DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Income Statement
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Analysis of Revenues
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Two-Component Disaggregation of ROE
Motorola Solutions Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-06-29), 10-Q (reporting date: 2024-03-30), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-07-01), 10-Q (reporting date: 2023-04-01), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-01), 10-Q (reporting date: 2022-07-02), 10-Q (reporting date: 2022-04-02), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-02), 10-Q (reporting date: 2021-07-03), 10-Q (reporting date: 2021-04-03), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-26), 10-Q (reporting date: 2020-06-27), 10-Q (reporting date: 2020-03-28), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-28), 10-Q (reporting date: 2019-06-29), 10-Q (reporting date: 2019-03-30).
- Return on Assets (ROA)
- The Return on Assets exhibits a generally positive trajectory from March 2020 to June 2024. Initially positioned at 8.16% in the first quarter of 2020, ROA displays consistent improvement over subsequent quarters, peaking at 13.69% in September 2023. After reaching this high, it experiences a moderate decline, settling around 10.97% by the second quarter of 2024. This pattern suggests enhanced efficiency in utilizing assets to generate profits, with some volatility towards the most recent periods.
- Financial Leverage
- Financial Leverage data begins being reported starting April 2022, showing a marked decrease in ratios over time. The leverage ratio drops sharply from 110.47 to 16.64 by June 2024. This downward trend suggests a significant reduction in reliance on debt financing or liabilities relative to equity, indicating a strengthening balance sheet and potentially lower financial risk.
- Return on Equity (ROE)
- Return on Equity values reveal extremely high and erratic figures from April 2022 through June 2024, with values starting at 1175%, then declining to around 182.54% by the latest quarter. Although these values are abnormally elevated, the downward trend may reflect normalization from previously inflated performance metrics or extraordinary items. The data indicates that equity returns remain strong but have been decreasing over recent quarters.
Three-Component Disaggregation of ROE
Motorola Solutions Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-06-29), 10-Q (reporting date: 2024-03-30), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-07-01), 10-Q (reporting date: 2023-04-01), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-01), 10-Q (reporting date: 2022-07-02), 10-Q (reporting date: 2022-04-02), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-02), 10-Q (reporting date: 2021-07-03), 10-Q (reporting date: 2021-04-03), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-26), 10-Q (reporting date: 2020-06-27), 10-Q (reporting date: 2020-03-28), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-28), 10-Q (reporting date: 2019-06-29), 10-Q (reporting date: 2019-03-30).
- Net Profit Margin
- The net profit margin shows a generally increasing trend from 11.01% in the first quarter of 2020 to a peak of 17.3% in the last quarter of 2023. After reaching this high point, it declined to 13.65% by the first quarter of 2024, then experienced a slight recovery to 14.05% in the second quarter of 2024. Overall, the margin improved steadily over the five-year period, indicating enhanced profitability efficiency except for the recent minor drop.
- Asset Turnover
- Asset turnover remained relatively stable with minor fluctuations, beginning at 0.74 in early 2020 and showing small variations between 0.67 and 0.79 in subsequent quarters. Notably, the highest values were observed near the end of 2023 with 0.79, indicating a modest improvement in how effectively the company utilizes its assets to generate revenue. The ratio's stability suggests consistent operational efficiency over the observed period.
- Financial Leverage
- Financial leverage data is only available from early 2023 onward and shows significant volatility. It started extremely high at 110.47, then decreased sharply to 18.42 by the first quarter of 2024, with intermediate fluctuations. This pronounced decline suggests a considerable reduction in the use of debt financing relative to equity, indicating a move towards a more conservative capital structure or repayment of liabilities during this period.
- Return on Equity (ROE)
- Return on equity data is limited to the same recent interval as financial leverage and reveals very high levels, with values soaring above 100% and peaking at 1175% before decreasing to 182.54% in the latest quarter. Despite the downward trend, these figures are extraordinarily high and indicate strong profitability relative to shareholder equity. The decreasing trend in ROE aligns with the reduction in financial leverage, suggesting the earlier high returns may have been amplified by leverage effects.
Two-Component Disaggregation of ROA
Motorola Solutions Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2024-06-29), 10-Q (reporting date: 2024-03-30), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-07-01), 10-Q (reporting date: 2023-04-01), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-10-01), 10-Q (reporting date: 2022-07-02), 10-Q (reporting date: 2022-04-02), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-02), 10-Q (reporting date: 2021-07-03), 10-Q (reporting date: 2021-04-03), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-26), 10-Q (reporting date: 2020-06-27), 10-Q (reporting date: 2020-03-28), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-28), 10-Q (reporting date: 2019-06-29), 10-Q (reporting date: 2019-03-30).
- Net Profit Margin
- The net profit margin shows an overall upward trend starting from 11.01% at the end of March 2020, reaching a peak of 17.3% in the fourth quarter of 2023. This increase suggests improving profitability relative to revenue over this period. After peaking, the margin experienced a decline, dropping to 13.65% in the first quarter of 2024 before slightly recovering to 14.05% in the subsequent quarter. The fluctuations towards the end indicate some volatility in profit efficiency despite the generally positive trend observed from 2020 through 2023.
- Asset Turnover
- Asset turnover has remained relatively stable across the periods, fluctuating within a narrow band between 0.67 and 0.79. Starting around 0.74 in early 2020, the ratio experienced minor declines and increases, hitting lows around 0.67 in the first quarter of 2022 and climbing back to 0.79 in the third and fourth quarters of 2023. The slight variations suggest consistent but modest efficiency in utilizing assets to generate revenue, with a marginal improvement towards the end of the timeline.
- Return on Assets (ROA)
- Return on assets exhibited a steady upward trajectory from 8.16% in March 2020 to a peak of 13.69% in the third quarter of 2023. This positive movement reflects enhanced overall asset profitability over time. A subsequent decrease to 10.45% in the first quarter of 2024 was observed, followed by a minor recovery to 10.97% in the next quarter. The trend indicates improving operational performance with some recent moderation.
- Summary of Trends and Insights
- The data suggests overall improved financial performance from 2020 through 2023, as evidenced by rising net profit margin and return on assets, indicating better profitability and asset utilization. Asset turnover remained relatively stable, implying consistent revenue generation efficiency from total assets. The declines in profitability and ROA in early 2024 suggest some emerging pressures or operational challenges. The recovery seen in the most recent quarters may indicate initial signs of stabilization or strategic adjustments. Careful monitoring of these trends is advisable to assess the sustainability of profitability gains.