DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2007
- Total Asset Turnover since 2007
- Analysis of Debt
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Two-Component Disaggregation of ROE
Super Micro Computer Inc., decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | |||
| Jun 30, 2023 | = | × | |||
| Jun 30, 2022 | = | × | |||
| Jun 30, 2021 | = | × | |||
| Jun 30, 2020 | = | × | |||
| Jun 30, 2019 | = | × |
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Return on Assets (ROA)
- The Return on Assets shows a positive and increasing trend from 2019 to 2023, rising from 4.27% in 2019 to a peak of 17.42% in 2023. This indicates an improving efficiency in the company's ability to generate earnings from its assets. However, in 2024, there is a noticeable decline to 11.73%, although this level remains significantly higher than the values observed in 2019 through 2021.
- Financial Leverage
- Financial leverage exhibits moderate fluctuation across the years. It slightly increases from 1.79 in 2019 to 2.25 in 2022, suggesting a moderate rise in the use of debt financing relative to equity. Following 2022, the leverage ratio decreases, reaching 1.81 in 2024, which is close to the initial level observed in 2019, indicating a reduction in financial risk or a shift towards a more conservative capital structure.
- Return on Equity (ROE)
- ROE follows a pronounced upward trajectory from 7.64% in 2019 to a peak of 32.45% in 2023, mirroring the improvement seen in ROA and possibly amplified by changes in financial leverage. The substantial increase suggests enhanced profitability and effective equity utilization during this period. Similar to ROA, ROE decreases in 2024 to 21.28%, though it remains significantly elevated relative to the earlier years, indicating sustained strong performance despite the dip.
- Summary of Trends
- Overall, the data reveal a period of robust financial improvement between 2019 and 2023, with notable enhancements in asset efficiency and equity returns. The peak values in 2023 for both profitability ratios suggest an optimal use of assets and equity. The subsequent reduction in 2024, while noticeable, still reflects a strong performance compared to the earlier years. The financial leverage changes contribute to understanding these profitability trends, with an increase up to 2022 followed by a decline, indicating more prudent financial management or shifts in financing strategy preceding 2024.
Three-Component Disaggregation of ROE
Super Micro Computer Inc., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | × | ||||
| Jun 30, 2023 | = | × | × | ||||
| Jun 30, 2022 | = | × | × | ||||
| Jun 30, 2021 | = | × | × | ||||
| Jun 30, 2020 | = | × | × | ||||
| Jun 30, 2019 | = | × | × |
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Net Profit Margin
- The net profit margin exhibited a consistent upward trend from 2.05% in 2019 to a peak of 8.98% in 2023, indicating improving profitability over the years. However, in 2024, there was a slight decline to 7.69%, suggesting some reduction in profit efficiency relative to revenue in the most recent period.
- Asset Turnover
- Asset turnover initially decreased from 2.08 in 2019 to a low of 1.59 in 2021, reflecting a decline in asset efficiency. A gradual recovery occurred in 2022 and 2023, with a noticeable increase to 1.94 in 2023. Nonetheless, in 2024, the ratio fell again to 1.53, indicating variability and a recent weakening in how effectively assets generate sales.
- Financial Leverage
- Financial leverage remained relatively stable with a slight increasing trend from 1.79 in 2019 to a high of 2.25 in 2022, implying higher use of debt relative to equity during this period. Following 2022, leverage decreased to 1.86 in 2023 and further to 1.81 in 2024, indicating a reduction in reliance on financial leverage in the latest periods.
- Return on Equity (ROE)
- Return on equity demonstrated significant growth from 7.64% in 2019 to a substantial 32.45% in 2023, reflecting enhanced profitability and efficient use of shareholder equity. In 2024, ROE declined to 21.28%, which, despite being lower than the previous year, remains well above early period levels, showing sustained strong returns overall.
Five-Component Disaggregation of ROE
Super Micro Computer Inc., decomposition of ROE
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden
- The tax burden ratio fluctuated moderately over the analyzed period, beginning at 0.83 in 2019 and reaching a peak of 0.97 in 2020. It then declined to 0.84 in 2022 before increasing again to 0.95 in 2024. This indicates variation in the proportion of pre-tax income retained after taxes, with no consistent trend of increase or decrease.
- Interest Burden
- The interest burden ratio remained relatively stable and high, ranging from 0.93 in 2019 to values consistently around 0.98-0.99 from 2020 onward. This suggests the company maintained stable interest expenses in relation to earnings before interest and taxes, reflecting controlled financial costs.
- EBIT Margin
- The EBIT margin showed a notable positive trend, rising from a low of 2.67% in 2019 to a peak of 10.69% in 2023. There was a slight decline to 8.24% in 2024 but the margin remained significantly higher than in earlier years. This indicates improved operational profitability over the period.
- Asset Turnover
- Asset turnover experienced a decrease from 2.08 in 2019 to a minimum of 1.53 in 2024, with some fluctuations in intermediate years. After dropping to 1.59 in 2021 and staying relatively flat to 1.62 in 2022, there was an increase to 1.94 in 2023 before declining again. This reflects a general decline in the efficiency of asset use to generate revenue over the six years.
- Financial Leverage
- Financial leverage increased from 1.79 in 2019 to a peak of 2.25 in 2022, indicating higher use of debt or liabilities to finance assets during this period. It subsequently decreased to 1.81 in 2024, nearing the initial level. This suggests a temporary rise in leverage followed by a reduction toward more conservative levels.
- Return on Equity (ROE)
- Return on equity exhibited a impressive upward trend from 7.64% in 2019 to a high of 32.45% in 2023, followed by a decline to 21.28% in 2024. Despite the decrease in the last year, ROE remained substantially elevated compared to the starting point, indicating enhanced overall profitability and value generation for shareholders during most of the period.
- Overall Insights
- Operational efficiency, as indicated by asset turnover, has generally weakened, while profitability metrics such as EBIT margin and ROE have improved significantly, particularly between 2019 and 2023. The fluctuations in tax burden and leverage suggest changes in financial strategy and tax environment, but interest burden remained stable, reflecting consistent management of financing costs. The combination of improved profitability with reduced asset turnover implies that the company may be generating more profit per unit of sales despite declining asset utilization efficiency.
Two-Component Disaggregation of ROA
Super Micro Computer Inc., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | |||
| Jun 30, 2023 | = | × | |||
| Jun 30, 2022 | = | × | |||
| Jun 30, 2021 | = | × | |||
| Jun 30, 2020 | = | × | |||
| Jun 30, 2019 | = | × |
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Net Profit Margin
- The net profit margin exhibits a generally upward trend over the analyzed periods, starting at 2.05% in mid-2019 and increasing steadily to a peak of 8.98% in mid-2023. This represents a significant improvement in profitability relative to sales. However, there is a slight decline to 7.69% in the most recent period, suggesting a small reduction in profitability after reaching the high point.
- Asset Turnover
- The asset turnover ratio shows a fluctuating pattern, with an initial decline from 2.08 in 2019 to a low of 1.59 in 2021. Following this, a modest recovery is observed, rising to 1.94 in 2023 before falling again to 1.53 in 2024. Overall, the trend indicates reduced efficiency in generating sales from assets compared to the starting point, with periodic short-term recoveries.
- Return on Assets (ROA)
- Return on assets demonstrates a strong upward trend from 4.27% in 2019 to a peak of 17.42% in 2023. This indicates substantial improvement in the company’s ability to convert assets into net income. In 2024, ROA declines to 11.73%, which, although lower than the peak, remains significantly higher than the initial years. The overall pattern suggests enhanced operational performance with some recent moderation.
Four-Component Disaggregation of ROA
Super Micro Computer Inc., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | × | × | |||||
| Jun 30, 2023 | = | × | × | × | |||||
| Jun 30, 2022 | = | × | × | × | |||||
| Jun 30, 2021 | = | × | × | × | |||||
| Jun 30, 2020 | = | × | × | × | |||||
| Jun 30, 2019 | = | × | × | × |
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden
- The tax burden ratio exhibited fluctuations over the analyzed period. Starting at 0.83 in mid-2019, it rose markedly to 0.97 in mid-2020, followed by a slight decline to 0.94 in 2021. It then decreased again to 0.84 in 2022 and remained near that level in 2023 at 0.85, before increasing sharply to 0.95 in 2024. This pattern indicates variability in the effective tax rate impacting net earnings after taxes.
- Interest Burden
- The interest burden ratio remained relatively stable and consistently high throughout the period, starting at 0.93 in 2019 and reaching near perfect levels of 0.98 to 0.99 from 2020 onward. This stability suggests limited influence of interest expenses on operating income, indicative of manageable debt levels or favorable interest conditions.
- EBIT Margin
- The EBIT margin showed a significant upward trend from 2019 through 2023. It began at a modest 2.67% in 2019, remaining almost flat in 2020, then increased to 3.41% in 2021. A substantial jump occurred in 2022 to 6.63%, followed by a continued rise to a peak of 10.69% in 2023. In 2024, the margin slightly decreased to 8.24%, yet it remained substantially higher than earlier years. This indicates improved operational profitability and efficiency over the period, albeit with some recent margin softening.
- Asset Turnover
- The asset turnover ratio declined from 2.08 in 2019 to a low of 1.59 in 2021, suggesting a reduction in revenue generated per unit of assets during these years. A slight recovery occurred in 2022 and more notably in 2023, reaching 1.94. However, it declined again to 1.53 in 2024. This fluctuation indicates variability in asset utilization efficiency, with periods of both contraction and improvement.
- Return on Assets (ROA)
- The ROA demonstrated a strong positive trajectory over the period analyzed. It increased steadily from 4.27% in 2019 to 4.99% in 2021, then experienced a significant rise to 8.9% in 2022. It peaked sharply at 17.42% in 2023 before declining to 11.73% in 2024. These results reflect enhanced overall profitability and effective use of assets, especially notable during the 2022-2023 interval, with some moderation in the latest year.
Disaggregation of Net Profit Margin
Super Micro Computer Inc., decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Jun 30, 2024 | = | × | × | ||||
| Jun 30, 2023 | = | × | × | ||||
| Jun 30, 2022 | = | × | × | ||||
| Jun 30, 2021 | = | × | × | ||||
| Jun 30, 2020 | = | × | × | ||||
| Jun 30, 2019 | = | × | × |
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden Ratio
- The tax burden ratio shows some fluctuations across the periods. Starting at 0.83 in mid-2019, it increased significantly to 0.97 in mid-2020, indicating a reduction in tax expenses relative to pre-tax income. The ratio then slightly declined in 2021 to 0.94, dropped further in 2022 to 0.84, and remained relatively stable at 0.85 in 2023 before rising again to 0.95 in 2024. This pattern suggests variability in tax efficiency and expense management over the years, with the most recent period showing improved retention of earnings after tax.
- Interest Burden Ratio
- The interest burden ratio has remained consistently high throughout the analyzed timeframe, starting at 0.93 in 2019 and fluctuating narrowly between 0.98 and 0.99 from 2020 onward. This stability close to 1.0 indicates that interest expenses have a minimal and steady impact on earnings before taxes, reflecting consistent debt servicing costs or low leverage.
- EBIT Margin
- There is a clear upward trend in the EBIT margin from 2.67% in 2019 to a peak of 10.69% in 2023, demonstrating improving operational profitability. The margin progressed steadily from single digits in the early years, with a particularly notable jump between 2021 and 2022, indicating enhanced earnings from core operations. In 2024, the EBIT margin decreased to 8.24%, signaling a relative decline in operational efficiency or increased costs, though it remains significantly above the earlier years.
- Net Profit Margin
- The net profit margin exhibits growth consistent with the EBIT margin trends, increasing from 2.05% in mid-2019 to a high of 8.98% in 2023. This progression reflects improved overall profitability after accounting for taxes and interest. The margin saw a sharp rise starting in 2021, pointing to effective cost control or revenue enhancements. In 2024, it slightly declined to 7.69%, mirroring the drop in EBIT margin but still sustaining a strong profit level compared to prior years.