DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2008
- Return on Assets (ROA) since 2008
- Debt to Equity since 2008
- Price to Earnings (P/E) since 2008
- Price to Book Value (P/BV) since 2008
- Analysis of Revenues
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Two-Component Disaggregation of ROE
Visa Inc., decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Sep 30, 2022 | = | × | |||
| Sep 30, 2021 | = | × | |||
| Sep 30, 2020 | = | × | |||
| Sep 30, 2019 | = | × | |||
| Sep 30, 2018 | = | × | |||
| Sep 30, 2017 | = | × |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Return on Assets (ROA)
- The Return on Assets displayed a generally upward trajectory over the analyzed period. Starting at 9.85% in 2017, it increased significantly to 14.88% in 2018 and continued rising to 16.65% in 2019. There was a noted decline to 13.43% in 2020, which could be indicative of external economic pressures or operational challenges during that year. However, the ROA rebounded in subsequent years, reaching 14.85% in 2021 and peaking at 17.49% in 2022. This suggests improving asset utilization and profitability over the long term.
- Financial Leverage
- Financial leverage remained relatively stable throughout the period, fluctuating slightly around a ratio of approximately 2.08. Starting at 2.08 in 2017, it decreased marginally to 2.04 in 2018 before increasing again to 2.09 in 2019. There was a more noticeable rise to 2.23 in 2020, which held steady through 2021 at 2.21, before increasing again to 2.40 in 2022. The general trend indicates a moderate increase in leverage, suggesting a growing reliance on debt or other financial obligations over time.
- Return on Equity (ROE)
- Return on Equity showed strong growth and marked variability over the years. Beginning at 20.45% in 2017, ROE jumped significantly to 30.29% in 2018, then increased further to 34.83% in 2019. Despite a slight decline to 30.01% in 2020, it recovered to 32.75% in 2021 and reached its highest value of 42.04% in 2022. This upward trend alongside occasional dips suggests enhanced profitability and efficiency in utilizing shareholders' equity, albeit with some sensitivity to external or internal variables.
Three-Component Disaggregation of ROE
Visa Inc., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Sep 30, 2022 | = | × | × | ||||
| Sep 30, 2021 | = | × | × | ||||
| Sep 30, 2020 | = | × | × | ||||
| Sep 30, 2019 | = | × | × | ||||
| Sep 30, 2018 | = | × | × | ||||
| Sep 30, 2017 | = | × | × |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Net Profit Margin
- The net profit margin showed a general upward trend over the analyzed periods. Starting at 36.49% in 2017, it increased substantially to reach a peak of 52.57% in 2019. After a slight decline in 2020, the margin stabilized around 51% in both 2021 and 2022, indicating sustained profitability at a high level.
- Asset Turnover
- Asset turnover exhibited moderate fluctuations during the period. It increased steadily from 0.27 in 2017 to 0.32 in 2019, followed by a decline to 0.27 in 2020. Subsequently, the ratio rose again, reaching its highest value of 0.34 in 2022. This suggests an improvement in the efficiency of asset utilization towards the end of the period.
- Financial Leverage
- Financial leverage remained relatively stable with a slow upward inclination. Starting at 2.08 in 2017, it saw minor decreases and increases, reaching 2.23 in 2020. The ratio increased further to 2.40 in 2022, reflecting a modest increase in the use of debt or equity financing to support assets.
- Return on Equity (ROE)
- Return on equity demonstrated a strong positive trend over the years. The figure rose from 20.45% in 2017 to 34.83% in 2019, then experienced a slight dip to 30.01% in 2020. Afterwards, ROE increased again, peaking at 42.04% in 2022. This indicates progressively improving profitability in relation to shareholders' equity, supported by the combination of profit margin, asset turnover, and financial leverage trends.
Five-Component Disaggregation of ROE
Visa Inc., decomposition of ROE
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Tax Burden
- The tax burden ratio demonstrated an overall increasing trend from 0.57 in 2017 to 0.82 in 2022, indicating a greater proportion of earnings retained after taxes over time. There was a notable sharp rise between 2017 and 2018, followed by relatively stable values around 0.79 to 0.82 in subsequent years.
- Interest Burden
- The interest burden ratio remained very stable throughout the period, fluctuating narrowly between 0.95 and 0.97. This suggests consistent management of interest expenses relative to earnings before interest and taxes.
- EBIT Margin
- EBIT margin showed fluctuation over time, starting at 66.77% in 2017, peaking at 68.77% in 2021, before declining to 63.71% in 2022. Despite this recent decrease, the margin generally stayed within a moderate range around mid-60%. The variability may reflect changing operating efficiencies or cost structures.
- Asset Turnover
- Asset turnover exhibited a gradual increase from 0.27 in 2017 to 0.34 in 2022, with a slight dip noted in 2020. The upward movement over the long term indicates improving efficiency in generating revenue from assets.
- Financial Leverage
- Financial leverage increased moderately over the period from 2.08 in 2017 to 2.4 in 2022, suggesting a growing use of debt relative to equity in capital structure. This incremental rise may enhance returns but also increases financial risk.
- Return on Equity (ROE)
- ROE experienced overall robust growth, rising from 20.45% in 2017 to a peak of 42.04% in 2022. The trend included a peak of 34.83% in 2019, a subsequent dip to 30.01% in 2020, and then a strong recovery thereafter. The increasing ROE appears supported by improvements in tax efficiency, modestly higher asset turnover, and rising financial leverage.
Two-Component Disaggregation of ROA
Visa Inc., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Sep 30, 2022 | = | × | |||
| Sep 30, 2021 | = | × | |||
| Sep 30, 2020 | = | × | |||
| Sep 30, 2019 | = | × | |||
| Sep 30, 2018 | = | × | |||
| Sep 30, 2017 | = | × |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Net Profit Margin
- The net profit margin demonstrated a generally upward trend from 2017 to 2022. It began at 36.49% in 2017 and increased significantly to 49.98% in 2018, followed by a steady rise reaching a peak of 52.57% in 2019. Although there was a slight decrease to 49.74% in 2020, the margin stabilized around the 51% range in the subsequent years, indicating sustained profitability efficiency.
- Asset Turnover
- Asset turnover showed variability across the periods, starting at 0.27 in 2017. It increased gradually to 0.30 in 2018 and 0.32 in 2019, before declining back to 0.27 in 2020. The ratio then recovered moderately, climbing to 0.29 in 2021 and reaching 0.34 in 2022. This pattern suggests fluctuating efficiency in utilizing assets to generate revenue, with improvement evident in the latest year.
- Return on Assets (ROA)
- ROA experienced notable growth from 2017 through 2022. The metric rose from 9.85% in 2017 to a high of 16.65% in 2019, reflecting improved profitability relative to total assets. A decline occurred in 2020 down to 13.43%, likely influenced by external or operational factors during that period. Recovery followed, with ROA increasing to 14.85% in 2021 and further advancing to 17.49% by 2022, the highest observed in the timeframe, indicating enhanced effectiveness in asset utilization to generate returns.
Four-Component Disaggregation of ROA
Visa Inc., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Sep 30, 2022 | = | × | × | × | |||||
| Sep 30, 2021 | = | × | × | × | |||||
| Sep 30, 2020 | = | × | × | × | |||||
| Sep 30, 2019 | = | × | × | × | |||||
| Sep 30, 2018 | = | × | × | × | |||||
| Sep 30, 2017 | = | × | × | × |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Tax Burden
- The tax burden ratio displayed an overall increasing trend from 0.57 in 2017 to 0.82 in 2022. Notably, a significant rise occurred between 2017 and 2018, followed by stabilization around the 0.77-0.82 range in subsequent years, indicating increasing effective tax rates over the period.
- Interest Burden
- The interest burden remained relatively stable and high throughout the period, fluctuating narrowly between 0.95 and 0.97. This consistency suggests limited variation in interest expenses relative to earnings before interest and taxes over the years analyzed.
- EBIT Margin
- The EBIT margin showed some fluctuation across the years, beginning at 66.77% in 2017 and peaking at 68.77% in 2021 before decreasing to 63.71% in 2022. This pattern implies that operating profitability generally remained strong but faced pressure during the latest period examined.
- Asset Turnover
- The asset turnover ratio increased from 0.27 in 2017 to 0.34 in 2022, with a dip in 2020 to 0.27 that aligned with the broader economic challenges during that time. The gradual improvement suggests enhanced efficiency in utilizing assets to generate revenue in the later years.
- Return on Assets (ROA)
- ROA experienced an upward trend overall, rising from 9.85% in 2017 to 17.49% in 2022, with a slight decline in 2020 to 13.43%. This improvement indicates greater profitability generated from the company's asset base, reflecting effective management and operational performance enhancements over the analyzed period.
Disaggregation of Net Profit Margin
Visa Inc., decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Sep 30, 2022 | = | × | × | ||||
| Sep 30, 2021 | = | × | × | ||||
| Sep 30, 2020 | = | × | × | ||||
| Sep 30, 2019 | = | × | × | ||||
| Sep 30, 2018 | = | × | × | ||||
| Sep 30, 2017 | = | × | × |
Based on: 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30).
- Tax Burden
- The tax burden ratio showed a notable increase from 0.57 in 2017 to a range between 0.77 and 0.82 from 2019 onward, indicating a higher proportion of earnings retained after tax over this period. This suggests improved tax efficiency or changes in tax regulations affecting the company's tax expenses relative to pre-tax income.
- Interest Burden
- The interest burden ratio remained relatively stable throughout the years, fluctuating slightly between 0.95 and 0.97. This stability implies consistent management of interest expenses relative to earnings before interest and taxes, with no significant impact from financing costs on operating income.
- EBIT Margin
- The EBIT margin fluctuated modestly within the 63.71% to 68.77% range. It peaked in 2021 at 68.77% before declining to 63.71% in 2022. This decline may reflect increased operating expenses or changes in revenue composition affecting operating profitability, though overall, the margin remains relatively high, indicating strong operational efficiency.
- Net Profit Margin
- The net profit margin increased significantly from 36.49% in 2017 to a high of 52.57% in 2019, maintaining levels above 49% thereafter. This upward trend denotes improved overall profitability and effective cost control, even as EBIT margin experienced some volatility. The ratio's stability near 51% in recent years suggests sustained strong net earnings relative to sales.