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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Two-Component Disaggregation of ROE
Cigna Group, decomposition of ROE (quarterly data)
Based on: 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31).
- Return on Assets (ROA)
- The Return on Assets (ROA) values begin from March 31, 2021, showing an initial upward trend with percentages around 5.44% to 5.55% in mid-2021. This performance slightly decreases by the end of 2021 but remains above 5.2%. Starting from March 2022, ROA experiences a significant decline, dropping to approximately 3.46% and fluctuating around 3.5% to 4.6% through the end of 2022. In 2023, ROA demonstrates a gradual decline again, reaching roughly 3.38% by mid-year and further decreasing to around 2.36% by the end of the year. The first quarters of 2024 continue this downward trend, with ROA values falling below 2.5%, reaching a low near 1.93% before slightly recovering to about 2.2% at year-end.
- Financial Leverage
- Financial Leverage shows a generally stable pattern from March 2020 through December 2020, decreasing from 3.43 to 3.09, reflecting a reduction in leverage. Starting in 2021, the ratio rises steadily, fluctuating around the 3.2 to 3.3 mark throughout the year. During 2022, leverage remains relatively constant, averaging near 3.3 with minor variation. In 2023, the ratio shows slight variability but hovers around 3.3 before increasing notably from March 2024 onward. The leverage ratio climbs to 3.72 and continues to rise steadily, ending at approximately 3.8 by December 2024, indicating a moderate increase in reliance on debt financing towards the end of the observed period.
- Return on Equity (ROE)
- The Return on Equity (ROE) values begin reporting from March 31, 2021, starting strong with figures in the range of 16.7% to 17.7% through the end of 2021, consistent with robust profitability. Throughout 2022, ROE declines noticeably to a range from about 11.3% to 14.9%, indicating a reduction in shareholders' returns compared to the previous year. In 2023, a further downward trend persists, with values gradually moving between approximately 11.2% and 15.2%, showing some fluctuation but generally declining. Starting in early 2024, ROE decreases sharply, falling from approximately 11.6% in the first quarter to around 7.2% by the third quarter, although it recovers slightly to 8.4% by the end of the year. This indicates a weakening in return generation on equity capital during the later periods.
- Summary of Trends
- The analysis reveals an overall decline in profitability metrics over the observed intervals. ROA and ROE both exhibit strong performance initially but show a consistent downward trajectory starting in early 2022 and continuing through 2024. Meanwhile, Financial Leverage decreases in the early part of the timeline, stabilizes, and then gradually increases towards 2024, possibly reflecting changes in the company's capital structure amid declining profitability. The increasing leverage combined with reduced returns on assets and equity may suggest rising financial risk or operational challenges faced in recent periods.
Three-Component Disaggregation of ROE
Cigna Group, decomposition of ROE (quarterly data)
Based on: 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31).
- Net Profit Margin
- The net profit margin exhibits a declining trend over the observed periods. Starting from 5.31% in March 2021, it gradually decreases with minor fluctuations, reaching 1.4% by December 2024. This steady decline indicates reduced profitability relative to revenue over time.
- Asset Turnover
- Asset turnover shows a consistent upward trend throughout the periods. From a ratio of 1.02 in March 2021, it steadily increases to 1.58 by December 2024. This improvement suggests enhanced efficiency in utilizing assets to generate sales.
- Financial Leverage
- Financial leverage remains relatively stable with some modest increases over time. Beginning at 3.09 in December 2020, it hovers around the low 3.3 range through 2023, then rises moderately to 3.8 by December 2024. This trend indicates a slight increase in reliance on debt or borrowed funds.
- Return on Equity (ROE)
- Return on equity demonstrates a notable decline during the period analyzed. From a peak of approximately 17.68% in December 2020, ROE decreases to 8.37% by December 2024. This reduction reflects lower profitability from shareholders' equity, potentially influenced by both decreasing net profit margins and relatively stable financial leverage.
- Summary Insights
- The data reveals a pattern where asset efficiency improves, as indicated by rising asset turnover, while profitability margins and returns to equity holders decrease. The steady financial leverage suggests increasing operational risk is not fully offsetting gains in asset utilization. Overall, the figures highlight challenges in maintaining profitability and shareholder returns despite stronger asset utilization over the observed years.
Two-Component Disaggregation of ROA
Cigna Group, decomposition of ROA (quarterly data)
Based on: 10-K (reporting date: 2024-12-31), 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31).
- Net Profit Margin
- The net profit margin data begins from March 31, 2020, with an initial value of 5.31%. It shows a gradual decline through 2021, decreasing from 5.22% in June 2021 to 4.97% in December 2021. The margin experiences a further notable drop in 2022, falling to around 3.11% in March and fluctuating slightly to 3.69% by December 2022. In 2023, the margin remains relatively stable in the low 3% range before declining again in late 2023 and into 2024, reaching 1.4% by December 31, 2024. Overall, the net profit margin exhibits a significant downward trend over the observed period, indicating reduced profitability relative to sales or revenue.
- Asset Turnover
- The asset turnover ratio starts at 1.02 in March 2020 and shows a consistent upward trajectory throughout the entire period. It gradually rises to 1.09 by December 2020 and continues increasing steadily through 2021 and 2022, reaching 1.24 by December 2022. This upward trend persists into 2023 and 2024, with the ratio improving from about 1.25 to a high of 1.58 by December 31, 2024. This pattern suggests an improving efficiency in utilizing assets to generate revenue over time.
- Return on Assets (ROA)
- The ROA starts at 5.44% in March 2020 and fluctuates mildly in the early periods, reaching a peak of 5.55% in June 2020 and maintaining levels above 5% until December 2020. From 2021 onwards, the return diminishes substantially, dropping to 3.46% in March 2021 and settling around 4.6% by the end of 2022. In 2023 and into 2024, ROA experiences a steady decline, reaching lows around 1.93% in September 2024 before a slight recovery to 2.2% in December 2024. This downward trend indicates decreasing profitability from the company’s asset base over the latter part of the period examined.
- Summary
- The company shows a clear improvement in asset utilization as evidenced by the steadily increasing asset turnover ratio, which suggests enhanced operational efficiency. However, this improvement is not translating into proportional profit gains, as both net profit margin and return on assets demonstrate a marked decline over the same timeframe. The reduction in profitability metrics may point to increased costs, pricing pressures, or other challenges affecting the bottom line despite better usage of assets. The divergence of these trends highlights potential areas for further operational and financial analysis to address profitability concerns.