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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Two-Component Disaggregation of ROE
Accenture PLC, decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Aug 31, 2024 | = | × | |||
| Aug 31, 2023 | = | × | |||
| Aug 31, 2022 | = | × | |||
| Aug 31, 2021 | = | × | |||
| Aug 31, 2020 | = | × | |||
| Aug 31, 2019 | = | × |
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Return on Assets (ROA)
- The ROA shows a declining trend over the six-year period. It started at 16.04% in 2019 and decreased to 12.99% in 2024. Although there was a slight increase from 2021 (13.68%) to 2022 (14.55%), the overall movement is downward, indicating a gradual reduction in the company’s efficiency in generating profit from its assets.
- Financial Leverage
- Financial leverage remained relatively stable with minor fluctuations. It increased from 2.07 in 2019 to a peak of 2.21 in 2021, then declined steadily to 1.98 by 2024. This suggests a slight reduction in the use of borrowed funds relative to equity in the latter years, potentially indicating a more conservative capital structure.
- Return on Equity (ROE)
- ROE exhibited a general downward trajectory from 33.17% in 2019 to 25.68% in 2024. Despite a period of stability and modest improvement between 2020 (30.05%) and 2022 (31.11%), the ratio dropped significantly after 2022. This decline reflects diminishing profitability relative to shareholders’ equity over time, which could be influenced by changes in operational efficiency, leverage, or net income generation.
Three-Component Disaggregation of ROE
Accenture PLC, decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Aug 31, 2024 | = | × | × | ||||
| Aug 31, 2023 | = | × | × | ||||
| Aug 31, 2022 | = | × | × | ||||
| Aug 31, 2021 | = | × | × | ||||
| Aug 31, 2020 | = | × | × | ||||
| Aug 31, 2019 | = | × | × |
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Net Profit Margin
- The net profit margin exhibited a generally stable pattern over the observed periods, fluctuating within a narrow range from 10.72% to 11.69%. It showed a slight increase from 11.06% in 2019 to a peak of 11.69% in 2021, followed by a decline to 10.72% in 2023, and then rebounding to 11.19% in 2024. This indicates relatively consistent profitability with minor variations year-over-year.
- Asset Turnover
- Asset turnover demonstrated a declining trend from 1.45 in 2019 to 1.17 in 2021, suggesting a reduction in the efficiency with which assets were used to generate revenue during this period. A partial recovery occurred in 2022 to 1.30, but the ratio decreased again to 1.16 by 2024, indicating that overall asset utilization efficiency weakened after initial recovery.
- Financial Leverage
- Financial leverage ratios rose slightly from 2.07 in 2019 to a peak of 2.21 in 2021, then declined progressively to 1.98 by 2024. This trend reflects a decreasing reliance on debt or borrowed capital relative to equity over the recent years, illustrating a more conservative capital structure entering the later period.
- Return on Equity (ROE)
- Return on equity showed a downward trend across the timeline analyzed, starting at 33.17% in 2019 and decreasing consistently to 25.68% in 2024. The decline indicates a reduced capacity to generate earnings from shareholders’ equity. Although the financial leverage decreased, mitigating some risk, the overall lower ROE suggests diminished profitability or efficiency in equity utilization.
- Summary
- The financial indicators reveal a moderate decrease in operational efficiency and profitability ratios over the period. Despite fluctuations in net profit margin and asset turnover, the net profit margin remained relatively stable, signaling controlled profit generation. The decrease in financial leverage points toward a cautious financial approach, possibly prioritizing lower financial risk. However, the consistent decline in ROE highlights challenges in maintaining equity returns, which could warrant further investigation into underlying operational or market factors.
Five-Component Disaggregation of ROE
Accenture PLC, decomposition of ROE
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Tax Burden
- The tax burden ratio remained relatively stable throughout the observed periods, fluctuating slightly around 0.76 to 0.77. This consistency indicates that the effective tax rate has been maintained without significant changes over the years.
- Interest Burden
- The interest burden ratio showed minimal decline from 1.00 in 2019 and 2020 to 0.99 starting in 2021 and maintained through 2024. This suggests a very slight increase in interest expenses relative to earnings before interest and taxes, but overall the interest expense impact has remained low and steady.
- EBIT Margin
- The EBIT margin saw an initial increase from 14.36% in 2019 to a peak of 15.31% in 2021, followed by a decline to 14.12% in 2023 before a modest recovery to 14.8% in 2024. This pattern indicates some variability in operating profitability, with a noticeable dip in the most recent years but a partial rebound in the latest period.
- Asset Turnover
- Asset turnover declined from 1.45 in 2019 to 1.17 in 2021, indicating a reduction in efficiency in generating sales from assets. This was followed by a partial recovery to 1.30 in 2022, but it decreased again to 1.16 by 2024. The overall trend points to a gradual decrease in asset utilization efficiency over the six-year span.
- Financial Leverage
- Financial leverage ratios increased from 2.07 in 2019 to a high of 2.21 in 2021, implying greater reliance on debt financing. However, a steady decrease followed, ending at 1.98 in 2024, suggesting a strategic reduction in leverage and a move towards a more conservative capital structure.
- Return on Equity (ROE)
- ROE experienced a downward trend over the period, starting at a high of 33.17% in 2019 and gradually declining to 25.68% by 2024. Despite a slight uptick in 2022, the overall decrease signals a reduction in the firm’s ability to generate profits from shareholders’ equity, which could be attributed to the combined effects of lower asset turnover and decreasing financial leverage, partially offset by fluctuations in EBIT margin.
Two-Component Disaggregation of ROA
Accenture PLC, decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Aug 31, 2024 | = | × | |||
| Aug 31, 2023 | = | × | |||
| Aug 31, 2022 | = | × | |||
| Aug 31, 2021 | = | × | |||
| Aug 31, 2020 | = | × | |||
| Aug 31, 2019 | = | × |
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Net Profit Margin
- The net profit margin exhibited a generally stable pattern with minor fluctuations over the analyzed periods. It increased slightly from 11.06% in 2019 to 11.69% in 2021, indicating improved profitability during that timeframe. Despite a slight decline to 10.72% in 2023, the margin rebounded to 11.19% in 2024, suggesting a recovery in profitability.
- Asset Turnover
- Asset turnover shows a declining trend overall. Starting at 1.45 in 2019, it dropped to 1.17 by 2021, reflecting decreased efficiency in utilizing assets to generate revenue. Although there was a recovery in 2022 to 1.30, the ratio again declined to 1.16 by 2024, representing reduced operational efficiency compared to the initial year.
- Return on Assets (ROA)
- ROA trended downward from 16.04% in 2019 to 12.99% in 2024, denoting a decrease in overall effectiveness in generating profits from assets. There was a slight recovery in 2022 with ROA increasing to 14.55%, but subsequent years showed a persistent decline. This trend aligns with the reduced asset turnover ratio, indicating decreasing asset utilization efficiency impacting profitability.
Four-Component Disaggregation of ROA
Accenture PLC, decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Aug 31, 2024 | = | × | × | × | |||||
| Aug 31, 2023 | = | × | × | × | |||||
| Aug 31, 2022 | = | × | × | × | |||||
| Aug 31, 2021 | = | × | × | × | |||||
| Aug 31, 2020 | = | × | × | × | |||||
| Aug 31, 2019 | = | × | × | × |
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Tax Burden
- The tax burden ratio remained fairly consistent over the years, fluctuating slightly between 0.76 and 0.77. This stability indicates a consistent proportion of earnings retained after taxes, suggesting no significant changes in tax policies or tax-related impacts on profitability during the analyzed periods.
- Interest Burden
- The interest burden ratio was stable at 1.00 for 2019 and 2020 and slightly decreased to 0.99 from 2021 onward. The minimal decline suggests a marginal increase in interest expenses relative to earnings before interest and taxes, but overall, interest costs have remained low and stable.
- EBIT Margin
- The EBIT margin showed some fluctuations, increasing from 14.36% in 2019 to a peak of 15.31% in 2021. Following this, there was a decline to 14.12% in 2023, with a slight recovery to 14.8% in 2024. This pattern reflects variability in operational profitability, with a general trend of moderate margin erosion after 2021 but retaining levels above those in 2019.
- Asset Turnover
- Asset turnover exhibited a declining trend from 1.45 in 2019 to 1.16 in 2024, with a minor rebound in 2022 at 1.3. This downward movement indicates decreasing efficiency in using assets to generate revenue over time, possibly reflecting increased asset base or lower sales growth relative to assets.
- Return on Assets (ROA)
- ROA showed a declining trend from 16.04% in 2019 to 12.99% in 2024. Despite a slight increase in 2022 (14.55%), the overall decrease suggests diminishing profitability relative to the asset base. This decline may be influenced by the falling asset turnover and fluctuations in EBIT margin, highlighting less effective asset utilization and operational efficiency.
Disaggregation of Net Profit Margin
Accenture PLC, decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Aug 31, 2024 | = | × | × | ||||
| Aug 31, 2023 | = | × | × | ||||
| Aug 31, 2022 | = | × | × | ||||
| Aug 31, 2021 | = | × | × | ||||
| Aug 31, 2020 | = | × | × | ||||
| Aug 31, 2019 | = | × | × |
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Tax Burden
- The tax burden ratio has remained consistently stable over the six-year period, fluctuating minimally between 0.76 and 0.77. This indicates a steady tax impact on pre-tax earnings without significant changes in tax rate or tax-related expenses.
- Interest Burden
- The interest burden ratio has also displayed a stable trend, maintaining a value of 1 from 2019 to 2020, followed by a slight decline to 0.99 from 2021 onward. This suggests minimal interest expense relative to operating income, implying low leverage or stable financing costs during the period under review.
- EBIT Margin
- The EBIT margin shows moderate fluctuations within a narrow range. It started at 14.36% in 2019, peaked at 15.31% in 2021, then experienced a decline to a low of 14.12% in 2023 before rebounding to 14.8% in 2024. This pattern reflects some variability in operating profitability, possibly influenced by factors such as operational efficiency, cost management, or revenue mix changes.
- Net Profit Margin
- Net profit margin increased slightly from 11.06% in 2019 to a peak of 11.69% in 2021, followed by a gradual decrease to 10.72% in 2023 before recovering to 11.19% in 2024. This trend aligns with the EBIT margin movements, indicating that post-operating expenses and taxes have a consistent but slightly variable impact on final profitability. The observed dip and subsequent recovery could be associated with transient operational challenges or fluctuating non-operating items.