Monsanto Co. (NYSE:MON)

The financial analysis reveals several noteworthy trends over the six-year period. Return on Assets (ROA) initially increased from 10.11% in 2012 to a peak of 12.47% in 2014, followed by a decline to 6.77% in 2016 before rising again to 10.59% in 2017. This fluctuation suggests variations in asset efficiency and profitability over time.

Financial Leverage shows a clear upward trend from 1.71 in 2012 to a peak of 4.35 in 2016, indicating an increasing reliance on debt financing. However, in 2017, this ratio decreases to 3.31, possibly reflecting a strategic reduction in leverage or repayment of debt.

Return on Equity (ROE) exhibits a substantial increase from 17.28% in 2012 to an exceptional 34.79% in 2014. After a slight decline to 29.47% in 2016, ROE reaches a new high of 35.1% in 2017. This corresponds with the periods of higher financial leverage, suggesting that increased leverage may have contributed to enhanced shareholder returns despite fluctuations in asset profitability.

Return on Assets (ROA)

Increase from 2012 to 2014, peak at 12.47%, decline until 2016, recovery in 2017.

Financial Leverage

Steady increase from 2012 to 2016, peak at 4.35, followed by a decrease in 2017.

Return on Equity (ROE)

Strong upward trend with peaks in 2014 and 2017; influenced by leverage levels.

Overall, the data suggests a strategic use of financial leverage to amplify shareholder returns, despite periods of fluctuating asset performance. The dip in ROA during 2015-2016 coupled with high leverage indicates increased financial risk, whereas the recalibration of leverage in 2017 coincides with improved asset returns and the highest observed ROE.

Net Profit Margin

The net profit margin showed an overall fluctuating trend between 2012 and 2017. It began at 15.14% in 2012 and increased steadily to a peak of 17.28% in 2014. A decline followed in 2015 and 2016, reaching a low of 9.89% in 2016. The margin then rebounded sharply to 15.44% in 2017, nearly restoring the earlier profitability levels.

Asset Turnover

The asset turnover ratio remained relatively stable during the period under review. Starting at 0.67 in 2012, it experienced a slight increase to 0.72 in 2013 and 2014. This was followed by a modest decrease to 0.68 in 2015 and 2016, and a marginal rise to 0.69 in 2017. Overall, asset utilization efficiency neither improved nor deteriorated significantly.

Financial Leverage

Financial leverage showed a notable upward trend from 2012 to 2016, increasing from 1.71 to a peak of 4.35 in 2016. This indicates a growing reliance on debt financing over time. However, in 2017, financial leverage decreased to 3.31, suggesting a partial reduction in this dependency.

Return on Equity (ROE)

Return on equity exhibited substantial growth throughout the six-year period, starting at 17.28% in 2012. This figure more than doubled in 2014, reaching 34.79%, and remained relatively high in the following years, though with some fluctuations. It dipped to 29.47% in 2016 before rising again to 35.10% in 2017. The overall trend demonstrates improved profitability from shareholders’ perspectives, potentially influenced by changes in profit margins, asset turnover, and financial leverage.

Tax Burden

The tax burden ratio exhibited moderate fluctuations over the period. Starting at 0.69 in 2012, it increased steadily to reach 0.73 by 2013 and 2015, dipped notably to 0.66 in 2016, before rising again to its peak of 0.78 in 2017. This indicates variability in the effective tax rate impacting net income.

Interest Burden

The interest burden ratio showed a slight downward trend during the analyzed years. Beginning at 0.94 in 2012 and maintaining similar values until 2014, it experienced a decline in 2015 to 0.88, further decreasing to its lowest at 0.82 in 2016, and recovering slightly to 0.86 in 2017. This pattern reflects changes in interest expenses relative to earnings before interest and taxes (EBIT), with an overall slight increase in interest costs over time.

EBIT Margin

The EBIT margin demonstrated a general upward trend initially, growing from 23.23% in 2012 to a peak of 25.64% in 2014. Subsequently, it declined sharply to 18.27% in 2016, before partially rebounding to 22.8% in 2017. This volatility suggests fluctuations in operating profitability possibly due to changes in cost management or revenue mix.

Asset Turnover

Asset turnover remained relatively stable, hovering around 0.67 to 0.72 throughout the period. The minor changes indicate consistent efficiency in using assets to generate sales, with no significant improvement or deterioration in asset utilization.

Financial Leverage

Financial leverage showed a notable increasing trend from 1.71 in 2012 to a peak of 4.35 in 2016, followed by a decrease to 3.31 in 2017. The rise in leverage indicates increasing use of debt financing over the years, which may have contributed to higher financial risk, though the reduction in the last year suggests a possible deleveraging effort.

Return on Equity (ROE)

ROE increased significantly over the period, from 17.28% in 2012 to a substantial peak of 34.79% in 2014. Although it dipped to 29.47% in 2016, it rose again to 35.1% in 2017. The elevated ROE values reflect strong profitability, potentially amplified by the increased financial leverage, despite some fluctuations in margins and costs.

Net Profit Margin

Over the six-year period, the net profit margin exhibits fluctuations with an initial increase from 15.14% in 2012 to a peak of 17.28% in 2014, indicating improving profitability margins during these years. After 2014, there is a notable decline to 9.89% in 2016, reflecting a period of reduced profitability. The margin then recovers to 15.44% in 2017, suggesting a rebound in profit efficiency towards the end of the timeline.

Asset Turnover

The asset turnover ratio remains relatively stable, ranging narrowly between 0.67 and 0.72 throughout the years. This consistency suggests that the company maintained steady efficiency in utilizing its assets to generate sales, with no significant improvement or deterioration observed during this period.

Return on Assets (ROA)

Return on assets shows a pattern similar to the net profit margin, beginning at 10.11% in 2012 and increasing to 12.47% in 2014, indicating enhanced overall profitability relative to total assets. The ROA then declines sharply to 6.77% in 2016, signaling reduced effectiveness in asset use, but partially recovers to 10.59% in 2017. This volatile movement points to varying operational performance and asset efficiency over the years.

Tax Burden

The tax burden ratio displays moderate fluctuations over the observed periods, starting at 0.69 in 2012 and generally increasing to reach 0.78 in 2017. A noticeable dip occurs in 2016 with a ratio of 0.66, indicating a temporary reduction in tax impact among the years analyzed.

Interest Burden

The interest burden ratio trends downward from 0.94 in 2012 to a low of 0.82 in 2016, signifying a gradual reduction in interest expense relative to earnings before interest and taxes. This trend reverses slightly in 2017, where the ratio rises to 0.86, though it remains below earlier levels.

EBIT Margin

The EBIT margin reflects an overall decline during the period despite some fluctuations. It peaks at 25.64% in 2014 and then declines considerably to 18.27% in 2016 before improving somewhat to 22.8% in 2017. This indicates variability in operational efficiency and profitability margins over time.

Asset Turnover

The asset turnover ratio remains relatively stable across the years, hovering between 0.67 and 0.72. Minimal variation suggests consistent efficiency in the utilization of assets to generate sales revenue, with a slight decrease in 2015 and modest recovery in 2017.

Return on Assets (ROA)

The ROA demonstrates notable variability, initially rising from 10.11% in 2012 to a high of 12.47% in 2014, followed by a decline to 6.77% in 2016. This decline is significant, indicating reduced overall profitability in asset use during this period. ROA recovers to 10.59% in 2017, suggesting improved returns in the final year analyzed.

The financial data reveals several noteworthy trends over the six-year period ending August 31, 2017. An examination of key ratios and margins provides insight into the company's profitability and expense management dynamics.

Tax Burden

The tax burden ratio exhibited moderate fluctuations, initially increasing from 0.69 in 2012 to 0.73 in 2013, and maintaining near that level through 2015. A noticeable dip occurred in 2016, reaching 0.66, followed by a significant rebound to 0.78 in 2017. This pattern suggests variability in effective tax rates that impact the proportion of earnings retained after taxes.

Interest Burden

The interest burden ratio demonstrated a gradual decline over the period. Starting at 0.94 in 2012, it remained stable through 2014, then decreased to 0.88 in 2015 and further down to 0.82 in 2016, with a slight recovery to 0.86 in 2017. This trend implies a reduction in earnings consumed by interest expenses, although a partial reversal occurred in the final year.

EBIT Margin

Operating profitability, as indicated by EBIT margin, experienced initial growth from 23.23% in 2012 to a peak of 25.64% in 2014. Thereafter, a decline is evident, dropping to 24.07% in 2015 and sharply to 18.27% in 2016 before partially recovering to 22.8% in 2017. This decline signals challenges in operating efficiency or increased operating costs that reduced profitability in the mid-period, followed by some recuperation.

Net Profit Margin

Net profit margin trends align broadly with EBIT margin movements. The margin rose from 15.14% in 2012 to 17.28% in 2014, then declined to 15.43% in 2015 and sharply to 9.89% in 2016. In 2017, a recovery to 15.44% occurred. This pattern underscores the combined effects of operating results, interest expenses, and tax rates on the final profitability, with 2016 notably marked by diminished net returns.

Overall, the period under review highlights a trajectory of initial improvement in profitability and cost management up to 2014, followed by a downturn in 2015 and 2016 that impacted both operating and net margins adversely. The rebound observed in 2017 suggests a potential stabilization or improvement in operational and financial factors influencing profitability.