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DuPont Analysis Calculator
Decompose ROE into profit margin, asset turnover, and equity multiplier. See exactly which driver is behind a company's return on equity.
Inputs (all in $M)
From the balance sheet
Total assets minus total liabilities
DuPont decomposition
DuPont Formula
ROE = Profit Margin × Asset Turnover × Equity Multiplier
Understanding DuPont analysis
Why decompose ROE?
A company reporting 20% ROE might be operationally excellent — or it might be a highly leveraged business with thin margins papering over structural weakness. A single ROE number can't tell you which. DuPont analysis breaks the number open, revealing whether returns are built on durable competitive advantages or financial engineering that could unwind in a downturn.
The original DuPont formula was developed in the 1920s by the DuPont Corporation to measure divisional performance. Today it's a standard tool in fundamental analysis because it forces you to understand the mechanism behind returns.
Three paths to the same ROE
High ROE can come from three very different sources: (1) High profit margin — Apple charges premium prices and keeps most of the revenue as profit. (2) High asset turnover — Walmart earns thin margins but turns over its inventory rapidly, so return on assets stays strong. (3) High leverage — a bank or utility can boost ROE by financing assets mostly with debt.
The first two paths represent real competitive advantages. The third is a double-edged sword: leverage amplifies returns when things go well and losses when they don't.
Profit margin: quality of earnings
Profit margin (net income ÷ revenue) tells you how much of each dollar of sales the company keeps. Software companies can reach 25–35% net margins; retailers run 1–5%; airlines hover around 1–3%. High margins usually signal pricing power, low competition, or significant intellectual property. Expanding margins over time often predict superior long-run returns.
Watch for one-time items that inflate net income. Recurring operating margins tell a cleaner story — check EBIT margin as a cross-reference.
Asset turnover: capital efficiency
Asset turnover (revenue ÷ total assets) shows how efficiently the company deploys its asset base. A turnover of 1.5× means the company generates $1.50 of revenue per $1 of assets. Asset-light businesses (software, professional services) naturally run high turnover; capital-intensive businesses (manufacturing, energy, utilities) run low turnover and must compensate with higher margins or leverage to achieve competitive ROE.
The margin-turnover tradeoff is the core insight of DuPont analysis. A low-margin retailer can achieve excellent ROE through very high turnover; a low-turnover manufacturer must have high margins to compete.
How to use this DuPont calculator
Get net income and revenue
Use trailing twelve months figures from the income statement. Found in the 10-K or latest earnings release. Use GAAP net income for comparability.
Get total assets
From the balance sheet — the sum of all current and non-current assets. Use the most recent quarter-end figure from the latest 10-Q or 10-K.
Get shareholders' equity
Also from the balance sheet — total assets minus total liabilities. Sometimes called "stockholders' equity" or "book value."
Read the driver verdict
The calculator shows which of the three components is primarily driving ROE. High margin + high turnover = durable advantage. High multiplier alone = leverage-dependent.
Frequently asked questions
What is a good ROE for DuPont analysis?
A ROE above 15% is generally considered good; above 20% is excellent. Warren Buffett looks for ROE consistently above 15% without excessive leverage. Always check whether ROE is driven by margins/efficiency or financial leverage — the composition matters as much as the level.
What is the equity multiplier?
The equity multiplier = Total Assets ÷ Shareholders' Equity. It measures financial leverage — how many dollars of assets the company controls per dollar of equity. An equity multiplier of 3× means $3 of assets per $1 of equity, implying $2 of debt for every $1 of equity.
How is the equity multiplier related to debt?
Equity Multiplier = 1 + (Total Debt ÷ Equity). A multiplier of 1.0 means no debt; 2.0 means debt equals equity (D/E of 1.0); 4.0 means $3 of debt per $1 of equity. Higher leverage amplifies ROE during good times but increases bankruptcy risk during downturns.
Can DuPont analysis detect earnings quality issues?
Yes. If ROE is high but driven primarily by a high equity multiplier and thin margins, the company is using leverage to paper over operational weakness. If asset turnover is falling while margins hold, the company may be becoming less efficient. Trends over 3–5 years reveal far more than a single-year snapshot.
What is a good asset turnover ratio?
Asset turnover varies by industry. Retailers: 1.5–3×. Industrials: 0.8–1.5×. Technology: 0.5–1.5×. Utilities: 0.2–0.5×. Financial institutions: 0.05–0.1×. Compare within the same sector — a 0.4× turnover is excellent for a utility but weak for a grocery chain.
FINISHED THE NUMBERS?
A calculator gives you one number. The report gives you the argument.
Assumptions, scenarios, and what breaks them — on any public company.
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