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
ConocoPhillips, decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | |||
| Dec 31, 2023 | = | × | |||
| Dec 31, 2022 | = | × | |||
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Return on Assets (ROA)
- The Return on Assets demonstrated significant variability over the observed periods. Initially, there was a negative return of -4.31% at the end of 2020, followed by a notable improvement to 8.91% in 2021. This upward trend continued strongly into 2022, peaking at 19.91%, before declining to 11.42% in 2023 and further to 7.53% in 2024. Overall, ROA showed a recovering trend from a loss position to positive profitability, with peak efficiency occurring in 2022, and a subsequent gradual decline over the last two years.
- Financial Leverage
- Financial leverage remained relatively stable across the periods, with a slight decreasing trend. Starting from a ratio of 2.1 in 2020, leverage decreased to 2.0 in 2021 and further reduced gradually to 1.89 by 2024. This indicates a cautious approach towards debt utilization, reflecting a moderate reduction in the proportion of debt financing relative to equity over time.
- Return on Equity (ROE)
- Return on Equity experienced a pronounced fluctuation. It began with a negative return of -9.05% in 2020, migrated sharply upward to 17.79% in 2021, and surged to a peak of 38.91% in 2022. After this high, ROE declined to 22.23% in 2023 and decreased further to 14.27% in 2024. Despite this decrease, the ROE remained strongly positive compared to the initial years, indicating improved shareholder profitability and effective equity utilization, though with some volatility in recent years.
Three-Component Disaggregation of ROE
ConocoPhillips, decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Net Profit Margin
- The net profit margin experienced a significant increase from -14.38% in 2020 to a positive 17.63% in 2021, indicating a marked improvement in profitability. This positive trend continued, reaching a peak of 23.8% in 2022. However, subsequent years showed a gradual decline, with margins decreasing to 19.52% in 2023 and further to 16.89% in 2024, suggesting some challenges in maintaining the peak profitability levels.
- Asset Turnover
- Asset turnover demonstrated a substantial increase from 0.3 in 2020 to 0.51 in 2021 and peaked at 0.84 in 2022. This trend implies enhanced efficiency in utilizing assets to generate revenue during these years. However, the ratio declined thereafter to 0.59 in 2023 and 0.45 in 2024, indicating a reduction in the efficiency of asset utilization over the recent periods.
- Financial Leverage
- Financial leverage remained relatively stable across the observed years, with a slight downward trend from 2.1 in 2020 to 1.89 in 2024. This gradual reduction suggests a cautious approach to leveraging, potentially reflecting efforts to decrease reliance on debt or improve the equity base.
- Return on Equity (ROE)
- ROE showed a marked improvement from a negative return of -9.05% in 2020 to a positive 17.79% in 2021, followed by a sharp increase to 38.91% in 2022. This indicates a strong improvement in generating returns on shareholders' equity. Nevertheless, ROE declined to 22.23% in 2023 and further to 14.27% in 2024, mirroring the downward trends seen in net profit margin and asset turnover, and suggesting challenges in sustaining peak profitability and efficiency levels.
Five-Component Disaggregation of ROE
ConocoPhillips, decomposition of ROE
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden
- The tax burden ratio shows a gradual increase from 0.64 in 2021 to 0.68 in 2024, indicating a slightly rising proportion of earnings retained after taxes over the period.
- Interest Burden
- The interest burden ratio remains relatively stable, fluctuating narrowly between 0.93 and 0.97 from 2021 through 2024, suggesting consistent interest expenses relative to earnings before interest and taxes.
- EBIT Margin
- EBIT margin experienced a significant recovery from a negative margin of -12.67% in 2020 to a peak of 36.99% in 2022. However, it thereafter declined to 26.4% by 2024, indicating some contraction in operational profitability after reaching high levels.
- Asset Turnover
- Asset turnover improved markedly from 0.30 in 2020 to 0.84 in 2022, demonstrating more efficient use of assets to generate sales. This efficiency declined in subsequent years to 0.45 by 2024, suggesting a reduction in asset utilization effectiveness.
- Financial Leverage
- Financial leverage shows a gradual decrease from 2.1 in 2020 to 1.89 in 2024, indicating a trend toward a less leveraged capital structure over time.
- Return on Equity (ROE)
- ROE exhibited a strong recovery from a negative -9.05% in 2020 to a high of 38.91% in 2022. Following this peak, ROE declined to 14.27% by 2024, signaling a reduction in profitability attributable to equity holders after a period of significant growth.
Two-Component Disaggregation of ROA
ConocoPhillips, decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | |||
| Dec 31, 2023 | = | × | |||
| Dec 31, 2022 | = | × | |||
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Net Profit Margin
- The net profit margin exhibited a notable recovery from a negative value of -14.38% in 2020 to a positive 17.63% in 2021, indicating a significant improvement in profitability. This upward trend continued into 2022, reaching a peak of 23.8%. However, margins declined in the subsequent years, falling to 19.52% in 2023 and further to 16.89% in 2024. Despite this decline, the margin remained substantially above the 2020 level, reflecting sustained profitability improvements after the initial recovery.
- Asset Turnover
- The asset turnover ratio increased steadily from 0.3 in 2020 to 0.84 in 2022, demonstrating enhanced efficiency in utilizing assets to generate revenue. This improvement suggests operational optimization or growth in sales relative to asset base during this period. However, the ratio subsequently decreased to 0.59 in 2023 and 0.45 in 2024, indicating a reduction in asset utilization effectiveness in the latter years.
- Return on Assets (ROA)
- ROA showed significant recovery from a negative -4.31% in 2020 to a positive 8.91% in 2021, aligning with the improvement observed in net profit margin. It peaked at 19.91% in 2022, reflecting strong profitability relative to assets during that year. Similar to the net profit margin, ROA declined in 2023 and 2024, settling at 11.42% and 7.53%, respectively. Despite the downward trend, ROA remained positive and substantially improved compared to the 2020 base, indicating an overall enhanced return on asset investments.
Four-Component Disaggregation of ROA
ConocoPhillips, decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | × | |||||
| Dec 31, 2023 | = | × | × | × | |||||
| Dec 31, 2022 | = | × | × | × | |||||
| Dec 31, 2021 | = | × | × | × | |||||
| Dec 31, 2020 | = | × | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden
- The tax burden ratio shows a consistent upward trend from 0.64 in 2021 to 0.68 in 2024. This indicates a gradual increase in the proportion of earnings retained after tax over the observed periods.
- Interest Burden
- The interest burden ratio demonstrates relative stability, remaining close to 0.95 from 2022 through 2024, after a slight rise from 0.93 in 2021. This suggests that interest expenses have maintained a consistent share relative to earnings before interest and tax during these years.
- EBIT Margin
- EBIT margin experienced significant improvement from a negative margin of -12.67% in 2020 to a peak of 36.99% in 2022, followed by a decline to 26.4% in 2024. This pattern indicates a recovery and strong profitability through 2022, subject to a moderate reduction in operating profitability in the subsequent two years.
- Asset Turnover
- Asset turnover improved markedly from 0.3 in 2020 to 0.84 in 2022, signalling more efficient use of assets to generate sales. However, it declined afterwards to 0.45 in 2024, suggesting decreased operational efficiency or asset utilization in the latter period.
- Return on Assets (ROA)
- The return on assets shifted dramatically from negative -4.31% in 2020 to a strong peak of 19.91% in 2022, reflecting enhanced overall profitability. This was followed by a decline to 7.53% in 2024, indicating a reduction in effective returns generated from assets, although still positive compared to the initial period.
Disaggregation of Net Profit Margin
ConocoPhillips, decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden
- The tax burden ratio demonstrates a consistent upward trend from 0.64 in 2021 to 0.68 in 2024. This indicates a gradual increase in the proportion of earnings paid as tax over the analyzed periods.
- Interest Burden
- The interest burden ratio shows slight fluctuations while maintaining a high level, starting at 0.93 in 2021, rising to 0.97 in 2022, and then stabilizing at 0.95 through 2023 and 2024. This suggests relatively stable interest expenses in relation to earnings before interest and taxes (EBIT).
- EBIT Margin
- The EBIT margin exhibits significant volatility. It was negative at -12.67% in 2020, followed by a strong recovery to 29.67% in 2021 and peaking at 36.99% in 2022. However, it declined subsequently to 30.4% in 2023 and further to 26.4% in 2024. Despite the decrease in the later years, the margin remains substantially positive compared to the initial negative value.
- Net Profit Margin
- The net profit margin follows a pattern similar to the EBIT margin. Starting from a negative margin of -14.38% in 2020, it rose to 17.63% in 2021 and increased further to 23.8% in 2022. Thereafter, it decreased to 19.52% by 2023 and 16.89% in 2024. The data reflects a recovery and strengthening in profitability initially, followed by a moderate decline while still maintaining positive profitability levels.