Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Waste Management Inc., profitability ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Gross Profit Margin
- The gross profit margin displayed a generally stable trend over the examined period, starting at 37.72% in 2017 and peaking slightly at 38.62% in 2020 before marginally decreasing to 38.03% in 2021. This suggests consistent efficiency in managing production and direct costs relative to sales revenue.
- Operating Profit Margin
- The operating profit margin experienced some fluctuations, beginning at 18.2% in 2017 and reaching a high of 18.7% in 2018. It then declined steadily to 15.99% in 2020, with a modest recovery to 16.54% in 2021. This trend indicates increasing operating expenses or other operational challenges that slightly eroded profitability at the operating level over time.
- Net Profit Margin
- The net profit margin showed a downward trajectory from 13.46% in 2017 to a low of 9.83% in 2020, followed by a minor increase to 10.13% in 2021. This pattern points to pressures on net profitability, possibly due to higher costs, taxation, interest expenses, or other non-operating factors affecting the company's bottom line.
- Return on Equity (ROE)
- The return on equity decreased significantly from 32.38% in 2017 to 20.08% in 2020, before rising to 25.49% in 2021. This decline over the initial years may reflect diminished profitability or changes in financial leverage, while the subsequent increase could indicate improved earnings performance or capital management in the latest year.
- Return on Assets (ROA)
- The return on assets followed a similar pattern to ROE but at a lower scale, decreasing from 8.93% in 2017 to 5.1% in 2020, with a rebound to 6.24% in 2021. This suggests a reduced efficiency in asset utilization to generate profit during the middle years, with a partial recovery more recently.
Return on Sales
Return on Investment
Gross Profit Margin
Waste Management Inc., gross profit margin calculation
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Gross profit margin = 100 × Gross profit ÷ Operating revenues
= 100 × 6,820 ÷ 17,931 = 38.03%
- Operating Revenues
- The operating revenues exhibit a general upward trend over the five-year period. Starting at 14,485 million USD in 2017, revenues increased steadily each year, reaching 17,931 million USD by the end of 2021. This represents an approximate growth of 23.8% over the period, with a slight decline observed in 2020 compared to 2019.
- Gross Profit
- Gross profit follows a similar increasing trend analogous to operating revenues. Beginning at 5,464 million USD in 2017, gross profit grew to 6,820 million USD in 2021. While 2020 showed a small decrease from the previous year, the gross profit rebounded strongly in 2021, surpassing previous highs. Overall, gross profit increased by nearly 24.8% across the period.
- Gross Profit Margin
- The gross profit margin remained relatively stable throughout the entire timeframe. It started at 37.72% in 2017 and showed a slight incremental increase, peaking at 38.62% in 2020. In 2021, there was a minor decline to 38.03%. The margin fluctuations are minimal, suggesting consistent cost management relative to revenues.
- Summary of Trends
- Overall, the data demonstrates consistent growth in both operating revenues and gross profit over the five years, with a slight dip during 2020 that could be aligned with broader economic factors affecting that year. The gross profit margin's relative stability suggests that the company maintained effective cost control as revenues expanded, preserving profitability levels. The rebound in revenues and gross profit in 2021 indicates a recovery or expansion phase following the 2020 slowdown.
Operating Profit Margin
Waste Management Inc., operating profit margin calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Operating profit margin = 100 × Income from operations ÷ Operating revenues
= 100 × 2,965 ÷ 17,931 = 16.54%
- Operating Revenues
- The operating revenues display a generally increasing trend over the five-year period. Starting from $14,485 million in 2017, there was a steady increase each year, reaching $17,931 million by 2021. Although there was a slight dip in 2020 to $15,218 million, likely impacted by broader economic factors, the revenue rebounded strongly in 2021.
- Income from Operations
- Income from operations follows a somewhat fluctuating pattern. It increased from $2,636 million in 2017 to $2,789 million in 2018, then slightly decreased in 2019 to $2,706 million. A more noticeable decline occurred in 2020, dropping to $2,434 million, before recovering to $2,965 million in 2021. This fluctuation suggests varying operational efficiency or cost management challenges, especially evident during the 2020 downturn.
- Operating Profit Margin
- The operating profit margin shows a declining trend over the observed period. Starting at 18.2% in 2017, it rose marginally to 18.7% in 2018 but then consistently decreased each year to reach 16.54% in 2021. The most significant drop was between 2019 and 2020 (from 17.51% to 15.99%). This decline indicates a reduced proportion of revenue translating into operating profit, possibly due to increased costs or competitive pressures.
- Overall Insights
- The company's operating revenues have generally grown over the years, reflecting increased sales or service volumes. However, the income from operations and operating profit margin trends suggest that profitability has faced pressures. Particularly in 2020, both income and margin declined conspicuously, signaling operational challenges during that period. The recovery in income from operations in 2021 alongside a modest increase in operating margin suggests some restoration of profitability, although the margin remains lower than earlier years. This highlights a need for continuous focus on cost control and operational efficiency to support sustainable profitability amid revenue growth.
Net Profit Margin
Waste Management Inc., net profit margin calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net profit margin = 100 × Net income attributable to Waste Management, Inc. ÷ Operating revenues
= 100 × 1,816 ÷ 17,931 = 10.13%
- Net Income Attributable to Waste Management, Inc.
- The net income demonstrates a declining trend from 2017 to 2020, decreasing from 1,949 million USD in 2017 to 1,496 million USD in 2020. However, there is a notable recovery in 2021, reaching 1,816 million USD, although it remains below the 2017 level.
- Operating Revenues
- Operating revenues exhibit a generally increasing trend over the analyzed period. Revenues rose steadily from 14,485 million USD in 2017 to 15,455 million USD in 2019, with a slight dip to 15,218 million USD in 2020. In 2021, revenues surged significantly to 17,931 million USD, marking the highest value in the period.
- Net Profit Margin
- The net profit margin shows a consistent declining pattern from 13.46% in 2017 to a low of 9.83% in 2020, indicating decreased profitability relative to revenue. In 2021, an improvement to 10.13% is observed, although the margin remains below the levels observed in the early years.
- Summary of Trends
- The financial data indicates that despite an overall increase in operating revenues, both net income and net profit margin faced downward pressure, especially between 2017 and 2020. This suggests rising costs or other factors affecting profitability. The year 2021 shows signs of recovery, with a sharp increase in revenues accompanied by improvements in net income and profit margin, but profitability metrics have not fully returned to earlier levels. These trends might warrant further investigation into operational efficiency and cost management practices during the observed period.
Return on Equity (ROE)
Waste Management Inc., ROE calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROE = 100 × Net income attributable to Waste Management, Inc. ÷ Total Waste Management, Inc. stockholders’ equity
= 100 × 1,816 ÷ 7,124 = 25.49%
- Net Income
- The net income attributable to the company demonstrated a declining trend from 2017 through 2020, decreasing from $1,949 million in 2017 to $1,496 million in 2020. However, in 2021, there was a recovery with net income rising to $1,816 million, approaching levels seen earlier in the period but not fully rebounding to the 2017 figure.
- Total Stockholders' Equity
- Stockholders’ equity showed a generally increasing pattern from 2017 to 2020, moving from $6,019 million to $7,452 million. In 2021, a decline was observed with equity falling to $7,124 million, though it remained higher than the initial years reported.
- Return on Equity (ROE)
- Return on Equity exhibited a declining trajectory from 2017 to 2020, decreasing from 32.38% to 20.08%, indicating reduced efficiency in generating profits from equity during this time. In 2021, ROE improved to 25.49%, signaling a partial recovery in the company’s ability to generate returns for shareholders, yet still below the highest value noted in 2017.
- Overall Analysis
- The data reveals a period of declining profitability indicators from 2017 through 2020, as evidenced by falling net income and ROE. The subsequent partial recovery in 2021 suggests improved operational performance or financial management. Despite this recovery, stockholders’ equity showed a slight decrease in 2021 after consistent growth, which may merit further investigation. The fluctuation in ROE relative to net income and equity levels reflects changes in profitability efficiency over time.
Return on Assets (ROA)
Waste Management Inc., ROA calculation, comparison to benchmarks
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROA = 100 × Net income attributable to Waste Management, Inc. ÷ Total assets
= 100 × 1,816 ÷ 29,097 = 6.24%
- Net income attributable to Waste Management, Inc.
- Over the five-year period, net income showed a declining trend from 2017 to 2020, decreasing from 1,949 million USD in 2017 to 1,496 million USD in 2020. In 2021, there was a recovery with net income increasing to 1,816 million USD, although it remained below the 2017 level.
- Total assets
- Total assets consistently increased over the period from 21,829 million USD in 2017 to a peak of 29,345 million USD in 2020. In 2021, total assets slightly decreased to 29,097 million USD but remained close to the highest recorded value.
- Return on Assets (ROA)
- The return on assets exhibited a declining trend from 8.93% in 2017 to a low of 5.1% in 2020, indicating reduced efficiency in generating net income from total assets. A partial recovery occurred in 2021 with ROA rising to 6.24%, aligning with the increase in net income.
- Overall Analysis
- The data reveals a period of growth in asset base accompanied by a general decline in profitability from 2017 through 2020, as evidenced by decreasing net income and ROA. The partial rebound in 2021 suggests an improvement in operational performance or market conditions, leading to higher net income and better asset utilization. Despite this recovery, profitability metrics have not returned to their 2017 levels, indicating ongoing challenges in maximising returns on the asset base.