2.4 PROFITABILITY RATIOS 

2.4.1 Gross Profit Margin 
YEAR  2018  2019  2020 

 Gross Profit Margin = Gross Profits / Sales 

$ 55,838,000 - $ $ 70,697,000 - $
$ - $ 16,692,000
Gross Profits = Sales 9,355,000 12,770,000
= 
revenue - Cost  =  = 
$ 69,273,000
$ 46,483,000 $ 57,927,000

Sales   $ 55,838,000 $ 70,697,000 $ 85,965,000

0.8325 0.8194 0.8058

Gross Profit Margin 
83.25%  81.94%  80.58% 

Explanation       

Overview: The higher the gross profit margin, the better (that is, the lower the relative cost
of merchandise sold).

2.4.2 Operating Profit Margin 

YEAR  2018  2019  2020 

 Operating Profit Margin = Operating Profits / Sales 

Operating Profits  $ 25,370,000 $ 24,832,000 $ 32,671,000

Sales   $ 55,838,000 $ 70,697,000 $ 85,965,000

Operating Profit 0.4544  0.3512 0.3801

Margin  45.44%  35.12%  38.01% 

Explanation       

Overview:  The operating profit margin measures the percentage of each sales dollar remaining
after all costs and expenses other than interest, taxes, and preferred stock dividends are deducted.
High operating profit margin is better.
 
2.4.3 Net Profit Margin 
YEAR  2018  2019  2020 

Earnings available for common stockholder = net income common stockholder 

 Net profit margin = earnings available for common stockholder / Sales 

Earnings available for
$ 22,111,000 $ 18,485,000 $ 29,146,000
common stockholder 

Sales   $ 55,838,000 $ 70,697,000 $ 85,965,000

0.3960  0.2615 0.3390 

Net Profit Margin 
39.60%  26.15%  33.90% 

Explanation       

Overview: Net profit margin measures the percentage of each sales dollar remaining after all
costs and expenses has been deducted. The higher the firm’s net profit margin is better.
 
2.4.4 Earnings Per Share (EPS) 
YEAR  2018  2019  2020 
 Earnings per share = Earnings available for common stock holders / Number of shares of
common stock outstanding 
Earnings available for
$ 22,111,000 $ 18,485,000 $ 29,146,000
common stockholder 
Number of shares of
common stock $ 2,854,000 $ 2,852,000 $ 2,849,000
outstanding 
Earnings per share  $ 7.75 $ 6.48  $ 10.23

Explanation       

Overview: EPS represents the number of dollars earned during the period on behalf of each
outstanding share of common stock.
 
2.4.5 Return on Total Assets (ROA) 
YEAR  2018  2019  2020 

 ROA = Earnings available for common stockholders / Total assets 

Earnings available for

$ 22,111,000 $ 18,485,000 $ 29,146,000
common stockholder 
 
Total assets  $ 159,316,000 $ 133,376,000 $ 97,334,000
 
0.1388 0.1386 0.2994
ROA 
13.88%  13.86%  29.94% 
 Explanation       

Overview: Return on total assets (ROA), often called the return on investment (ROI),
measures the overall effectiveness of management in generating profits with its available assets.
 
2.4.6 Return on Equity (ROE) 
YEAR  2018  2019  2020 

 ROE = Earnings available for common stockholders / Common stock equity 

Earnings available for

$ 22,111,000 $ 18,485,000 $ 29,146,000
common stockholder 

Common stock equity  $ 84,127,000 $ 101,054,000 $ 128,290,000

0.2628 0.1829 0.2272

ROE 
26.28% 18.29%  22.72%

Explanation       

Overview:   

 
2.5 MARKET RATIOS 
2.5.1 Price / Earnings (P/E) Ratio 
YEAR  2018  2019  2020 

P/E Ratio = Market Price Per Share of Common Stock / Earnings Per Share 

Market Price Per Share of Common Stock = Diluted Net Income Common Stockholders’ 

Market Price Per

Share of Common $ 124.95 $ 143.08 $ 271.16
Stock 
Earnings Per Share  $ 7.74 $ 6.48 $ 10.23

P/e Ratio 

Explanation       

Overview:   
 
2.5.2 Market/Book (M/B) Ratio  
YEAR  2018  2019  2020 
Book value per share of common stock = Common stock equity / Numbers of shares of
common stock outstanding 
 
Common stock
$ 6,805,594  $ 8,704,386  $ 7,970,082 
equity 
 
Numbers of shares
common stock 764,257  779,619  796,000 
outstanding 
Book value per share
$ 8.90  $ 11.16  $ 10.01 
of common stock 

Explanation       

Market/book (M/B) ratio = Market price per share of common stock / Book value per
share of common stock  
Market price per
share of common  $ 124.95 $ 143.08  $ 271.16
stock 
Book value per share
$ 8.90  $ 11.16  $ 10.01 
of common stock 

Market/book 
$ 14.04  $ 12.82  $ 27.08 
 (M/B) ratio  
   
Investor currently Investor currently Investor currently
paying $ 14.04 for paying $ 12.82 for paying $ 27.09 for
Explanation 
each $ 1.00 of book each $ 1.00 of book each $ 1.00 of book
value in 2018  value in 2019  value in 2020 
   

Overview: 

 
2.6 DUPONT SYSTEM OF ANALYSIS 
Dupont Formula 
 
ROA = Net Profit Margin  x  Total Asset Turnover 
 
YEAR  2018  2019  2020 

ROA = Net Profit Margin  x  Total Asset Turnover 

 Net Profit Margin  39.6%  26.14%  33.90% 

Total Asset Turnover  0.57 0.53 0.54

ROA  22.57 %  13.85%  18.31% 

Explanation       

Overview: