Element Solutions Inc (ESI)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 42.15% | 39.37% | 37.37% | 40.04% | 42.40% |
| Operating profit margin | 14.00% | 7.44% | 12.76% | 12.50% | 9.76% |
| Pretax margin | 8.12% | 5.53% | 10.67% | 10.49% | 4.38% |
| Net profit margin | 9.94% | 5.06% | 7.34% | 8.47% | 4.08% |
The analysis of Element Solutions Inc.'s profitability ratios over the period from December 31, 2020, to December 31, 2024, indicates several notable trends and fluctuations across key profitability metrics.
Starting with the gross profit margin, which measures the efficiency of production and the ability to generate revenue above the cost of goods sold, the data reveals a decline from 42.40% in 2020 to a low of 37.37% in 2022. This downward trend suggests increased cost pressures or pricing challenges during this period. However, the gross profit margin demonstrates a recovery in 2023 and 2024, rising to 39.37% and further to 42.15%, respectively, indicating a potential improvement in cost management or pricing strategies.
The operating profit margin, reflecting the core operating efficiency, exhibits a more volatile pattern. It increased from 9.76% in 2020 to a peak of 12.76% in 2022, suggesting enhanced operational efficiency or higher contribution margins during this period. Nonetheless, a significant decline to 7.44% occurs in 2023, which may be attributable to increased operating expenses or sector-specific challenges. A marked rebound to 14.00% in 2024 indicates a substantial improvement in operational profitability.
Pretax margin, representing profitability before income taxes, follows a similar fluctuation pattern. It increased from 4.38% in 2020 to a high of 10.67% in 2022, then dropped to 5.53% in 2023 before rising again to 8.12% in 2024. This variability points to changing pre-tax earnings relative to revenue, influenced by factors such as operational results, non-operating items, or expense management.
The net profit margin, which reflects the bottom-line profitability after all expenses, shows a similar trajectory. It rose notably from 4.08% in 2020 to 8.47% in 2021, followed by a decline to 7.34% in 2022, a further decrease to 5.06% in 2023, before increasing substantially to 9.94% in 2024. The recent upward movement suggests an improvement in net profitability, potentially driven by better cost control, revenue growth, or tax efficiencies.
Overall, Element Solutions Inc. experienced a period of margin compression around 2022 and 2023, interrupted by a strong recovery in 2024. The recent upward trends in gross, operating, pretax, and net profit margins reflect positive developments in profitability, potentially indicating successful strategic adjustments, operational improvements, or favorable market conditions.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 7.06% | 3.49% | 6.63% | 5.84% | 4.04% |
| Return on assets (ROA) | 5.01% | 2.37% | 3.82% | 3.96% | 1.69% |
| Return on total capital | 14.44% | 7.66% | 14.35% | 12.56% | 6.23% |
| Return on equity (ROE) | 10.25% | 5.07% | 8.03% | 8.20% | 3.26% |
The analysis of Element Solutions Inc.'s profitability ratios over the period from December 31, 2020, to December 31, 2024, reveals several notable trends and patterns.
Firstly, the Operating Return on Assets (Operating ROA) exhibited variability during the period. It increased from 4.04% in 2020 to a peak of 6.63% in 2022, indicating an improvement in the efficiency of core operations relative to the assets employed. However, this measure declined sharply to 3.49% in 2023 before rebounding significantly to 7.06% in 2024, surpassing previous levels and suggesting a recovery or enhancement in operational efficiency.
In contrast, the Return on Assets (ROA) showed a different trajectory. It rose from 1.69% in 2020 to a high of 3.96% in 2021, then slightly declined to 3.82% in 2022. The subsequent decrease to 2.37% in 2023 was followed by a substantial increase to 5.01% in 2024. This pattern indicates that while overall asset utilization in terms of profitability experienced some fluctuations, there was a notable improvement in 2024, reflecting better overall asset efficiency and profitability.
The Return on Total Capital demonstrated a general upward trend from 6.23% in 2020 to a peak of 14.35% in 2022. Following a decline to 7.66% in 2023, it sharply increased again to 14.44% in 2024, suggesting significant enhancements in generating returns from the capital invested, especially in the latest year. This volatility may hint at strategic financial decisions such as adjustments in capital structure or reinvestment strategies affecting overall profitability.
Finally, the Return on Equity (ROE) experienced considerable growth over the period. Starting from 3.26% in 2020, it more than doubled to 8.20% in 2021 and remained relatively stable through 2022 at 8.03%. A decline to 5.07% in 2023 was observed, but this was followed by a substantial rebound to 10.25% in 2024. The increases in 2021 and 2024 suggest improved shareholder returns likely driven by better operational performance and strategic financial management.
Overall, the profitability ratios demonstrate an initial upward trajectory in early years, fluctuations around 2022 and 2023, and a marked improvement in 2024. These patterns reflect periods of operational and strategic adjustments, culminating in a strong profitability position by the end of 2024.