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Using the DuPont approach to reveal what's really driving the company's ROE.

What is Really Driving Valmont Industries, Inc. (NYSE: VMI) ROE Of 10%?

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Valmont Industries, Inc.’s (NYSE: VMI) most recent return on equity was a below average 10.5% in comparison to the Industrials sector which returned 10.6%. Though Valmont’s performance over the past twelve months is subpar, it’s useful to understand how the company achieved its low ROE. Was it a result of profit margins, operating efficiency or maybe even leverage? Knowing these components may change your views on Valmont and its future prospects.


ROE Trends Of Valmont

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. It is calculated as follows:

ROE = Net Income To Common / Average Total Common Equity

ROE is a helpful metric that illustrates how effective the company is at turning the cash put into the business into gains or returns for investors. But it is important to note that ROE can be impacted by management’s financing decisions such as the deployment of leverage.

The return on equity of Valmont is shown below.

Valmont's ROE Trends Chart

source: finbox.io data explorer – ROE

The return on equity of Valmont has generally been declining over the last few years. ROE increased from 3.6% to 17.8% in fiscal year 2016, decreased to 10.9% in 2017 and decreased again to 10.5% as of LTM Mar’18. So what’s causing the general decline?


Valmont’s Declining ROE Trends

In addition to the formula previously discussed, there’s actually another way to calculate ROE. It’s often called the DuPont formula and is as follows:

Return on Equity = Net Profit Margin * Asset Turnover * Equity Multiplier

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So let’s take a closer look at the drivers behind Valmont’s returns.

Net Profit Margin

The net profit margin of Valmont has generally been declining over the last few years. Margins increased from 1.5% to 6.9% in fiscal year 2016, decreased to 4.2% in 2017 and decreased again to 4.2% as of LTM Mar’18.

VMI Net Profit Margin Trends

source: data explorer – net profit margin

Therefore, the company’s decreasing margins help explain, at least partially, why ROE is also decreasing. Now let’s take a look at Valmont’s efficiency performance.

Asset Turnover

A promising sign for shareholders, Valmont’s asset turnover has increased each year since 2015. Turnover increased from 1.02x to 1.05x in fiscal year 2016, increased to 1.10x in 2017 and increased again to 1.10x as of LTM Mar’18.

VMI Asset Turnover Trends

source: data explorer – asset turnover

Therefore, the company’s ROE decline is not as a result of its asset turnover performance which has been steadily increasing.

Finally, the DuPont constituents that make up Valmont’s ROE are shown in the table below. Note that the table also compares Valmont to a peer group that includes Lindsay Corporation(NYSE: LNN), Quanta Services, Inc. (NYSE: PWR), AECOM (NYSE: ACM) and Fluor Corporation(NYSE: FLR).

VMI ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Valmont’s general decline in return on equity is the result of a worsening net profit margin, an improving asset turnover ratio and declining leverage. Therefore when looking at the core operations of the business, Valmont shareholders don’t necessarily need to panic just yet due to the company’s general decline in profitability along with a steady improvement in operational efficiency and declining leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. However, it doesn’t necessarily tell the whole story. If you have not done so already, I highly recommend that you complete your research on Valmont by taking a look at the following:

Valuation Metrics: what is Valmont’s free cash flow yield and how does it compare to its publicly traded peers? This metric measures the amount of free cash flow for each dollar of equity (market capitalization). Analyze the free cash flow yield here.

Risk Metrics: what is Valmont’s cash ratio which is used to assess a company’s short-term liquidity. View the company’s cash ratio here.

Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Valmont’s return on equity here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Is Consolidated Edison Inc (NYSE: ED) Management Utilizing Shareholder’s Equity Efficiently?

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Consolidated Edison Inc (NYSE: ED) generated an above average return on equity of 10.4% over the past twelve months, while the Utilities sector returned 8.9%. Even though Consolidated Edison’s performance is impressive relative to its peers, it’s useful to understand what’s really driving the company’s healthy ROE and how it’s trending. Understanding these components may change your views on Consolidated Edison and its future prospects.


Consolidated Edison’s Return On Equity

Return on equity represents the percentage return a company generates on the money shareholders have invested. Return on equity or ROE is defined as follows:

ROE = Net Income To Common / Average Total Common Equity

A higher return on equity suggests management is utilizing the capital invested by shareholders efficiently. However, it is important to note that ROE can be “manufactured” by management with the use of leverage or debt.

Consolidated Edison’s historical ROE trends are highlighted in the chart below.

Consolidated Edison's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of Consolidated Edison has generally been increasing over the last few years. ROE decreased from 9.3% to 9.1% in fiscal year 2016, increased to 10.3% in 2017 and increased again to 10.4% as of LTM Mar’18. So what’s causing the general improvement?


What’s Driving Consolidated Edison’s Improving Return On Equity

The DuPont analysis is simply a separate way to calculate a company’s ROE:

ROE = Net Profit Margin * Asset Turnover * Equity Multiplier

Created by the DuPont Corporation in the 1920s, the analysis is a useful tool that helps determine what’s responsible for changes in a company’s ROE. It highlights that a firm’s ROE is affected by three things: profit margin, asset turnover, and its equity multiplier or financial leverage.

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So let’s take a closer look at what’s driving Consolidated Edison’s returns.

Consolidated Edison’s Net Profit Margin

A promising sign for shareholders, Consolidated Edison’s net profit margin has increased each year since 2015. Margins increased from 9.5% to 10.3% in fiscal year 2016, increased to 12.7% in 2017 and increased again to 12.9% as of LTM Mar’18.

ED Net Profit Margin Trends

source: data explorer – net profit margin

As a result, the company’s improving margins help explain, at least partially, why ROE is also improving. Now let’s take a look at Consolidated Edison’s efficiency performance.

Consolidated Edison’s Asset Turnover

It appears that asset turnover of Consolidated Edison has generally been declining over the last few years. Turnover decreased from 0.28x to 0.26x in fiscal year 2016, decreased to 0.25x in 2017 and increased to 0.25x as of LTM Mar’18.

ED Asset Turnover Trends

source: data explorer – asset turnover

Therefore, the company’s ROE improvement is not as a result of its asset turnover performance which has generally been decreasing.

Finally, the DuPont constituents that make up Consolidated Edison’s ROE are shown in the table below. Note that the table also compares Consolidated Edison to a peer group that includes Dominion Resources, Inc. (NYSE: D), Entergy Corporation (NYSE: ETR), Sempra Energy (NYSE: SRE) and DTE Energy Company (NYSE: DTE).

ED ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Consolidated Edison’s general improvement in return on equity is the result of steadily improving net profit margin, a declining asset turnover ratio and declining leverage. Therefore when looking at the core operations of the business, Consolidated Edison shareholders have reason to be excited due to the company’s steady improvement profitability along with a general decline in operational efficiency and declining leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. However, it doesn’t necessarily tell the whole story. For example, how do the company’s ROE trends compare to its peers or sector? How about in absolute returns? I recommend that investors continue to research Consolidated Edison to gain a better understanding of its fundamentals before making an investment decision.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Should Investors Be Excited About YuMe, Inc. (NYSE: YUME) Improving ROE?

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YuMe, Inc. (NYSE: YUME) delivered an above average 10.2% ROE over the past year, compared to the 3.0% return generated by the Information Technology sector. YuMe’s results may indicate management is running an efficient business relative to its peers, which may very well be the case, but it is important to understand what ROE is made up of and how it should be interpreted. Knowing these components may change your view on YuMe’s performance and future prospects. I show you exactly what I mean in my DuPont analysis below.


How To Calculate YuMe’s ROE

Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Return on Equity or ROE is generally calculated using the following formula:

ROE = Net Income To Common / Average Total Common Equity

ROE is a helpful metric that illustrates how effective the company is at turning the cash put into the business into gains or returns for investors. However, it is important to note that ROE can be “manufactured” by management with the use of leverage or debt.

The return on equity achieved by YuMe over the last few years is shown below.

YuMe's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of YuMe has generally been increasing over the last few years. ROE decreased from -8.2% to -15.9% in fiscal year 2015, increased to -7.7% in 2016 and increased again to 10.2% as of LTM Sep’17. So what’s causing the general improvement?


Understanding YuMe’s Improving Return On Equity

The DuPont analysis is another way to calculate a company’s ROE using the following three metrics:

Return on Equity = Net Profit Margin * Asset Turnover * Equity Multiplier

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So what exactly is causing YuMe’s improving returns?

Net Profit Margin Trends

It appears that the net profit margin of YuMe has generally been increasing over the last few years. Margins decreased from -4.9% to -9.7% in fiscal year 2015, increased to -4.8% in 2016 and increased again to 5.3% as of LTM Sep’17.

YUME Net Profit Margin Trends

source: data explorer – net profit margin

Therefore, the company’s increasing margins help explain, at least partially, why ROE is also increasing. Now let’s take a look at YuMe’s efficiency performance to see if that is also boosting ROE.

Asset Turnover Trends

It appears that asset turnover of YuMe has generally been declining over the last few years. Turnover decreased from 1.18x to 1.14x in fiscal year 2015, decreased to 1.12x in 2016 and increased to 1.31x as of LTM Sep’17.

YUME Asset Turnover Trends

source: data explorer – asset turnover

Therefore, the company’s ROE improvement is not as a result of its asset turnover performance which has generally been decreasing.

Finally, the DuPont constituents that make up YuMe’s ROE are shown in the table below. Note that the table also compares YuMe to a peer group that includes The Rubicon Project, Inc.(NYSE: RUBI), Rocket Fuel Inc. (NASDAQ: FUEL), Brightcove Inc. (NASDAQ: BCOV) and Bitauto Holdings Limited (NYSE: BITA).

YUME ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that YuMe’s general improvement in return on equity is the result of an improving net profit margin, a declining asset turnover ratio and increasing leverage. Therefore when looking at the core operations of the business, YuMe shareholders may need to start worrying due to the company’s general improvement in profitability along with a general decline in operational efficiency and increasing leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. But before making an investment decision, I recommend you continue to research YuMe to get a more comprehensive view of the company by looking at:

Valuation Metrics: what is YuMe’s EBITDA less CapEx multiple and how does it compare to its peers? This is a helpful multiple to analyze when comparing capital intensive businesses. View the company’s EBITDA less CapEx multiple here.

Risk Metrics: what is YuMe’s asset efficiency? This ratio measures the amount of cash flow that a company generates from its assets. View the company’s asset efficiency here.

Efficiency Metrics: is management becoming more or less efficient in creating value for the firm? Find out by analyzing the company’s return on invested capital ratio here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Why Steelcase Inc (NYSE: SCS) ROE of 10% Doesn’t Tell The Whole Story

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Steelcase Inc. (NYSE: SCS) underperformed the Industrials sector by -0.4% as it relates to ROE, producing a low 10.2% compared to the sector’s 10.6%. But what is more interesting is whether Steelcase will continue to post subpar returns moving forward. The DuPont analysis is a useful tool that may help us determine this. In my analysis below, I’ll use the DuPont model to reveal what’s really driving the company’s low ROE.


Steelcase’s ROE Trends

Return on equity or ROE represents the percentage return a company generates on the money shareholders have invested.

ROE = Net Income To Common / Average Total Common Equity

In general, a higher return on equity suggests management is utilizing the capital invested by shareholders efficiently. However, it is important to note that ROE can be impacted by management’s financing decisions such as the deployment of leverage.

Steelcase’s recent ROE trends are illustrated in the chart below.

Steelcase's ROE Trends Chart

source: finbox.io data explorer – ROE

Unfortunately for shareholders, Steelcase’s return on equity has decreased each year since 2016. ROE decreased from 24.3% to 16.6% in fiscal year 2017, decreased to 10.2% in 2018 and the LTM period is also its latest fiscal year. So what’s causing the steady decline?


What’s Causing Steelcase’s Declining Return On Equity

A less used approach although being much more intuitive, the DuPont formula is another way to calculate a company’s ROE. It is defined as:

ROE = Net Profit Margin * Asset Turnover * Equity Multiplier

Created by the DuPont Corporation in the 1920s, the analysis is a useful tool that helps determine what’s responsible for changes in a company’s ROE. It highlights that a firm’s ROE is affected by three things: profit margin, asset turnover, and its equity multiplier or financial leverage.

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So let’s take a closer look at what’s causing Steelcase’s declining returns.

Steelcase’s Net Profit Margin Trends

Unfortunately for shareholders, Steelcase’s net profit margin has decreased each year since 2016. Margins decreased from 5.6% to 4.1% in fiscal year 2017, decreased to 2.6% in 2018 and the LTM period is also its latest fiscal year.

SCS Net Profit Margin Trends

source: data explorer – net profit margin

As a result, the company’s worsening margins help explain, at least in part, why ROE continues to decline. However, let’s also take a look at Steelcase’s efficiency.

Steelcase’s Asset Turnover Trends

Unfortunately for shareholders, Steelcase’s asset turnover has decreased each year since 2016. Turnover decreased from 1.73x to 1.68x in fiscal year 2017, decreased to 1.67x in 2018 and the LTM period is also its latest fiscal year.

SCS Asset Turnover Trends

source: data explorer – asset turnover

As a result, the company’s worsening asset turnover ratio helps explain, at least partially, why ROE continues to decline.

Finally, the DuPont constituents that make up Steelcase’s ROE are shown in the table below. Note that the table also compares Steelcase to a peer group that includes HNI Corporation(NYSE: HNI), Knoll, Inc. (NYSE: KNL), Pitney Bowes Inc. (NYSE: PBI) and STERIS plc (NYSE: STE).

SCS ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Steelcase’s continuous fall in return on equity is the result of a steadily deteriorating net profit margin, a declining asset turnover ratio and declining leverage. Therefore when looking at the core operations of the business, Steelcase shareholders have reason to be concerned due to the company’s deteriorating profitability along with deteriorating operational efficiency and declining leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. However, it doesn’t necessarily tell the whole story. For example, how do the company’s ROE trends compare to its peers or sector? How about in absolute returns? I recommend that investors continue to research Steelcase to gain a better understanding of its fundamentals before making an investment decision.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Why Tech Data Corporation (NASDAQ: TECD) 5% ROE Should Have Investors Worried

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Tech Data Corporation’s (NASDAQ: TECD) most recent return on equity was an above average 4.6% in comparison to the Information Technology sector which returned 3.0%. Though Carbonite’s performance over the past twelve months is impressive, it’s useful to understand how the company achieved its healthy ROE. Was it a result of profit margins, operating efficiency or maybe even leverage? Knowing these components may change your views on Carbonite and its future prospects.


ROE Trends Of Carbonite

Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. It is calculated as follows:

ROE = Net Income To Common / Average Total Common Equity

ROE is a helpful metric that illustrates how effective the company is at turning the cash put into the business into gains or returns for investors. But it is important to note that ROE can be impacted by management’s financing decisions such as the deployment of leverage.

The return on equity of Carbonite is shown below.

Carbonite's ROE Trends Chart

source: finbox.io data explorer – ROE

Unfortunately for shareholders, Carbonite’s return on equity has decreased each year since 2016. ROE decreased from 13.4% to 9.3% in fiscal year 2017, decreased to 4.6% in 2018 and the LTM period is also its latest fiscal year. So what’s causing the steady decline?


Carbonite’s Declining ROE Trends

In addition to the formula previously discussed, there’s actually another way to calculate ROE. It’s often called the DuPont formula and is as follows:

Return on Equity = Net Profit Margin * Asset Turnover * Equity Multiplier

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So let’s take a closer look at the drivers behind Carbonite’s returns.

Net Profit Margin

The net profit margin of Carbonite has generally been declining over the last few years. Margins decreased from 1.0% to 0.7% in fiscal year 2017, decreased to 0.3% in 2018 and the LTM period is also its latest fiscal year.

TECD Net Profit Margin Trends

source: data explorer – net profit margin

Therefore, the company’s decreasing margins help explain, at least partially, why ROE is also decreasing. Now let’s take a look at Carbonite’s efficiency performance.

Asset Turnover

Unfortunately for shareholders, Carbonite’s asset turnover has decreased each year since 2016. Turnover decreased from 4.22x to 3.67x in fiscal year 2017, decreased to 3.57x in 2018 and the LTM period is also its latest fiscal year.

TECD Asset Turnover Trends

source: data explorer – asset turnover

As a result, the company’s worsening asset turnover ratio helps explain, at least partially, why ROE continues to decline.

Finally, the DuPont constituents that make up Carbonite’s ROE are shown in the table below. Note that the table also compares Carbonite to a peer group that includes Arrow Electronics, Inc. (NYSE: ARW), Synnex Corporation (NYSE: SNX), Anixter International Inc. (NYSE: AXE) and ePlus inc. (NASDAQ: PLUS).

TECD ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Carbonite’s continuous fall in return on equity is the result of a worsening net profit margin, a declining asset turnover ratio and increasing leverage. Therefore when looking at the core operations of the business, Carbonite shareholders have reason to be concerned due to the company’s general decline in profitability along with deteriorating operational efficiency and increasing leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. However, it doesn’t necessarily tell the whole story. If you have not done so already, I highly recommend that you complete your research on Carbonite by taking a look at the following:

Valuation Metrics: what is Carbonite’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.

Risk Metrics: how much interest coverage does Carbonite have? This is a ratio used to assess a firm’s ability to pay interest expenses based on operating profits (EBIT). View the company’s interest coverage here.

Efficiency Metrics: fixed asset turnover is calculated by dividing revenue by average fixed assets. View Carbonite’s fixed asset turnover here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

What is Really Driving Shake Shack, Inc. (NYSE: SHAK) ROE Of 0%?

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Shake Shack, Inc. (NYSE: SHAK) generated a below average return on equity of 0.4% over the past twelve months, while the Consumer Discretionary sector returned 9.3%. Even though Carbonite’s performance is subpar relative to its peers, it’s useful to understand what’s really driving the company’s low ROE and how it’s trending. Understanding these components may change your views on Carbonite and its future prospects.


Carbonite’s Return On Equity

Return on equity represents the percentage return a company generates on the money shareholders have invested. Return on equity or ROE is defined as follows:

ROE = Net Income To Common / Average Total Common Equity

A higher return on equity suggests management is utilizing the capital invested by shareholders efficiently. However, it is important to note that ROE can be “manufactured” by management with the use of leverage or debt.

Carbonite’s historical ROE trends are highlighted in the chart below.

Carbonite's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of Carbonite has generally been increasing over the last few years. ROE increased from -10.3% to 6.9% in fiscal year 2016, decreased to -0.2% in 2017 and increased to 0.4% as of LTM Mar’18. So what’s causing the general improvement?


What’s Driving Carbonite’s Improving Return On Equity

The DuPont analysis is simply a separate way to calculate a company’s ROE:

ROE = Net Profit Margin * Asset Turnover * Equity Multiplier

Created by the DuPont Corporation in the 1920s, the analysis is a useful tool that helps determine what’s responsible for changes in a company’s ROE. It highlights that a firm’s ROE is affected by three things: profit margin, asset turnover, and its equity multiplier or financial leverage.

Analyzing changes in these three items over time allows investors to figure out if operating efficiency, asset use efficiency or the use of leverage is what’s causing changes in ROE. Strong companies should have ROE that is increasing because its net profit margin and/or asset turnover is increasing. On the other hand, a company may not be as strong as investors would otherwise think if ROE is increasing from the use of leverage or debt.

So let’s take a closer look at what’s driving Carbonite’s returns.

Carbonite’s Net Profit Margin

It appears that the net profit margin of Carbonite has generally been increasing over the last few years. Margins increased from -4.6% to 4.6% in fiscal year 2016, decreased to -0.1% in 2017 and increased to 0.2% as of LTM Mar’18.

SHAK Net Profit Margin Trends

source: data explorer – net profit margin

Therefore, the company’s increasing margins help explain, at least partially, why ROE is also increasing. Now let’s take a look at Carbonite’s efficiency performance to see if that is also boosting ROE.

Carbonite’s Asset Turnover

It appears that asset turnover of Carbonite has generally been increasing over the last few years. Turnover decreased from 0.82x to 0.59x in fiscal year 2016, increased to 0.71x in 2017 and increased again to 0.72x as of LTM Mar’18.

SHAK Asset Turnover Trends

source: data explorer – asset turnover

Therefore, the company’s increasing asset turnover ratio helps explain, at least in part, why ROE is also increasing.

Finally, the DuPont constituents that make up Carbonite’s ROE are shown in the table below. Note that the table also compares Carbonite to a peer group that includes Zoe’s Kitchen, Inc.(NYSE: ZOES), Chipotle Mexican Grill, Inc. (NYSE: CMG), McDonald’s Corporation (NYSE: MCD) and Restaurant Brands International Inc. (NYSE: QSR).

SHAK ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Carbonite’s general improvement in return on equity is the result of an improving net profit margin, an improving asset turnover ratio and declining leverage. Therefore when looking at the core operations of the business, Carbonite shareholders have reason to be excited due to the company’s general improvement in profitability along with a general improvement in operational efficiency and declining leverage.

The DuPont approach is a helpful tool when analyzing how well management is utilizing shareholder capital. However, it doesn’t necessarily tell the whole story. For example, how do the company’s ROE trends compare to its peers or sector? How about in absolute returns? I recommend that investors continue to research Carbonite to gain a better understanding of its fundamentals before making an investment decision.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

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