Central Garden & Pet Company (CENT)
Operating return on assets (Operating ROA)
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Operating income | US$ in thousands | 210,646 | 260,036 | 254,496 | 197,977 | 152,068 |
| Total assets | US$ in thousands | 3,378,650 | 3,282,000 | 3,116,680 | 2,339,360 | 2,025,020 |
| Operating ROA | 6.23% | 7.92% | 8.17% | 8.46% | 7.51% |
September 30, 2023 calculation
Operating ROA = Operating income ÷ Total assets
= $210,646K ÷ $3,378,650K
= 6.23%
Operating Return on Assets (Operating ROA) measures the efficiency of Central Garden & Pet Co. in generating operating income from its assets. It reflects the company's ability to utilize its assets to generate profits from its core business operations.
Looking at the trend of Operating ROA over the past five years, we observe a gradual decline from 8.46% in 2020 to 6.23% in 2023. This decline indicates a reduction in the company's efficiency in generating operating income from its assets.
The decreasing trend in Operating ROA could be a result of various factors. One possibility is that the company's operating income has not been growing at the same rate as its total assets, leading to a decline in the efficiency of asset utilization. This could be due to a slowdown in sales growth, increasing operating expenses, or a combination of both.
Another factor that could impact Operating ROA is changes in the composition of the company's asset base. For instance, if the company is investing in assets that are not generating sufficient operating income, it could lead to a lower Operating ROA.
Furthermore, changes in the capital structure of the company could also impact Operating ROA. If the company is relying more on debt financing, the interest expense associated with the debt could lower operating income, thereby reducing the operating ROA.
It is important for Central Garden & Pet Co. to assess the reasons behind the declining Operating ROA and take appropriate measures to improve asset efficiency. This may involve optimizing the asset mix, controlling operating expenses, and evaluating the capital structure to strike a balance between debt and equity financing.
In conclusion, the declining trend in Central Garden & Pet Co.'s Operating ROA indicates a potential decrease in the efficiency of asset utilization. Further analysis of the company's financial and operational strategies is necessary to address the factors contributing to this trend and to enhance the company's profitability.
Peer comparison
Sep 30, 2023