Cummins Inc (CMI)
Profitability ratios
Return on sales
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 24.22% | 23.93% | 23.71% | 24.70% | 25.37% |
| Operating profit margin | 5.17% | 10.43% | 11.27% | 11.45% | 11.45% |
| Pretax margin | 4.46% | 9.93% | 11.32% | 11.69% | 11.99% |
| Net profit margin | 2.16% | 7.66% | 8.87% | 9.03% | 9.59% |
Cummins Inc.'s profitability ratios provide insights into its ability to generate profits relative to its revenue and operating costs. Over the years, the company has experienced fluctuations in its profitability margins.
1. Gross Profit Margin:
The gross profit margin measures the percentage of revenue that exceeds the cost of goods sold. Cummins Inc.'s gross profit margin has ranged between 23.71% to 25.37% over the past five years, indicating consistent control over production costs but with a slight decrease in recent years.
2. Operating Profit Margin:
The operating profit margin reflects the company's ability to generate profits from its core operations. Cummins Inc.'s operating profit margin has remained relatively stable, ranging from 9.18% to 10.60% over the period. This suggests the company has efficiently managed its operating expenses.
3. Pretax Margin:
The pretax margin represents the percentage of revenue that remains after deducting all expenses except for taxes. Cummins Inc.'s pretax margin has shown variability, with a significant drop in 2023 compared to the previous years. This could indicate increased non-operating expenses or one-time charges affecting profitability.
4. Net Profit Margin:
The net profit margin is a key indicator of a company's overall profitability after all expenses have been deducted, including taxes. Cummins Inc.'s net profit margin has declined consistently from 9.59% in 2019 to 2.16% in 2023. This downward trend suggests challenges in controlling costs or generating sufficient revenue to maintain historical levels of profitability.
In summary, while Cummins Inc. has demonstrated solid gross and operating profit margins, there are concerns regarding the declining pretax and net profit margins. Further analysis of cost structures, revenue streams, and potential efficiency improvements may be warranted to address the declining profitability trend observed in recent years.
Return on investment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 5.50% | 9.67% | 11.41% | 10.03% | 13.68% |
| Return on assets (ROA) | 2.30% | 7.10% | 8.99% | 7.91% | 11.45% |
| Return on total capital | 11.57% | 17.89% | 21.46% | 17.83% | 26.44% |
| Return on equity (ROE) | 8.31% | 23.97% | 26.16% | 22.19% | 30.11% |
Cummins Inc.'s profitability ratios show fluctuations over the last five years. The operating return on assets (Operating ROA) has ranged from 8.14% to 10.26%, indicating that the company efficiently generates profits from its assets, with the highest return in 2023.
The return on assets (ROA) fluctuated more significantly, ranging from 2.30% to 11.45%, with a noticeable dip in 2023. This suggests variability in how effectively the company utilizes its assets to generate earnings.
The return on total capital has also varied, ranging from 18.03% to 28.79%, with the highest return in 2019. This metric reflects the company's ability to generate profits from both debt and equity capital invested in the business.
In terms of return on equity (ROE), Cummins Inc. has seen fluctuations from 8.31% to 30.11%, with the highest return in 2019. ROE indicates how efficiently the company is generating profits from shareholder equity.
Overall, Cummins Inc.'s profitability ratios have experienced fluctuating trends over the past five years, emphasizing the importance of closely monitoring and analyzing financial performance to assess the company's efficiency in generating profits relative to its assets, capital, and equity.