Cummins Inc (CMI)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 24.75% | 24.22% | 23.93% | 23.71% | 24.70% |
| Operating profit margin | 11.00% | 5.17% | 10.43% | 11.27% | 11.45% |
| Pretax margin | 14.02% | 4.46% | 9.93% | 11.32% | 11.69% |
| Net profit margin | 11.57% | 2.16% | 7.66% | 8.87% | 9.03% |
Based on the provided data, let's analyze the profitability ratios of Cummins Inc:
1. Gross Profit Margin:
- The Gross Profit Margin of Cummins Inc has been relatively stable over the years, fluctuating between 23.71% and 24.75%. This indicates that the company has been effectively managing its direct production costs and has maintained a consistent level of profitability from its core operations.
2. Operating Profit Margin:
- The Operating Profit Margin shows some variability in performance, with a notable decrease in 2023 before rebounding in 2024. The decline in 2023 could be attributed to higher operating expenses relative to operating revenue. However, the improvement in 2024 indicates successful cost management or potentially increased revenue generation from operations.
3. Pre-tax Margin:
- The Pre-tax Margin also experienced fluctuations, with a significant drop in 2023 followed by a sharp increase in 2024. The decrease in 2023 may be due to higher non-operating expenses, such as interest or taxes, impacting the company's profitability. The rebound in 2024 suggests better control over these costs or improved revenue streams.
4. Net Profit Margin:
- The Net Profit Margin, which represents the bottom line profitability after all expenses, showed a similar pattern as the Pre-tax Margin. The sharp drop in 2023 may be attributed to non-operating expenses affecting the company's net income. However, the substantial improvement in 2024 indicates efficient cost management or increased profitability from operations after accounting for all expenses.
In conclusion, while Cummins Inc has faced some fluctuations in its profitability margins, the overall trend shows resilience and adaptability in managing costs and improving profitability over time. The company's ability to rebound from challenging periods and enhance its margins indicates sound financial management strategies.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 11.89% | 5.50% | 9.67% | 11.41% | 10.03% |
| Return on assets (ROA) | 12.51% | 2.30% | 7.10% | 8.99% | 7.91% |
| Return on total capital | 22.16% | 11.57% | 17.89% | 21.46% | 17.83% |
| Return on equity (ROE) | 38.42% | 8.31% | 23.97% | 26.16% | 22.19% |
Cummins Inc's profitability ratios show fluctuating performance over the five-year period. Starting with the Operating Return on Assets (Operating ROA), the company saw an increase from 10.03% in 2020 to 11.41% in 2021, indicating improved efficiency in generating operating profits from its assets. However, there was a decline to 9.67% in 2022 and a more significant drop to 5.50% in 2023 before rebounding to 11.89% in 2024.
Looking at the Return on Assets (ROA), which includes all earnings, the trend is similar but more pronounced. The ROA increased from 7.91% in 2020 to 8.99% in 2021, dipped to 7.10% in 2022, sharply declined to 2.30% in 2023, and then surged to 12.51% in 2024. This ratio provides a broader view of the company's overall profitability.
The Return on Total Capital ratio reflects how effectively Cummins Inc utilizes all its capital to generate profits. The company exhibited a notable improvement in this aspect, with the ratio climbing from 17.83% in 2020 to 21.46% in 2021, slightly dropping to 17.89% in 2022, declining further to 11.57% in 2023, and then reaching 22.16% in 2024.
Lastly, the Return on Equity (ROE) indicates the return earned on the shareholders' equity. Cummins Inc's ROE grew from 22.19% in 2020 to 26.16% in 2021, slightly decreased to 23.97% in 2022, dropped significantly to 8.31% in 2023, and then substantially increased to 38.42% in 2024, showing strong shareholder value creation in the most recent year.
In summary, while the company experienced fluctuations in profitability ratios over the period, there are signs of improvement, particularly in the most recent year, pointing to effective use of assets, capital, and equity to generate returns.