Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Aggregate Accruals
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Profitability Ratios (Summary)
General Dynamics Corp., profitability ratios
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
- Gross Profit Margin
- The gross profit margin exhibited a gradual decline over the five-year period, decreasing from 19.48% in 2015 to 17.94% in 2019. This indicates a slight erosion in the profitability from core operations, suggesting either increased cost of goods sold or pricing pressures.
- Operating Profit Margin
- Operating profit margin followed a similar downward trend, moving from 13.28% in 2015 to 11.81% in 2019. The consistent decline reflects rising operating expenses relative to revenue or reduced operational efficiency over time.
- Net Profit Margin
- The net profit margin remained relatively stable but showed a minor decrease, starting at 9.42% in 2015 and ending at 8.85% in 2019. While the margin has been relatively consistent, the slight fall corresponds with declines observed in gross and operating margins.
- Return on Equity (ROE)
- ROE experienced fluctuations throughout the period. It started at a strong 27.61% in 2015, dipped to 25.47% in 2017, peaked at 28.51% in 2018, before declining again to 25.66% in 2019. This pattern suggests variability in the company’s efficiency in generating profit from shareholders' equity.
- Return on Assets (ROA)
- ROA demonstrated a consistent downward trajectory from 9.27% in 2015 to 7.13% in 2019. The decline signifies reduced effectiveness in utilizing assets to generate net income, which may be linked to the decreased profitability margins and operational challenges.
Return on Sales
Return on Investment
Gross Profit Margin
General Dynamics Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data indicates several key trends in the company's performance over the five-year period from 2015 to 2019.
- Gross Profit
- Gross profit generally exhibited a positive trend, increasing from 6,130 million US dollars in 2015 to 7,059 million US dollars in 2019. Notably, there was a small dip in 2017, followed by recovery and continued growth through 2019.
- Revenue
- Revenue fluctuations were somewhat stable but showed a noticeable upward movement toward the end of the period. After a slight decline from 31,469 million US dollars in 2015 to 30,973 million US dollars in 2017, revenue rose significantly in the subsequent years, peaking at 39,350 million US dollars in 2019. This surge reflects expanding business activity or successful sales strategies implemented during that timeframe.
- Gross Profit Margin
- The gross profit margin experienced a gradual decline despite gross profit and revenue growth. Starting at 19.48% in 2015, it peaked slightly at 19.98% in 2017 before decreasing to 17.94% by 2019. This decline suggests rising costs relative to revenue or reduced pricing power, indicating potential margin pressure despite increased revenues and gross profits.
Overall, the company displayed growth in absolute profit and revenue terms, but the declining gross profit margin points to the importance of monitoring cost controls or pricing strategies to maintain profitability levels in the future.
Operating Profit Margin
General Dynamics Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating earnings | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Operating profit margin = 100 × Operating earnings ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
- Operating earnings
- The operating earnings have shown a generally upward trend over the analyzed period, increasing from 4178 million USD in 2015 to 4648 million USD in 2019. Notably, there was a slight decline in 2017 compared to 2016, but the earnings recovered and reached their highest point in 2019.
- Revenue
- Revenue figures exhibited relative stability between 2015 and 2017, with minor decreases each year, moving from 31469 million USD down to 30973 million USD. However, from 2017 onwards, there was a significant increase in revenue, rising sharply to 36193 million USD in 2018 and further to 39350 million USD in 2019. This indicates a notable growth phase in the latter part of the observed timeline.
- Operating profit margin
- The operating profit margin has experienced a gradual decline throughout the period. In 2015, the margin was at 13.28%. It slightly increased to 13.74% in 2016 but then trended downwards each year, reaching 11.81% by 2019. This downward trend suggests that despite growing revenue and earnings, the profitability relative to sales has decreased.
- Summary
- Overall, the data reflects growth in both operating earnings and revenue, especially from 2017 to 2019. However, the decreasing operating profit margin suggests increasing costs or other factors affecting profitability efficiency. This trend points to the company generating higher sales and earnings but at reduced relative profitability levels over time.
Net Profit Margin
General Dynamics Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Net profit margin = 100 × Net earnings ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals several key trends over the five-year period ending in 2019. Revenue demonstrated a generally positive trajectory, growing from $31,469 million in 2015 to $39,350 million in 2019. This represents a notable increase, particularly between 2017 and 2018 when revenue jumped from $30,973 million to $36,193 million, suggesting a period of accelerated sales growth.
Net earnings exhibited a slight decline from 2015 to 2017, moving marginally downward from $2,965 million to $2,912 million. However, this was followed by a recovery and subsequent growth to $3,484 million by the end of 2019. The improvement in net earnings from 2017 onwards corresponds with the revenue increase, indicating that revenue growth was accompanied by increased profitability in absolute terms.
Despite the rise in net earnings and revenue, the net profit margin showed a gradual decline over the period. Starting at 9.42% in both 2015 and 2016, the margin slightly decreased to 9.4% in 2017 and continued to fall to 8.85% by 2019. This trend suggests that although the company achieved higher revenues and net earnings, profitability relative to sales was under pressure, potentially due to rising costs or changes in pricing strategy.
- Revenue
- Increased consistently, with significant acceleration between 2017 and 2018.
- Net earnings
- Initially declined slightly but recovered strongly after 2017, reaching the highest level in 2019.
- Net profit margin
- Displayed a gradual decline, indicating decreasing profitability efficiency relative to revenue over the five years.
Overall, the data indicates a positive growth in both revenue and net earnings, but with a decreasing margin that warrants further analysis into cost structure and operational efficiency to sustain profitability improvements.
Return on Equity (ROE)
General Dynamics Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | ||||||
| Shareholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data over the five-year period reveals several key trends related to profitability, equity, and return metrics.
- Net Earnings
- Net earnings showed relatively stable performance from 2015 to 2017, with values around the 2900 million US dollars mark, experiencing a slight decline from 2965 million in 2015 to 2912 million in 2017. In 2018, earnings increased notably to 3345 million, followed by a further increase to 3484 million in 2019, indicating a positive upward trend in profitability in the last two years of the period.
- Shareholders’ Equity
- Shareholders' equity demonstrated a consistent growth trend throughout the five years. From 10738 million US dollars at the end of 2015, equity increased annually, reaching 13577 million by the end of 2019. This steady increase suggests accumulation of retained earnings or additional capital injections over the period.
- Return on Equity (ROE)
- ROE started at a high level of 27.61% in 2015 and showed a gradual decline to 25.47% by 2017. In 2018, the return on equity improved to 28.51%, which was the highest value in the observed timeframe. However, in 2019, ROE decreased again to 25.66%, indicating some volatility in the efficiency with which equity capital is utilized to generate earnings despite the increase in net earnings and shareholders' equity.
Overall, the company’s profitability improved in the recent two years examined, coinciding with increased shareholders' equity. However, the ROE indicates some fluctuations in the relationship between net earnings and shareholders’ equity, suggesting changes in operational efficiency or capital structure effects over the period.
Return on Assets (ROA)
General Dynamics Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net earnings | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data indicates several notable trends over the five-year period under review.
- Net Earnings
- Net earnings show a generally positive trajectory, starting at 2,965 million US dollars in 2015 and exhibiting slight fluctuation before rising more prominently in the last two years. The figure dips marginally from 2,965 million in 2015 to 2,912 million in 2017, followed by an increase to 3,345 million in 2018 and further to 3,484 million in 2019, indicating improved profitability towards the end of the period.
- Total Assets
- Total assets demonstrate consistent growth across the period. Starting from 31,997 million US dollars in 2015, total assets increased steadily each year, reaching 48,841 million by the end of 2019. The most significant growth appears between 2017 and 2018, with an increase of over 10 billion US dollars, suggesting possible acquisitions, capital expenditures, or other asset acquisition activities.
- Return on Assets (ROA)
- Return on assets shows a downward trend, declining consistently from 9.27% in 2015 to 7.13% in 2019. This decreasing ROA notwithstanding the rising net earnings and total assets points to diminishing efficiency in asset utilization or increased asset base that has not proportionally translated into earnings. It reflects a decrease in profitability relative to the company’s asset base over time.