Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Income Statement
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Selected Financial Data since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
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Profitability Ratios (Summary)
EMC Corp., profitability ratios
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
Analysis of the financial performance over the reported periods reveals several key trends and shifts in profitability and efficiency ratios.
- Gross Profit Margin
- The gross profit margin remained relatively stable throughout the periods, fluctuating slightly between 60.68% and 62.81%. It peaked in 2012 at 62.81% before displaying a modest decline to 60.68% by the end of 2015. This indicates that the company's core product or service profitability experienced only minor variations and maintained overall consistency during this timeframe.
- Operating Profit Margin
- The operating profit margin exhibited a downward trend, decreasing from 17.21% in 2011 to 11.5% in 2015. After a peak at 18.26% in 2012, this margin gradually declined over the subsequent years. This suggests rising operating expenses relative to revenue or potentially diminishing operational efficiency, impacting the company's ability to convert gross profit into operating income effectively.
- Net Profit Margin
- Net profit margin showed a similar declining pattern, moving from 12.3% in 2011 to 8.06% in 2015. Despite slight increases early on, the overall trend is downward, indicating that the company faced shrinking bottom-line profitability possibly due to higher costs, increased taxes, interest expenses, or other non-operating factors affecting net income.
- Return on Equity (ROE)
- Return on equity demonstrated a mild fluctuation with an initial decrease from 12.98% in 2011 to 12.22% in 2012, then a rise to 12.95% in 2013, followed by a downward trend culminating at 9.41% in 2015. The decline in later years signals a reduction in the efficiency with which the company generated profits from shareholders' equity, which may correlate with the declining net profit margin and operating performance.
- Return on Assets (ROA)
- Return on assets steadily declined during the period, from 7.18% in both 2011 and 2012 to 4.27% in 2015. This consistent decrease points to a reduced ability of the company to generate earnings from its asset base, reflecting diminishing asset utilization or lower profitability relative to total assets invested.
In summary, while the gross profit margin remained relatively stable, indicating steady core profitability, the operating and net profit margins showed clear declining trends, suggesting increasing costs or operational challenges. This overall decrease in profitability translated into weaker returns for equity holders and less efficient use of assets, highlighting potential areas for management focus to improve operational efficiency and cost control.
Return on Sales
Return on Investment
Gross Profit Margin
EMC Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The analysis of the annual financial data reveals several notable trends in the company's performance over the five-year period ending December 31, 2015.
- Revenues
- Revenues demonstrated consistent growth from 2011 through 2015, rising from $20,008 million to $24,704 million. This represents a steady increase each year, with the largest increment observed between 2012 and 2013.
- Gross Profit
- Gross profit also showed an upward trend, increasing from $12,169 million in 2011 to a peak of $15,249 million in 2014, followed by a slight decrease to $14,991 million in 2015. Despite this small decline in the final year, gross profit generally moved upward in tandem with revenues over the period.
- Gross Profit Margin
- The gross profit margin, expressed as a percentage, fluctuated moderately. It improved from 60.82% in 2011 to a high of 62.81% in 2012, and then stabilized around 62.3%-62.4% through 2014. However, there was a decline to 60.68% in 2015, indicating a slight reduction in profitability efficiency relative to revenues in the last year.
Overall, the company experienced steady revenue growth during the period under review, with gross profit generally following this positive trajectory. The gross profit margin exhibited minor volatility but remained above 60%, suggesting consistent cost control relative to sales. The dip in gross profit and margin in 2015 may warrant further investigation to identify underlying causes or potential operational challenges.
Operating Profit Margin
EMC Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Operating profit margin = 100 × Operating income ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
- Operating Income
- The operating income showed an overall upward trend from 2011 to 2014, increasing from 3,442 million US dollars in 2011 to a peak of 4,150 million US dollars in 2013 before slightly declining to 4,037 million US dollars in 2014. In 2015, there was a significant decrease in operating income to 2,841 million US dollars, indicating a potential challenge or unfavorable event impacting profitability.
- Revenues
- Revenues demonstrated consistent growth over the five-year period, increasing each year from 20,008 million US dollars in 2011 to 24,704 million US dollars in 2015. This steady increase suggests stable demand and successful sales efforts, with a total increase of approximately 23% over the period.
- Operating Profit Margin
- The operating profit margin followed a declining trend despite the growth in revenues, starting at 17.21% in 2011, rising slightly to 18.26% in 2012, then gradually decreasing to 16.52% in 2014. A marked drop to 11.5% occurred in 2015, indicating diminishing efficiency in converting revenues to operating profit, likely tied to the significant decline in operating income that year.
- Overall Insights
- The data reveals a company experiencing steady revenue growth but encountering decreasing profitability margins over the course of five years. The sharp decline in operating income and operating profit margin in 2015 contrasts with the continuing increase in revenues, suggesting potential cost pressures, operational inefficiencies, or other adverse factors affecting earnings quality. Monitoring cost structure and operational efficiency would be critical to reversing the declining profit margin trend.
Net Profit Margin
EMC Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to EMC Corporation | ||||||
| Revenues | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Net profit margin = 100 × Net income attributable to EMC Corporation ÷ Revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals a general upward trend in revenues over the five-year period. Revenues increased consistently from 20,008 million US dollars in 2011 to 24,704 million US dollars in 2015. This indicates steady growth in the company's sales or service income.
Despite the revenue growth, net income attributable to the company exhibits a different pattern. Net income rose from 2,461 million US dollars in 2011 to a peak of 2,889 million US dollars in 2013, followed by a decline in the subsequent years, ending at 1,990 million US dollars in 2015. This decline suggests increasing costs, expenses, or other factors negatively impacting profitability.
The net profit margin, expressed as a percentage, further illustrates this profitability trend. The margin remained relatively stable between 12.3% and 12.58% from 2011 to 2013, then dropped noticeably to 11.1% in 2014 and sharply declined to 8.06% in 2015. This decrease in profit margin alongside rising revenues indicates that the company is generating less profit per dollar of revenue than in previous years, which could be attributed to higher operating expenses, pricing pressure, or changes in cost structure.
- Revenues
- Consistent increase year-over-year, indicating growth in overall business activity.
- Net Income
- Initial growth through 2013 followed by a pronounced decrease, implying challenges in maintaining profitability.
- Net Profit Margin
- Relatively stable in the early years, with a significant decline in the final two years, signaling reduced profitability efficiency.
Overall, the data suggests that while sales have expanded steadily, the company has faced increasing profitability pressures, potentially warranting further investigation into cost management and operational efficiency.
Return on Equity (ROE)
EMC Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to EMC Corporation | ||||||
| Total EMC Corporation’s shareholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROE = 100 × Net income attributable to EMC Corporation ÷ Total EMC Corporation’s shareholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to EMC Corporation
- The net income displayed an increasing trend from 2011 to 2013, rising from 2,461 million US dollars to 2,889 million US dollars. However, a decline is observed in the subsequent years, with net income decreasing to 2,714 million in 2014 and further dropping to 1,990 million in 2015. This indicates a reduction in profitability after peaking in 2013.
- Total Shareholders’ Equity
- Shareholders' equity increased consistently from 18,959 million US dollars in 2011 to 22,357 million in 2012. It remained relatively stable in 2013 and 2014 at approximately 22,300 million and 21,896 million respectively, followed by a slight decrease to 21,140 million in 2015. Overall, equity levels maintained stability with a minor downward adjustment in the final year.
- Return on Equity (ROE)
- ROE started at 12.98% in 2011, followed a modest decrease to 12.22% in 2012, then increased slightly to 12.95% in 2013. Afterward, it declined to 12.39% in 2014 and dropped more significantly to 9.41% in 2015. The declining ROE trend in the last two years reflects decreased efficiency in generating profits from shareholders’ equity.
- Overall Analysis
- The analysis reveals initial growth in both profitability and equity from 2011 through 2013, with net income and ROE peaking in 2013. Post-2013, the company experienced decreases in net income, shareholders' equity, and ROE, suggesting operational or market challenges affecting financial performance and equity value. The notable decline in ROE and net income in 2015 is indicative of reduced return generation capability, which warrants attention for future strategic and operational adjustments.
Return on Assets (ROA)
EMC Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to EMC Corporation | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROA = 100 × Net income attributable to EMC Corporation ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Trend
- Net income attributable to EMC Corporation shows an overall upward trend from 2011 to 2013, increasing from $2,461 million to $2,889 million. In 2014, a decrease is observed with net income dropping to $2,714 million, followed by a more pronounced decline in 2015 to $1,990 million. This indicates a peak in profitability in 2013, with a downward trend over the last two years in the data set.
- Total Assets Trend
- Total assets demonstrate consistent growth across the entire period. Starting at $34,268 million in 2011, assets increased annually, reaching $46,612 million by 2015. The increment pace appears stable, with a notable jump between 2012 and 2013, and more moderate growth thereafter. This suggests continuing expansion in asset base despite fluctuations in profitability.
- Return on Assets (ROA) Trend
- The return on assets remains stable at 7.18% for both 2011 and 2012 before declining progressively to 6.3% in 2013, 5.91% in 2014, and dropping more sharply to 4.27% in 2015. This decline indicates decreasing efficiency in generating net income from the asset base over time.
- Overall Financial Insights
- The data reveals a disconnect between the growth in total assets and the company's profitability metrics. Despite steady increases in total assets, net income peaked in 2013 and then reduced significantly over the subsequent years. The decreasing ROA mirrors this trend, indicating that asset utilization effectiveness has deteriorated. This pattern suggests potential challenges in operational efficiency or market conditions impacting profit generation, despite asset growth.