Timken Company (TKR)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 31.50% | 100.00% | 28.65% | 26.68% | 28.75% |
| Operating profit margin | 13.36% | 13.78% | 13.50% | 12.42% | 12.95% |
| Pretax margin | 10.81% | 11.12% | 12.25% | 11.53% | 11.28% |
| Net profit margin | 7.71% | 8.56% | 9.06% | 8.93% | 8.10% |
The analysis of Timken Company's profitability ratios reveals some fluctuations over the years.
1. Gross Profit Margin:
- The gross profit margin indicates the percentage of revenue that exceeds the cost of goods sold. Timken Company's gross profit margin decreased from 28.75% in 2020 to 26.68% in 2021, but improved to 28.65% in 2022 and significantly jumped to 100.00% in 2023 before settling at 31.50% in 2024. The substantial increase in 2023 might indicate an anomaly or a significant event affecting the cost of goods sold relative to revenue.
2. Operating Profit Margin:
- The operating profit margin reflects the proportion of revenue that remains after deducting operating expenses. Timken Company's operating profit margin remained relatively stable, ranging from 12.42% in 2021 to 13.78% in 2023, with a small dip to 13.36% in 2024. The company managed to maintain profitability at the operating level over the years.
3. Pretax Margin:
- The pretax margin indicates the percentage of revenue that remains after deducting all operating expenses and before taxes. Timken Company's pretax margin showed slight fluctuations, increasing from 11.28% in 2020 to 12.25% in 2022 before declining to 10.81% in 2024. The profitability before tax was relatively healthy in most years.
4. Net Profit Margin:
- The net profit margin represents the percentage of revenue that remains as net income after all expenses, including taxes. Timken Company's net profit margin ranged from 7.71% in 2024 to 9.06% in 2022, with the lowest point at 7.71% in 2024. The decreasing trend in net profit margin could indicate challenges in controlling costs or generating higher revenues.
In conclusion, Timken Company showed varying trends in profitability ratios, with fluctuations observed in gross profit margin and net profit margin. The operating and pretax margins remained relatively stable, indicating efficient cost management. Further analysis of the company's operations and financial strategies would be necessary to fully understand the reasons behind these changes in profitability ratios.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 9.53% | 10.04% | 10.51% | 9.92% | 9.02% |
| Return on assets (ROA) | 5.50% | 6.24% | 7.06% | 7.14% | 5.64% |
| Return on total capital | 21.62% | 25.45% | 29.03% | 23.33% | 21.55% |
| Return on equity (ROE) | 12.48% | 15.80% | 17.96% | 16.08% | 13.21% |
Based on the provided data, we can analyze the profitability ratios of Timken Company as follows:
1. Operating Return on Assets (Operating ROA):
- Timken's Operating ROA has shown a positive trend over the past five years, increasing from 9.02% in 2020 to 10.51% in 2022 before slightly decreasing to 9.53% in 2024. This indicates that the company has been efficiently generating operating profits from its assets.
2. Return on Assets (ROA):
- The Return on Assets (ROA) of Timken has also exhibited an upward trend from 5.64% in 2020 to 7.06% in 2022, showing an improvement in the company's ability to generate profits from its total assets. However, there was a slight decline to 5.50% in 2024.
3. Return on Total Capital:
- Timken's Return on Total Capital has fluctuated over the years, reaching a peak of 29.03% in 2022. However, it dropped to 21.62% by the end of 2024. This ratio signifies the return generated from all sources of capital employed in the business.
4. Return on Equity (ROE):
- The Return on Equity (ROE) of Timken has seen fluctuations over the years, with the highest point of 17.96% in 2022 and the lowest point of 12.48% in 2024. ROE reflects the return generated for the shareholders based on their equity investment.
Overall, the profitability ratios of Timken Company suggest that the company has been reasonably effective in generating returns from its assets, although there are fluctuations in the ratios over the years, indicating changing profitability levels and management efficiency.