Simply Good Foods Co (SMPL)

Return on sales

Simply Good Foods Co's profitability ratios provide valuable insights into the company's ability to generate profits from its core business activities.

Starting with the gross profit margin, we can see a declining trend over the past five years, falling from 41.54% in 2019 to 36.49% in 2023. This indicates that the company's ability to generate profits from its revenue has weakened over the years, which could be attributed to increasing production or input costs.

Moving on to the operating profit margin, we observe a fluctuating pattern, with a peak of 17.35% in 2022 and a slight decline to 16.49% in 2023. Although this ratio has shown some variability, it generally indicates the company's efficiency in controlling its operating expenses and generating profits before interest and tax.

The pretax margin shows a notable improvement from 8.04% in 2021 to 14.14% in 2023. This suggests that the company has been successful in managing its non-operating expenses and generating greater profits before tax, which reflects positively on its overall financial performance.

Finally, the net profit margin, which represents the company's bottom-line profitability, shows a fluctuating trend over the five-year period. Although there has been some volatility, it is noteworthy that the net profit margin has shown an improvement from 4.07% in 2021 to 10.75% in 2023, indicating that the company has been effective in managing its tax expenses and generating higher profits after all costs.

In conclusion, while the gross profit margin has declined, the operating, pretax, and net profit margins have shown some improvements, reflecting the company's efforts to enhance its operational efficiency and control non-operating expenses. However, it will be important to monitor the trend in gross profit margin to ensure that the company can maintain its overall profitability in the long term.

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Return on investment

The profitability ratios of Simply Good Foods Co show a consistent improvement in operating performance and a strong return on investment over the past five years.

The operating return on assets (Operating ROA) has demonstrated steady growth, increasing from 7.05% in August 2019 to 9.77% in August 2023. This indicates that the company has become more efficient in generating operating income from its assets over the years.

Similarly, the return on assets (ROA) has shown a substantial improvement, rising from 4.16% in August 2019 to 6.37% in August 2023. This suggests that management has effectively leveraged the company's assets to generate higher net income.

The return on total capital has also exhibited a positive trend, climbing from 7.82% in August 2019 to 11.06% in August 2023. This indicates that the company has been successful in generating returns from both debt and equity investments, reflecting a strong capital allocation strategy.

Furthermore, the return on equity (ROE) has displayed consistent growth, increasing from 5.68% in August 2019 to 8.50% in August 2023. This signifies that shareholders' equity has been more effectively utilized to generate higher profits for the company.

Overall, the profitability ratios reflect a positive trend in Simply Good Foods Co's performance, indicating improved operational efficiency, better utilization of assets, and enhanced returns for the company's investors over the evaluated period.