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SHAREHOLDER RETURNS - page 2

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

Is Carbonite, Inc. (NASDAQ: CARB) Management Utilizing Shareholder’s Equity Efficiently?

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Carbonite, Inc. (NASDAQ: CARB) delivered a below average 0.9% ROE over the past year, compared to the 3.0% return generated by the Information Technology sector. Carbonite’s results may indicate management is running an inefficient 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 Carbonite’s performance and future prospects. I show you exactly what I mean in my DuPont analysis below.


How To Calculate Carbonite’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 Carbonite over the last few years is shown below.

Carbonite's ROE Trends Chart

source: finbox.io data explorer – ROE

A promising sign for shareholders, Carbonite’s return on equity has increased each year since 2015. ROE increased from -276.9% to -118.7% in fiscal year 2016, increased to -18.2% in 2017 and increased again to 0.9% as of LTM Mar’18. So what’s causing the steady improvement?


Understanding Carbonite’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 Carbonite’s improving returns?

Net Profit Margin Trends

A promising sign for shareholders, Carbonite’s net profit margin has increased each year since 2015. Margins increased from -15.8% to -2.0% in fiscal year 2016, increased to -1.7% in 2017 and increased again to 0.1% as of LTM Mar’18.

CARB 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 Carbonite’s efficiency performance.

Asset Turnover Trends

It appears that asset turnover of Carbonite has generally been declining over the last few years. Turnover increased from 1.06x to 1.53x in fiscal year 2016, decreased to 1.05x in 2017 and decreased again to 0.73x as of LTM Mar’18.

CARB 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 Carbonite’s ROE are shown in the table below. Note that the table also compares Carbonite to a peer group that includes Box, Inc. (NYSE: BOX), Angie’s List, Inc. (NASDAQ: ANGI), Endurance International Group Holdings, Inc.(NASDAQ: EIGI) and j2 Global, Inc. (NASDAQ: JCOM).

CARB 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 upswing 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, Carbonite 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. But before making an investment decision, I recommend you continue to research Carbonite to get a more comprehensive view of the company by looking at:

Valuation Metrics: what is Carbonite’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

Risk Metrics: what is Carbonite’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View Carbonite’s inventory 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.

Should Investors Be Worried About Bunge Limited (NYSE: BG) Declining ROE?

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Bunge Limited (NYSE: BG) well underperformed the Consumer Staples sector by -11.5% as it relates to ROE, producing a poor 0.9% compared to the sector’s 12.4%. But what is more interesting is whether Bunge will continue to produce dissapointing 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 poor ROE.


Bunge’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.

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

Bunge's ROE Trends Chart

source: finbox.io data explorer – ROE

The return on equity of Bunge has generally been declining over the last few years. ROE increased from 10.7% to 11.4% in fiscal year 2016, decreased to 1.9% in 2017 and decreased again to 0.9% as of LTM Mar’18. So what’s causing the general decline?


What’s Causing Bunge’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 Bunge’s declining returns.

Bunge’s Net Profit Margin Trends

Unfortunately for shareholders, Bunge’s net profit margin has decreased each year since 2015. Margins decreased from 1.7% to 1.7% in fiscal year 2016, decreased to 0.3% in 2017 and decreased again to 0.1% as of LTM Mar’18.

BG 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 Bunge’s efficiency.

Bunge’s Asset Turnover Trends

It appears that asset turnover of Bunge has generally been increasing over the last few years. Turnover increased from 2.21x to 2.30x in fiscal year 2016, increased to 2.41x in 2017 and decreased to 2.07x as of LTM Mar’18.

BG Asset Turnover Trends

source: data explorer – asset turnover

As a result, the company’s declining ROE is not due to its asset turnover performance which has generally been increasing.

Finally, the DuPont constituents that make up Bunge’s ROE are shown in the table below. Note that the table also compares Bunge to a peer group that includes Archer-Daniels-Midland Company (NYSE: ADM), General Mills, Inc. (NYSE: GIS), Ingredion Incorporated (NYSE: INGR) and J.M. Smucker Company (The) (NYSE: SJM).

BG ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Bunge’s general decline in return on equity is the result of a steadily deteriorating net profit margin, an improving asset turnover ratio and increasing leverage. Therefore when looking at the core operations of the business, Bunge shareholders have reason to be concerned due to the company’s deteriorating profitability along with a general improvement in 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. 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 Bunge 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 Crocs, Inc (NASDAQ: CROX) ROE of 0% Doesn’t Tell The Whole Story

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Crocs, Inc.’s (NASDAQ: CROX) most recent return on equity was a below average 0.0% in comparison to the Consumer Discretionary sector which returned 9.3%. Though CROX’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 CROX and its future prospects.


ROE Trends Of CROX

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 CROX is shown below.

CROX's ROE Trends Chart

source: finbox.io data explorer – ROE

A promising sign for shareholders, CROX’s return on equity has increased each year since 2015. ROE increased from -28.1% to -13.6% in fiscal year 2016, increased to -2.6% in 2017 and increased again to 0.0% as of LTM Mar’18. So what’s causing the steady improvement?


CROX’s Improving 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 CROX’s returns.

Net Profit Margin

A promising sign for shareholders, CROX’s net profit margin has increased each year since 2015. Margins increased from -9.0% to -3.1% in fiscal year 2016, increased to -0.5% in 2017 and increased again to 0.0% as of LTM Mar’18.

CROX 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 CROX’s efficiency performance.

Asset Turnover

It appears that asset turnover of CROX has generally been increasing over the last few years. Turnover increased from 1.54x to 1.76x in fiscal year 2016, increased to 1.84x in 2017 and decreased to 1.77x as of LTM Mar’18.

CROX 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 CROX’s ROE are shown in the table below. Note that the table also compares CROX to a peer group that includes Wolverine World Wide, Inc.(NYSE: WWW), Deckers Outdoor Corporation (NYSE: DECK), Genesco Inc. (NYSE: GCO) and Nike, Inc. (NYSE: NKE).

CROX ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that CROX’s upswing in return on equity is the result of steadily improving net profit margin, an improving asset turnover ratio and increasing leverage. Therefore when looking at the core operations of the business, CROX shareholders have reason to be excited due to the company’s steady improvement profitability along with a general improvement in 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 CROX by taking a look at the following:

Valuation Metrics: how much upside do shares of CROX have based on the Ben Graham Formula? Take a look at our Ben Graham Formula data explorer which also compares the company’s upside to its peers.

Risk Metrics: what is CROX’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.

Efficiency Metrics: how much free cash flow does CROX generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin 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 Littelfuse, Inc. (NASDAQ: LFUS) 10% ROE Should Have Investors Excited

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Littelfuse, Inc. (NASDAQ: LFUS) generated an above average return on equity of 10.2% over the past twelve months, while the Information Technology sector returned 2.9%. Even though Littelfuse’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 Littelfuse and its future prospects.


Littelfuse’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.

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

Littelfuse's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of Littelfuse has generally been increasing over the last few years. ROE increased from 11.0% to 13.4% in fiscal year 2016, increased to 13.7% in 2017 and decreased to 10.2% as of LTM Mar’18. So what’s causing the general improvement?


What’s Driving Littelfuse’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 Littelfuse’s returns.

Littelfuse’s Net Profit Margin

The net profit margin of Littelfuse has generally been declining over the last few years. Margins increased from 9.3% to 9.9% in fiscal year 2016, decreased to 9.8% in 2017 and decreased again to 8.6% as of LTM Mar’18.

LFUS Net Profit Margin Trends

source: data explorer – net profit margin

Therefore, the company’s ROE improvement is not as a result of its net profit margin performance which has generally been decreasing. Then could the increasing ROE be a result of improving efficiency?

Littelfuse’s Asset Turnover

It appears that asset turnover of Littelfuse has generally been declining over the last few years. Turnover increased from 0.81x to 0.83x in fiscal year 2016, decreased to 0.76x in 2017 and decreased again to 0.65x as of LTM Mar’18.

LFUS 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 Littelfuse’s ROE are shown in the table below. Note that the table also compares Littelfuse to a peer group that includes AVX Corporation(NYSE: AVX), Vishay Intertechnology, Inc. (NYSE: VSH), Belden Inc (NYSE: BDC) and Amphenol Corporation (NYSE: APH).

LFUS ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

In conclusion, the DuPont analysis has helped us better understand that Littelfuse’s general improvement 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, Littelfuse shareholders should not be too excited due to the company’s general decline 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. 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 Littelfuse 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.

What’s Really Driving RealPage, Inc. (NASDAQ: RP) Improving ROE?

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RealPage, Inc. (NASDAQ: RP) delivered a below average 0.6% ROE over the past year, compared to the 2.9% return generated by the Information Technology sector. RealPage’s results may indicate management is running an inefficient 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 RealPage’s performance and future prospects. I show you exactly what I mean in my DuPont analysis below.


How To Calculate RealPage’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 RealPage over the last few years is shown below.

RealPage's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of RealPage has generally been increasing over the last few years. ROE increased from -2.8% to 4.7% in fiscal year 2016, decreased to 0.1% in 2017 and increased to 0.6% as of LTM Mar’18. So what’s causing the general improvement?


Understanding RealPage’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 RealPage’s improving returns?

Net Profit Margin Trends

It appears that the net profit margin of RealPage has generally been increasing over the last few years. Margins increased from -2.0% to 2.9% in fiscal year 2016, decreased to 0.1% in 2017 and increased to 0.4% as of LTM Mar’18.

RP 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 RealPage’s efficiency performance to see if that is also boosting ROE.

Asset Turnover Trends

It appears that asset turnover of RealPage has generally been increasing over the last few years. Turnover increased from 0.79x to 0.81x in fiscal year 2016, decreased to 0.58x in 2017 and increased to 0.60x as of LTM Mar’18.

RP 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 RealPage’s ROE are shown in the table below. Note that the table also compares RealPage to a peer group that includes Tyler Technologies, Inc. (NYSE: TYL), Ellie Mae, Inc. (NYSE: ELLI), Fair Isaac Corporation (NYSE: FICO) and Guidewire Software, Inc. (NYSE: GWRE).

RP ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

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

Valuation Metrics: what is RealPage’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 RealPage 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 RealPage’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’s Really Driving Eagle Materials Inc’s (NYSE: EXP) ROE Of 20%?

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Eagle Materials Inc (NYSE: EXP) easily outperformed the Materials sector by 13.0% as it relates to ROE, producing a strong 19.8% compared to the sector’s 6.8%. But what is more interesting is whether Eagle will continue to achieve superior 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 strong ROE.


Eagle’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.

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

Eagle's ROE Trends Chart

source: finbox.io data explorer – ROE

It appears that the return on equity of Eagle has generally been increasing over the last few years. ROE decreased from 20.3% to 14.9% in fiscal year 2016, increased to 17.7% in 2017 and increased again to 19.8% as of LTM Dec’17. So what’s causing the general improvement?


What’s Causing Eagle’s Improving 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 Eagle’s improving returns.

Eagle’s Net Profit Margin Trends

It appears that the net profit margin of Eagle has generally been increasing over the last few years. Margins decreased from 17.5% to 13.3% in fiscal year 2016, increased to 16.4% in 2017 and increased again to 18.5% as of LTM Dec’17.

EXP 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 Eagle’s efficiency performance to see if that is also boosting ROE.

Eagle’s Asset Turnover Trends

It appears that asset turnover of Eagle has generally been declining over the last few years. Turnover decreased from 0.63x to 0.61x in fiscal year 2016, decreased to 0.59x in 2017 and increased to 0.64x as of LTM Dec’17.

EXP 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 Eagle’s ROE are shown in the table below. Note that the table also compares Eagle to a peer group that includes Summit Materials, Inc. (NYSE: SUM), Vulcan Materials Company (NYSE: VMC), Martin Marietta Materials, Inc. (NYSE: MLM) and USG Corporation (NYSE: USG).

EXP ROE Breakdown vs Peers Table - DuPont Analysis

source: finbox.io’s DuPont model

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