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.
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- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
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- Return on Assets (ROA) since 2005
- Current Ratio since 2005
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Two-Component Disaggregation of ROE
Apache Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31).
The financial data reveals distinct trends in key profitability and leverage metrics over the observed periods.
- Return on Assets (ROA)
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ROA demonstrates an overall declining trend across the period. Starting around 8.81% in early 2011, it decreases steadily, crossing below zero by March 31, 2015. After peaking positively in the earlier years, the metric enters negative territory from 2015 onwards, with a significant plunge observed from -9.66% in June 2015 to a trough of -122.7% by December 2015. While there is some recovery post this low, ROA remains deeply negative through mid-2016.
- Financial Leverage
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Financial leverage shows moderate growth initially, rising from about 1.78 in March 2011 to around 2.84 by December 2015, signaling increasing reliance on debt or borrowed capital over time. There is a notable spike to 7.34 in March 2016, indicating a sharp increase in leverage during that quarter. The values slightly moderate afterwards but remain elevated relative to the earlier periods, around 3.3 to 3.4 in mid-2016.
- Return on Equity (ROE)
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The ROE follows a pattern similar to ROA, starting strong at 15.81% in early 2011 and gradually declining across the periods. It dips into negative values by December 2014, indicating that the company experienced net losses relative to shareholder equity starting at this point. The magnitude of negative ROE worsens significantly especially from 2015 onward, reaching an extremely negative peak at nearly -901% in March 2016, suggesting severe erosion of shareholder value. Although slightly less negative after this, ROE remains largely unfavorable through mid-2016.
In summary, the data depicts a company facing increasingly poor profitability as evidenced by sharply declining ROA and ROE figures, accompanied by a marked ramp-up in financial leverage. The combination of these factors implies deteriorating financial health and heightened risk exposure especially from late 2014 through mid-2016.
Three-Component Disaggregation of ROE
Apache Corp., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31).
The analysis of the quarterly financial data reveals significant trends across the key performance indicators over the observed periods.
- Net Profit Margin
- There is a clear declining trend in net profit margin starting from the first available data point at 27.27% in March 31, 2011. This margin steadily decreases quarter over quarter, reaching negative values by December 31, 2014, at -2.85%. Subsequently, the margin deteriorates sharply, plunging to -362.2% by March 31, 2016. This indicates increasing losses and severe profitability challenges for the company throughout the later periods.
- Asset Turnover
- Asset turnover exhibits a slight decreasing trend overall, beginning at 0.32 in March 31, 2011. The ratio fluctuates mildly but generally trends downward to a low point near 0.22 by June 30, 2016. There is a minor temporary increase during late 2015 and early 2016; however, this is followed by another decline. The sustained low asset turnover suggests a decreasing efficiency in utilizing assets to generate sales.
- Financial Leverage
- Financial leverage displays a gradual increase throughout the periods, starting at approximately 1.78 in early 2011 and rising steadily, with some volatility, to peak dramatically at 7.34 in March 31, 2016. After this peak, it drops somewhat to near 3.41 by June 30, 2016. The overall upward trajectory signals growing reliance on debt or other liabilities, which may amplify financial risk.
- Return on Equity (ROE)
- ROE mirrors the trend seen in net profit margin, with positive values recorded initially, for example, 15.81% in March 31, 2011, steadily decreasing and then turning negative by the end of 2014. Following this, ROE significantly declines, reaching extreme negative values, including -900.97% in March 31, 2016. This dramatic downturn underscores severe damage to shareholder value and profitability.
In summary, the financial indicators collectively highlight a period of deteriorating profitability and operational efficiency, accompanied by growing financial leverage. The negative profitability metrics and sharp decline in ROE suggest that the company faced significant financial distress during the later quarters observed, which could indicate heightened risk and challenges in maintaining financial stability.
Two-Component Disaggregation of ROA
Apache Corp., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31), 10-K (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-Q (reporting date: 2011-03-31).
The quarterly financial data reveals notable trends in key performance indicators over the observed periods.
- Net Profit Margin
- The net profit margin displayed a declining trend after peaking around early 2011 at approximately 27.27%. It gradually decreased through 2012 and 2013, moving from double-digit positive margins down to near single digits by early 2014. The margin turned negative starting in 2015, with a sharp deterioration observed through 2015 and into 2016, reaching levels worse than -300%. This indicates significant profitability challenges and potential operational or market difficulties during the latter periods.
- Asset Turnover
- Asset turnover ratio showed modest fluctuations but generally remained around the 0.2 to 0.3 range across the periods. After a slight peak near 0.34 in late 2015, the ratio declined again in 2016 to approximately 0.22. This relatively stable but low asset turnover suggests that the company maintained consistent but not highly efficient use of assets to generate revenue throughout the period, with some slight improvements and declines depending on the quarter.
- Return on Assets (ROA)
- The ROA mirrored the behavior of net profit margin, initially positive and gradually decreasing over time. From strong performance in early 2011 at 8.81%, it declined steadily through 2012 and 2013, dipping into negative territory by 2014. The negative trend intensified dramatically in 2015 and 2016, reaching deeply negative levels by mid-2016. This reflects substantial declines in overall profitability relative to asset base, strongly indicating deteriorating operational performance and asset productivity.
Overall, the data points to an initial period of relatively strong profitability and asset efficiency, followed by a progressive decline culminating in negative profitability and returns on assets during the latest quarters. The decline in net profit margin and ROA, alongside a modestly fluctuating but generally low asset turnover, suggests worsening business conditions or operational challenges impacting financial health adversely over the analyzed time frame.