Neogen Corporation (NEOG)
Profitability ratios
Return on sales
| May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 25.12% | 23.05% | 22.95% | 23.47% | 23.17% |
| Operating profit margin | 2.32% | 5.56% | 7.92% | 8.07% | 8.22% |
| Pretax margin | -1.36% | 5.71% | 8.03% | 8.65% | 8.81% |
| Net profit margin | -1.42% | 4.58% | 6.50% | 7.11% | 7.26% |
Neogen Corp.'s profitability ratios reflect its ability to generate profits in relation to its revenues. Let's delve into the company's profitability ratios over the past five years to gain a better understanding.
1. Gross Profit Margin: This ratio indicates the efficiency of the company's production and pricing strategy. Neogen Corp. has shown a consistent increase in its gross profit margin, reaching 49.36% in 2023 from 46.34% in 2019. This suggests that the company has been effectively managing its production costs and pricing strategies to improve its profitability.
2. Operating Profit Margin: This ratio reveals the proportion of revenue that translates into operating income. Neogen Corp.'s operating profit margin has displayed a declining trend, dropping from 16.44% in 2019 to 4.56% in 2023. This decline may be attributed to increased operating expenses or other factors affecting the company's operating income.
3. Pretax Margin: Neogen Corp.'s pretax margin indicates the proportion of revenue remaining after deducting all operating expenses. The company's pretax margin has also exhibited a significant decrease, falling to -2.68% in 2023 from 17.62% in 2019. This decline may signify that the company's operating expenses or non-operating costs have had a substantial impact on its profitability.
4. Net Profit Margin: This ratio represents the company's net income as a percentage of its revenue. Neogen Corp.'s net profit margin has experienced a notable decrease, dropping to -2.78% in 2023 from 14.53% in 2019. This suggests that the company's overall profitability has been affected, potentially due to increased non-operating costs or other factors impacting its bottom-line performance.
In summary, while Neogen Corp. has managed to improve its gross profit margin, its operating, pretax, and net profit margins have displayed declining trends over the past five years. This indicates potential challenges in managing operating expenses, non-operating costs, or other factors impacting the company's overall profitability. As an analyst, it would be essential to further investigate the specific drivers behind these trends to provide a comprehensive assessment of the company's financial performance.
Return on investment
| May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | May 31, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 0.82% | 5.90% | 8.06% | 8.47% | 9.79% |
| Return on assets (ROA) | -0.50% | 4.87% | 6.62% | 7.46% | 8.65% |
| Return on total capital | 0.13% | 6.61% | 8.83% | 9.31% | 10.67% |
| Return on equity (ROE) | -0.73% | 5.44% | 7.24% | 8.20% | 9.43% |
Based on the profitability ratios of Neogen Corp for the past five years, several trends and insights can be observed.
1. Operating return on assets (Operating ROA):
The operating return on assets measures the company's operating income generated per dollar of assets. Neogen Corp's operating ROA has declined from 9.79% in 2019 to 0.82% in 2023. This indicates a significant decrease in the efficiency of using its assets to generate operating income.
2. Return on assets (ROA):
The return on assets ratio assesses the company's overall profitability in relation to its total assets. Neogen Corp's ROA has seen a decline from 8.65% in 2019 to -0.50% in 2023, indicating a loss in profitability relative to its assets. This negative trend suggests a decrease in the company's ability to generate profit from its assets.
3. Return on total capital:
The return on total capital measures the return earned by the company on its total capital employed. Neogen Corp's return on total capital has decreased from 10.70% in 2019 to 0.93% in 2023. This implies a decrease in the efficiency of using the total capital to generate returns for the company's investors and lenders.
4. Return on equity (ROE):
The return on equity ratio reflects the company's ability to generate profit from shareholders' equity. Neogen Corp's ROE has declined from 9.43% in 2019 to -0.73% in 2023, showing a significant decrease in the return earned on shareholders' equity. This trend indicates that the company's ability to generate profit for its shareholders has diminished.
In summary, Neogen Corp's profitability ratios have exhibited a declining trend over the past five years, indicating a decrease in the company's ability to generate profit relative to its assets, capital, and equity. This may raise concerns about the company's operational efficiency and overall financial performance.