Emerson Electric Co. (NYSE:EMR)

The financial data over the six-year period illustrates various trends and changes in profitability and financial structure.

Return on Assets (ROA)

ROA demonstrates fluctuation throughout the years. Starting at 8.88% in 2014, it reached a peak of 12.27% in 2015, followed by a decline in 2016 to 7.52%. The metric modestly recovered to 7.75% in 2017 and then exhibited a steady rise to 10.8% in 2018 and 11.25% in 2019. Overall, while there is variability, the latter years indicate an upward trajectory in asset profitability.

Financial Leverage

The financial leverage ratio shows moderate variability. It increased from 2.39 in 2014 to a high of 2.87 in 2016. Subsequently, it decreased notably to 2.25 in 2017, followed by a slight increase to 2.28 in 2018 and further to 2.49 in 2019. This pattern suggests some adjustments in the company's capital structure, with leverage first rising, then decreasing, and then stabilizing at a moderately increased level compared to the starting point.

Return on Equity (ROE)

ROE exhibits considerable volatility over the period. From 21.22% in 2014, it peaked significantly at 33.54% in 2015, which was followed by a sharp decline to 21.6% in 2016 and further to 17.41% in 2017. Subsequently, ROE improved to 24.62% in 2018 and further to 28.01% in 2019. This pattern reflects the impact of both profitability and leverage changes on shareholders' returns, with ROE reaching its highest point early in the period and rebounding toward the end.

In summary, the profitability metrics (ROA and ROE) reveal a pattern of initial improvement, mid-period decline, and late-period recovery. Financial leverage increased initially, declined, and then modestly increased again, potentially influencing the fluctuations observed in ROE. The recent trend towards improved asset returns and increased equity returns indicates strengthening financial performance.

Net Profit Margin

The net profit margin exhibited an overall upward trend between 2014 and 2019. It started at 8.75% in 2014 and increased significantly to 12.15% in 2015. After a slight dip to 11.26% in 2016 and further to 9.94% in 2017, profitability improved again in the following years, reaching 12.66% in 2018 and stabilizing around 12.55% in 2019. This pattern suggests fluctuations in profit efficiency with a generally positive trajectory in the latter years.

Asset Turnover

Asset turnover demonstrated a declining trend from 2014 to 2016, dropping from 1.01 to 0.67. This indicates decreasing efficiency in generating sales from assets during that period. From 2017 onward, there was gradual improvement, with the ratio increasing to 0.78 in 2017, 0.85 in 2018, and finally reaching 0.9 in 2019. Although not returning to initial levels, the recovery points to better asset utilization in recent years.

Financial Leverage

Financial leverage ratios fluctuated over the six-year span. Starting at 2.39 in 2014, leverage increased to 2.73 in 2015 and peaked at 2.87 in 2016, indicating a rise in the use of debt relative to equity. Subsequently, leverage declined to 2.25 in 2017 and remained relatively stable around 2.28 in 2018, before rising slightly to 2.49 in 2019. This suggests a cautious approach to leverage, with moderate adjustments during the period.

Return on Equity (ROE)

Return on equity showed significant volatility within the observed timeframe. It surged from 21.22% in 2014 to a high of 33.54% in 2015, followed by a sharp decline to 21.6% in 2016 and further down to 17.41% in 2017. From 2018 onward, ROE rebounded to 24.62% and then to 28.01% in 2019, indicating a recovery in overall shareholder returns. The fluctuations may be attributed to changes in profitability, asset efficiency, and leverage over the years.

The financial data over the six-year period reveals several noteworthy trends in key ratios and margins.

Tax Burden

The tax burden ratio remained stable at 0.65 in 2014 and 2015, then gradually increased to 0.7 in 2016 and 2017, followed by a significant rise to approximately 0.82 in the last two years. This indicates a higher proportion of pre-tax income being paid in taxes over time, particularly after 2017.

Interest Burden

The interest burden ratio stayed relatively stable throughout the period, fluctuating narrowly between 0.92 and 0.95. This stability suggests consistent interest expense relative to earnings before interest and taxes.

EBIT Margin

The earnings before interest and taxes (EBIT) margin peaked at 19.45% in 2015, after which it declined steadily to around 15.6% in 2017. A slight recovery occurred in subsequent years, reaching close to 16.5% by 2019, though still below the 2015 high. This pattern suggests a peak profitability period in 2015 followed by moderated operational efficiency or pricing pressure in later years.

Asset Turnover

Asset turnover experienced a significant decrease from 1.01 in 2015 to a low of 0.67 in 2016, indicating reduced efficiency in utilizing assets to generate sales. Subsequently, a gradual improvement occurred over the next three years, reaching 0.9 by 2019, which implies a recovery in asset utilization but not to earlier levels.

Financial Leverage

The financial leverage ratio increased from 2.39 in 2014 to a peak of 2.87 in 2016, suggesting more extensive use of debt financing relative to equity. After a decline in 2017 to 2.25, leverage ratios experienced a moderate upward trend again, standing at 2.49 in 2019. This indicates an overall tendency toward moderate to high leverage with some fluctuation.

Return on Equity (ROE)

Return on equity exhibited a marked increase in 2015, reaching 33.54%, reflecting a particularly strong performance that year. However, ROE declined to 17.41% in 2017, indicating reduced profitability for shareholders, before rising again to 28.01% by 2019. The ROE trend appears linked to fluctuations in EBIT margin, asset turnover, and leverage, highlighting the combined impact of operational efficiency, asset utilization, and financial structure on shareholder returns.

In summary, the data points to an overall environment where tax burdens have increased, operational margins have fluctuated with a peak in 2015, and asset efficiency suffered a temporary decline but improved toward the end of the period. The company maintained relatively stable interest costs, experienced moderate changes in financial leverage, and demonstrated volatile but generally strong returns on equity driven by these factors.

Net Profit Margin

The net profit margin exhibited fluctuations over the observed periods. It increased from 8.75% in 2014 to a peak of 12.15% in 2015, then slightly decreased to 11.26% in 2016. A further decline occurred in 2017, reaching 9.94%. However, the margin rebounded in 2018 and stabilized around 12.6% by 2019. Overall, the trend suggests periods of volatility followed by recovery and relative stabilization at a higher profit margin compared to the beginning of the timeframe.

Asset Turnover

Asset turnover demonstrated a notable decline from 1.01 in 2014 and 2015 to 0.67 in 2016, indicating a decrease in the efficiency with which the company utilized its assets to generate sales during that year. Following 2016, there was a steady recovery up to 0.9 by 2019, although the ratio did not return to the initial levels observed in 2014 and 2015. This pattern points to an initial drop in operational efficiency followed by gradual improvement.

Return on Assets (ROA)

The ROA mirrored some aspects of the net profit margin and asset turnover trends. Starting at 8.88% in 2014, it increased to 12.27% in 2015 before a sharp decline to 7.52% in 2016. Subsequently, a gradual improvement was evident from 2017 onwards, reaching 11.25% in 2019. The ROA’s fluctuations suggest that profitability relative to asset base saw significant variation, likely influenced by changes in both profit margins and asset utilization.

Tax Burden

The tax burden ratio remained stable at 0.65 in 2014 and 2015, then increased to 0.70 in 2016 and 2017, followed by a significant rise to above 0.80 in 2018 and 2019. This indicates a gradual increase in the proportion of earnings retained after taxes over the six-year period.

Interest Burden

The interest burden ratio showed minimal fluctuation, maintaining a consistent range between 0.92 and 0.95 from 2014 through 2019. This stability suggests that interest expenses relative to earnings before interest and taxes have remained fairly constant.

EBIT Margin

The EBIT margin demonstrated volatility, peaking at 19.45% in 2015, then declining to a low of 14.38% in 2014 and 15.59% in 2017. The margin experienced a moderate recovery to 16.54% by 2019. This pattern reflects fluctuations in operational profitability over the period, with an overall moderate margin.

Asset Turnover

Asset turnover began at 1.01 in both 2014 and 2015, followed by a sharp decline to 0.67 in 2016. Subsequently, there was a gradual recovery each year, reaching 0.90 in 2019. This trend indicates a decrease in the efficiency of asset utilization during the middle years, with partial improvement towards the end of the timeframe.

Return on Assets (ROA)

ROA displayed considerable variation. Starting at 8.88% in 2014, it rose to 12.27% in 2015, then dropped significantly to 7.52% in 2016. From that low point, ROA steadily increased to 11.25% by 2019. This trajectory shows a period of declining asset profitability followed by a recovery phase.

The financial data indicates multiple trends in the company's profitability and expense management over the six-year period under review.

Tax Burden

The tax burden ratio remained stable at 0.65 in the initial two years, then increased to 0.7 for the following two years. A more significant rise occurred in the last two years, reaching levels above 0.8. This upward trend suggests an increasing proportion of income paid as taxes during the later years.

Interest Burden

Interest burden ratios exhibited minimal fluctuation, maintaining values close to 0.92-0.95 throughout the period. This relative consistency indicates steady interest expenses relative to earnings before interest and taxes, without material changes impacting financial leverage or debt servicing costs.

EBIT Margin

EBIT margin showed a notable increase from 14.38% in 2014 to a peak of 19.45% in 2015, followed by a decline to 15.59% in 2017. Margins subsequently recovered slightly, ending at 16.54% in 2019. The initial peak indicates enhanced operational profitability, but the decline and subsequent partial recovery point to some volatility in core earnings efficiency.

Net Profit Margin

Net profit margin followed a similar trend to EBIT margin but with generally higher percentage values, rising from 8.75% in 2014 to 12.15% in 2015. There was a decrease in 2017 to below 10%, followed by a strong recovery to around 12.6% in 2018 and a slight decrease in 2019. This pattern reflects the influence of not only operational performance but also tax and interest expenses on bottom-line profitability.

Overall, the data reveals increasing tax burdens and steady interest costs, with profitability indicators showing peak performance mid-period and some volatility thereafter. The recovery of profit margins toward the end of the timeframe suggests operational adjustments or market conditions that allowed improved earnings despite higher tax obligations.