Emerson Electric Company (EMR)
Profitability ratios
Return on sales
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 49.14% | 32.14% | 41.40% | 41.76% | 42.54% |
| Operating profit margin | 12.45% | 13.68% | 12.48% | 11.50% | 13.34% |
| Pretax margin | 91.42% | 19.26% | 14.50% | 13.76% | 15.44% |
| Net profit margin | 87.46% | 16.47% | 12.61% | 11.71% | 12.55% |
Emerson Electric Co.'s profitability ratios provide insights into the company's ability to generate profits relative to its revenue and various cost categories. Let's analyze the data provided and understand the company's performance over the past five years.
Gross Profit Margin:
The gross profit margin represents the percentage of revenue that exceeds the cost of goods sold. Emerson Electric Co.'s gross profit margin has shown an increasing trend over the past five years, with a significant improvement from 41.47% in 2021 to 48.97% in 2023. This indicates that the company has been able to effectively manage its production costs and improve its pricing strategies.
Operating Profit Margin:
The operating profit margin reflects the company's ability to control its operating expenses and generate profit. Although there was a slight decrease in 2023 compared to 2022, the operating profit margin has remained relatively stable over the years, ranging from 16.59% to 18.25%. This suggests that Emerson Electric Co. has been efficient in managing its operating costs while maintaining a consistent level of profitability.
Pretax Margin:
The pretax margin measures the company's ability to generate profits before accounting for taxes. Emerson Electric Co.'s pretax margin has fluctuated over the years, with a notable increase from 13.91% in 2020 to 20.81% in 2022, followed by a slight decrease to 17.98% in 2023. This trend indicates some variability in the company's ability to manage non-operating expenses and tax liabilities.
Net Profit Margin:
The net profit margin represents the percentage of revenue that translates into net income. Emerson Electric Co.'s net profit margin has shown a significant improvement, particularly in 2023, where it surged to 87.13% from 16.46% in 2022. This substantial increase may be attributed to specific non-recurring items or adjustments that impacted the net income for 2023.
Overall, Emerson Electric Co. has demonstrated commendable performance in improving its gross profit margin and maintaining stable operating profit margins over the years. However, the variability in pretax margin and the significant spike in net profit margin in 2023 warrant further investigation to understand the underlying factors influencing these ratios.
Return on investment
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 4.40% | 7.53% | 9.22% | 8.44% | 11.95% |
| Return on assets (ROA) | 30.92% | 9.06% | 9.32% | 8.59% | 11.25% |
| Return on total capital | 6.65% | 14.42% | 17.84% | 13.11% | 19.58% |
| Return on equity (ROE) | 63.89% | 31.18% | 23.30% | 23.38% | 28.01% |
Emerson Electric Co.'s profitability ratios provide valuable insights into the company's ability to generate profits from its assets and capital over the past five years.
1. Operating Return on Assets (Operating ROA):
- Emerson's Operating ROA has shown a declining trend from 15.22% in 2019 to 6.04% in 2023. This indicates that the company's operating income generated from its assets has decreased over the period. However, it is important to note that Operating ROA takes into account only operating income, excluding non-operating items.
2. Return on Assets (ROA):
- ROA significantly improved in 2023, reaching 30.91% compared to 9.06% in 2022. This substantial increase suggests that Emerson has been more efficient in utilizing its assets to generate profits in the most recent fiscal year.
3. Return on Total Capital:
- The company's Return on Total Capital has fluctuated over the years, with a noticeable decline in 2023 to 8.95% from 17.28% in 2022. This decrease may signify that Emerson faced challenges in generating returns from its total capital investment during the latest period.
4. Return on Equity (ROE):
- Emerson's ROE has exhibited a substantial increase in 2023, reaching 63.86% compared to 31.18% in 2022. This remarkable jump suggests that the company has been successful in utilizing shareholder equity to generate higher profits, indicating efficient management and utilization of shareholder funds.
In conclusion, while Emerson Electric Co. experienced a decline in certain profitability ratios such as Operating ROA and Return on Total Capital in 2023, the substantial increase in ROA and ROE indicates improved overall profitability and efficient use of assets and equity. However, further analysis of the underlying factors contributing to these changes is necessary to provide a comprehensive understanding of the company's financial performance.