Advance Auto Parts Inc (AAP)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 37.48% | 40.07% | 44.48% | 44.81% | 44.34% |
| Operating profit margin | -7.84% | 1.01% | 6.40% | 7.63% | 7.42% |
| Pretax margin | -8.45% | 0.28% | 5.82% | 7.33% | 6.44% |
| Net profit margin | -3.69% | 0.26% | 4.16% | 5.42% | 4.88% |
The profitability ratios of Advance Auto Parts Inc demonstrate varying trends over the period from December 31, 2020, to December 31, 2024.
- Gross profit margin has shown a slight increase from 44.34% in 2020 to 44.81% in 2021, before slightly decreasing to 44.48% in 2022. However, there was a significant decline in 2023 to 40.07% and a further drop to 37.48% in 2024, indicating potential challenges in managing cost of goods sold.
- Operating profit margin followed a similar pattern, starting at 7.42% in 2020 and gradually increasing to 7.63% in 2021. However, there was a notable decline to 6.40% in 2022, a sharp decrease to 1.01% in 2023, and a negative margin of -7.84% in 2024, suggesting operational inefficiencies impacting profitability.
- Pretax margin also displayed fluctuations, starting at 6.44% in 2020, reaching 7.33% in 2021, but declining to 5.82% in 2022. The margins turned negative in 2023 at 0.28% and significantly dropped to -8.45% in 2024, indicating challenges in generating pre-tax earnings.
- Net profit margin similarly fluctuated, starting at 4.88% in 2020, increasing to 5.42% in 2021, but decreasing to 4.16% in 2022. A significant decline occurred in 2023 to 0.26%, followed by a negative margin of -3.69% in 2024, reflecting decreasing profitability after expenses.
Overall, the declining trends in operating, pretax, and net profit margins from 2022 to 2024 raise concerns about the company's ability to manage costs effectively and generate sustainable profitability. Further analysis of cost structures and revenue sources may be necessary to address these challenges and improve overall profitability.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | -6.61% | 0.93% | 5.96% | 6.88% | 6.33% |
| Return on assets (ROA) | -3.11% | 0.24% | 3.87% | 4.89% | 4.16% |
| Return on total capital | -31.66% | 4.76% | 25.22% | 26.97% | 19.61% |
| Return on equity (ROE) | -15.47% | 1.18% | 17.87% | 19.07% | 13.85% |
Based on the provided data, we can observe the following trends in Advance Auto Parts Inc profitability ratios:
1. Operating Return on Assets (Operating ROA): The Operating ROA has shown a slight improvement from 6.33% in 2020 to 6.88% in 2021. However, there was a decline in 2022 to 5.96% and a significant decrease to 0.93% in 2023. By 2024, the Operating ROA turned negative at -6.61%, indicating that the company's operating performance relative to its assets deteriorated significantly.
2. Return on Assets (ROA): The ROA has followed a similar trend to the Operating ROA, with a slight increase from 4.16% in 2020 to 4.89% in 2021, followed by declines to 3.87% in 2022 and 0.24% in 2023. In 2024, the ROA also turned negative at -3.11%, reflecting a decline in the company's overall profitability relative to its total assets.
3. Return on Total Capital: The Return on Total Capital increased notably from 19.61% in 2020 to 26.97% in 2021, indicating improved efficiency in generating returns from total capital employed. However, this ratio declined to 25.22% in 2022, 4.76% in 2023, and significantly dropped to -31.66% in 2024, suggesting that the company faced challenges in generating returns from its total capital invested.
4. Return on Equity (ROE): The ROE exhibited a similar pattern to the other profitability ratios, with an increase from 13.85% in 2020 to 19.07% in 2021. Subsequently, there was a decline to 17.87% in 2022 and a significant drop to 1.18% in 2023. By 2024, the ROE turned negative at -15.47%, indicating that the company's ability to generate returns for its equity shareholders was severely impacted.
Overall, the trend in Advance Auto Parts Inc profitability ratios shows a mixed performance with initial improvements in profitability metrics followed by significant declines, particularly in the later years under review. This suggests challenges in effectively utilizing the company's assets, capital, and equity to generate sustainable returns for its stakeholders.