement in asset utilization.

Financial Leverage

Financial Leverage remained relatively stable throughout the period. It increased modestly from 1.14 in 2021 to 1.17 in 2022, then decreased slightly to 1.16 in 2023, and again to 1.14 in 2024. A minor increase to 1.15 was observed in 2025. These values indicate a consistent, moderate use of debt financing.

Return on Equity (ROE)

ROE mirrored the combined effects of the three components. It decreased from 14.32% in 2021 to 11.98% in 2022, coinciding with the decline in Net Profit Margin. ROE then increased to 13.51% in 2023 and 14.13% in 2024, driven by improvements in both profitability and asset turnover. The most significant increase occurred in 2025, with ROE reaching 16.02%, reflecting the combined positive influence of a higher Net Profit Margin and Asset Turnover, alongside stable Financial Leverage.

The interplay between these ratios suggests that changes in profitability were the primary driver of ROE fluctuations. While asset turnover experienced some volatility, its impact was less pronounced than that of the Net Profit Margin. Financial leverage remained a relatively constant factor throughout the period.

The five-component DuPont analysis reveals shifts in the drivers of return on equity over the observed period. Return on Equity (ROE) experienced fluctuations, beginning at 14.32% in 2021, decreasing to 11.98% in 2022, and then exhibiting a generally upward trajectory, culminating in 16.02% in 2025.

Profitability (EBIT Margin)

EBIT Margin demonstrated volatility. A decline from 32.69% in 2021 to 25.47% in 2022 was followed by a recovery to 27.23% in 2023. Further improvement was observed in 2024 (31.84%) and 2025 (32.70%), nearly returning to the 2021 level. This suggests a strengthening of core operational profitability in the latter years of the period.

Asset Turnover

Asset Turnover showed modest variation. It increased from 0.42 in 2021 to 0.48 in 2022, then decreased slightly to 0.46 in 2023 and 0.45 in 2024 before rising again to 0.49 in 2025. This indicates a relatively stable efficiency in utilizing assets to generate sales, with a slight improvement towards the end of the period.

Financial Leverage

Financial Leverage remained consistently around 1.14 to 1.17 throughout the period. This indicates a stable capital structure and a consistent reliance on debt financing relative to equity. The minimal fluctuation suggests a deliberate approach to managing financial risk.

Tax Burden

Tax Burden fluctuated between 0.83 and 0.93. It began at 0.91 in 2021, decreased to 0.83 in 2022, and then increased to 0.93 in 2023 before stabilizing at 0.87 for 2024 and 2025. This suggests some variability in the effective tax rate, but overall remained relatively high, indicating a limited benefit from tax-saving strategies.

Interest Burden

Interest Burden remained constant at 1.00 across all years. This implies no change in the proportion of earnings required to cover interest expenses, consistent with the stable financial leverage observed.

The decrease in ROE in 2022 appears primarily driven by the decline in EBIT Margin, despite a concurrent increase in Asset Turnover. The subsequent recovery and improvement in ROE from 2023 to 2025 are attributable to the combined effect of the EBIT Margin recovery and a slight increase in Asset Turnover, supported by stable Financial Leverage and Tax Burden.

The period under review demonstrates fluctuations in profitability and efficiency metrics, ultimately impacting overall asset utilization. Return on Assets (ROA) experienced an initial decline followed by a recovery and subsequent improvement. This movement is attributable to offsetting changes in Net Profit Margin and Asset Turnover.

Net Profit Margin

The Net Profit Margin exhibited volatility throughout the period. It decreased significantly from 29.85% in 2021 to 21.25% in 2022, before recovering to 25.24% in 2023. Further gains were observed in 2024, reaching 27.81%, and continued into 2025, culminating in 28.38%. This suggests improving cost control or pricing power in the later years of the period.

Asset Turnover

Asset Turnover showed a moderate increase from 0.42 in 2021 to 0.48 in 2022. This indicates improved efficiency in generating sales from the asset base. However, it subsequently decreased to 0.46 in 2023 and 0.45 in 2024, suggesting a slight reduction in efficiency. A rebound was observed in 2025, with the ratio increasing to 0.49, indicating a renewed improvement in asset utilization.

Return on Assets (ROA)

ROA initially declined from 12.58% in 2021 to 10.19% in 2022, mirroring the decrease in Net Profit Margin. The ROA then increased to 11.64% in 2023, driven by improvements in both Net Profit Margin and Asset Turnover. Continued gains were seen in 2024 (12.39%) and a more substantial increase in 2025 (13.96%), reflecting the combined positive effects of a higher Net Profit Margin and a recovering Asset Turnover. The 2025 ROA represents the highest value observed during the period.

The interplay between Net Profit Margin and Asset Turnover demonstrates that while profitability fluctuations significantly influence ROA, efficient asset management plays a crucial role in amplifying or mitigating these effects. The recovery in ROA from 2022 onwards is attributable to both improved profitability and, ultimately, enhanced asset utilization.

The four-component DuPont analysis reveals shifts in the company’s profitability and efficiency between 2021 and 2025. Return on Assets (ROA) experienced volatility, ultimately demonstrating an upward trend over the period. This movement is attributable to changes in the constituent components of the ROA calculation: EBIT Margin, Asset Turnover, Interest Burden, and Tax Burden.

EBIT Margin

The EBIT Margin decreased from 32.69% in 2021 to 25.47% in 2022, indicating a reduction in operating profitability. However, the margin subsequently recovered, reaching 27.23% in 2023, 31.84% in 2024, and peaking at 32.70% in 2025. This suggests successful cost management or pricing strategies in the later years of the analyzed period.

Asset Turnover

Asset Turnover exhibited a moderate increase from 0.42 in 2021 to 0.48 in 2022, signifying improved efficiency in utilizing assets to generate sales. This was followed by a slight decline to 0.46 in 2023 and 0.45 in 2024 before rising again to 0.49 in 2025. The overall trend suggests a generally stable, and slightly improving, ability to generate revenue from its asset base.

Interest Burden

The Interest Burden remained constant at 1.00 across all years examined. This indicates that earnings before interest and taxes consistently covered interest expense, and there were no changes in the company’s financial leverage or interest obligations during the period.

Tax Burden

The Tax Burden fluctuated between 0.83 and 0.93. It began at 0.91 in 2021, decreased to 0.83 in 2022, and then increased to 0.93 in 2023. The final two years, 2024 and 2025, both registered a Tax Burden of 0.87. These variations suggest changes in the effective tax rate, potentially due to alterations in tax laws or the company’s geographic distribution of earnings.

The initial decline in ROA in 2022 was primarily driven by the decrease in EBIT Margin, despite a concurrent improvement in Asset Turnover. The subsequent recovery and growth in ROA from 2023 to 2025 were fueled by the rebound in EBIT Margin, coupled with a stabilizing and slightly increasing Asset Turnover. The consistent Interest Burden and fluctuating Tax Burden had a modulating effect on the overall ROA performance.

The period under review demonstrates fluctuations in profitability metrics, specifically concerning the relationship between operating profit and net income. A consistent tax burden is observed, while interest expense appears to have no impact on net income. The analysis focuses on the disaggregation of net profit margin through its key components.

Tax Burden

The tax burden remained remarkably stable throughout the period, fluctuating between 0.83 and 0.93. This indicates a consistent effective tax rate, with minimal variation year-over-year. The values suggest that for every dollar of pre-tax income, approximately 83 to 93 cents are retained after taxes.

Interest Burden

The interest burden consistently registered at 1.00 across all years. This implies that interest expense did not detract from earnings before tax, suggesting either a lack of debt or a tax shield effectively offsetting interest costs. The consistent value indicates no significant changes in the company’s financing structure or interest expense relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin experienced volatility. It decreased from 32.69 in 2021 to 25.47 in 2022, before recovering to 27.23 in 2023. Further improvement was noted in 2024, reaching 31.84, and continued to 32.70 in 2025. This suggests operational performance initially declined, followed by a recovery and subsequent strengthening of core profitability. The recent trend indicates improving operational efficiency or pricing power.

Net Profit Margin

The net profit margin mirrored the trend observed in the EBIT margin, though with a dampened effect. It declined from 29.85 in 2021 to 21.25 in 2022, then increased to 25.24 in 2023, 27.81 in 2024, and finally 28.38 in 2025. The consistent tax and interest burdens suggest the fluctuations in net profit margin are directly attributable to changes in the EBIT margin. The difference between the EBIT margin and net profit margin is relatively constant, reflecting the stable tax and interest expense environment.

In summary, the company’s net profitability is heavily influenced by its operational performance, as evidenced by the strong correlation between EBIT margin and net profit margin. The stable tax and interest burdens provide a consistent framework within which operational improvements translate into net income gains.