Stock Analysis on Net
Stock Analysis on Net

Applied Materials Inc. (NASDAQ:AMAT)

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin 

Microsoft Excel

Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.

Two-Component Disaggregation of ROE

Applied Materials Inc., decomposition of ROE

Microsoft Excel
ROE = ROA × Financial Leverage
Oct 29, 2023 41.94% = 22.31% × 1.88
Oct 30, 2022 53.51% = 24.41% × 2.19
Oct 31, 2021 48.08% = 22.80% × 2.11
Oct 25, 2020 34.21% = 16.19% × 2.11
Oct 27, 2019 32.94% = 14.22% × 2.32
Oct 28, 2018 48.44% = 18.64% × 2.60

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the decrease in return on equity ratio (ROE) over 2023 year is the decrease in financial leverage ratio.

Three-Component Disaggregation of ROE

Applied Materials Inc., decomposition of ROE

Microsoft Excel
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Oct 29, 2023 41.94% = 25.86% × 0.86 × 1.88
Oct 30, 2022 53.51% = 25.31% × 0.96 × 2.19
Oct 31, 2021 48.08% = 25.53% × 0.89 × 2.11
Oct 25, 2020 34.21% = 21.04% × 0.77 × 2.11
Oct 27, 2019 32.94% = 18.52% × 0.77 × 2.32
Oct 28, 2018 48.44% = 19.20% × 0.97 × 2.60

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the decrease in return on equity ratio (ROE) over 2023 year is the decrease in financial leverage ratio.

Five-Component Disaggregation of ROE

Applied Materials Inc., decomposition of ROE

Microsoft Excel
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Oct 29, 2023 41.94% = 0.89 × 0.97 × 30.00% × 0.86 × 1.88
Oct 30, 2022 53.51% = 0.86 × 0.97 × 30.35% × 0.96 × 2.19
Oct 31, 2021 48.08% = 0.87 × 0.97 × 30.38% × 0.89 × 2.11
Oct 25, 2020 34.21% = 0.87 × 0.95 × 25.61% × 0.77 × 2.11
Oct 27, 2019 32.94% = 0.83 × 0.93 × 24.00% × 0.77 × 2.32
Oct 28, 2018 48.44% = 0.71 × 0.95 × 28.56% × 0.97 × 2.60

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the decrease in return on equity ratio (ROE) over 2023 year is the decrease in financial leverage ratio.

Two-Component Disaggregation of ROA

Applied Materials Inc., decomposition of ROA

Microsoft Excel
ROA = Net Profit Margin × Asset Turnover
Oct 29, 2023 22.31% = 25.86% × 0.86
Oct 30, 2022 24.41% = 25.31% × 0.96
Oct 31, 2021 22.80% = 25.53% × 0.89
Oct 25, 2020 16.19% = 21.04% × 0.77
Oct 27, 2019 14.22% = 18.52% × 0.77
Oct 28, 2018 18.64% = 19.20% × 0.97

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the decrease in return on assets ratio (ROA) over 2023 year is the decrease in asset turnover ratio.

Four-Component Disaggregation of ROA

Applied Materials Inc., decomposition of ROA

Microsoft Excel
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Oct 29, 2023 22.31% = 0.89 × 0.97 × 30.00% × 0.86
Oct 30, 2022 24.41% = 0.86 × 0.97 × 30.35% × 0.96
Oct 31, 2021 22.80% = 0.87 × 0.97 × 30.38% × 0.89
Oct 25, 2020 16.19% = 0.87 × 0.95 × 25.61% × 0.77
Oct 27, 2019 14.22% = 0.83 × 0.93 × 24.00% × 0.77
Oct 28, 2018 18.64% = 0.71 × 0.95 × 28.56% × 0.97

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the decrease in return on assets ratio (ROA) over 2023 year is the decrease in efficiency measured by asset turnover ratio.

Disaggregation of Net Profit Margin

Applied Materials Inc., decomposition of net profit margin ratio

Microsoft Excel
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Oct 29, 2023 25.86% = 0.89 × 0.97 × 30.00%
Oct 30, 2022 25.31% = 0.86 × 0.97 × 30.35%
Oct 31, 2021 25.53% = 0.87 × 0.97 × 30.38%
Oct 25, 2020 21.04% = 0.87 × 0.95 × 25.61%
Oct 27, 2019 18.52% = 0.83 × 0.93 × 24.00%
Oct 28, 2018 19.20% = 0.71 × 0.95 × 28.56%

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

The primary reason for the increase in net profit margin ratio over 2023 year is the increase in effect of taxes measured by tax burden ratio.