Question

1) Find a company whose ticker symbol contains your initials. (For example if your initials are: BK, then Bank of New York Mellon (BK) or Barnes and Noble (BKS) or Ambac Financial Group (ABK) would satisfy this requirement). If you cannot find any company with your initials, then use one of your initials (you choose which) twice. So if your initial are: SV, choose a company with either 2 S’s or 2 V’s in the ticker. If there is still no suitable company, then choose any company contained in the Dow Jones Industrial Average. 2) Obtain the financial statements for the three most recent years. Usually, the financial statements are in the company’s annual report, and are on, or can be downloaded from the company’s website, or 3) For the three most recent years, analyze the Du Pont identity for your chosen company. How has ROE changed over this period? How have changes in each component of the Du Pont identity affected ROE over this period? 4) Choose two competitors of the company you chose in parts 1,2 and 3. Analyze the Du Pont identity for the competitors (over the most recent three years). How does your company’s profitability compare to the two competitors? What conclusion, if any, can you make about the condition of your chosen company?

I chose Agilent Technologies but I couldnt post their financial statement here, please go to https://www.agilent.com/about/newsroom/presrel/2017/20nov-gp17023_print.html

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AGILENT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
PRELIMINARY
		Three Months Ended
		October 31,								Percent
		2017				2016				Inc/(Dec)
Net revenue		$	1,189			$	1,111			7	%
Costs and expenses:
Cost of products and services			542				523			4	%
Research and development			89				84			6	%
Selling, general and administrative			325				321			1	%
Total costs and expenses			956				928			3	%
Income from operations			233				183			27	%
Interest income			7				3			133	%
Interest expense			(20	)			(19	)		5	%
Other income (expense), net			6				(16	)		—
Income before taxes			226				151			50	%
Provision for income taxes			49				25			96	%
Net income		$	177			$	126			40	%
Net income per share:
Basic		$	0.55			$	0.39
Diluted		$	0.54			$	0.38
Weighted average shares used in computing net income per share:
Basic			322				324
Diluted			326				328
Cash dividends declared per common share		$	0.132			$	0.115

	Years Ended
		October 31,								Percent
		2017				2016				Inc/(Dec)
Net revenue		$	4,472			$	4,202			6	%
Costs and expenses:
Cost of products and services			2,063				2,005			3	%
Research and development			339				329			3	%
Selling, general and administrative			1,229				1,253			(2	%)
Total costs and expenses			3,631				3,587			1	%
Income from operations			841				615			37	%
Interest income			22				11			100	%
Interest expense			(79	)			(72	)		10	%
Other income (expense), net			19				(10	)		—
Income before taxes			803				544			48	%
Provision for income taxes			119				82			45	%
Net income		$	684			$	462			48	%
Net income per share:
Basic		$	2.12			$	1.42
Diluted		$	2.10			$	1.40
Weighted average shares used in computing net income per share:
Basic			322				326
Diluted			326				329
Cash dividends declared per common share		$	0.528			$	0.460

Answer 1

As per DuPont Equation,

Return on Equity can be broken down into the following ratios for exact-analysis purposes.

ie. ROE=Profit Margin*Total Assets Turnover*Financial Leverage (or equity multiplier)

ie. ROE=(Net Income/Sales)*(Sales/Total assets)*(Total assets/Equity)

Accordingly, following details are collected & analysed.

Figures in Millions
Agilent Technologies Inc.					Thermo Fisher Scientific Inc				Danaher Corp
	Oct.2015	Oct.2016	Oct.2017		Dec-14	Dec. 2015	Dec,2016		Dec-14	Dec-15	Dec-16
Net Income	401	462	684		1,894	1,975	2,022		2,598	3,357	2,554
Sales/ Revenues	4038	4202	4472		16,890	16,965	18,274		19,914	20,563	16,882
Profit Margin	9.93%	10.99%	15.30%		11.21%	11.64%	11.06%		13.05%	16.33%	15.13%
Total Assets	7479	7802	8406		42,852	40,889	45,908		36,992	48,222	45,295
Total Assets Turnover	0.54	0.54	0.53		0.39	0.41	0.40		0.54	0.43	0.37
Total equity	4167	4243	4831		20,548	21,350	21,539		23,378	23,690	23,003
Financial leverage	1.79	1.84	1.74		2.09	1.92	2.13		1.58	2.04	1.97
ROE=	9.62%	10.89%	14.16%		9.22%	9.25%	9.39%		11.11%	14.17%	11.10%
PM*TATO*FL

Analysis of DuPont equation

Agilent Technologies Inc.

Increasing profit margin over the 3 years

$ sales generated per $ of assets employed remains the same at half over all the years

Employs lesser amount of debt in funding assets than equity in all the 3 years

Increasing ROE over the 3 years

Thermo Fisher Scientific Inc

Maintains almost same level of profit margin over the 3 years

$ sales generated per $ of assets employed also remains almost the same over all the years

Employs almost equal amount of debt in funding assets as equity in all the 3 years

Maintains almost same level of ROE over the 3 years

Danaher Corp

Increasing profit margin over the 3 years

$ sales generated per $ of assets employed has decreased over the 3 years

Increased amount of debt in funding assets than equity over the 3 years

ROE is maximum in 2015 & same in the other 2 yrs.

Comparison Of Agilent Technologies Inc. with competitors

Profit margin is continuously improving , despite increase in sales revenues--which denotes good cost control.

Asset utilisation ($ sales generated )is better & consistent ,when compared to both the competitors.

More of Equity-funding of the total assets is prominent when compared to the other 2 which have more proportion of debt in their capital structures.

ROE is continuously improving ,despite increase in equity & sales revenues --which indicates   improving profit margin(& better cost control)--- much better than Thermo Fisher & Danaher Corp, the latter being a little inconsistent.