Simple DuPont analysis is important for companies with significant asset base that actually used to generate returns (i.e. asset base is not composed primarily of intangible assets, or in a more tenuous scenario, of goodwill).
It is also important to tie in the RoIC concept to the growth that the company is generating to see what kind if capital does the company need to invest to generate its growth. Plus, all growth is not the same, which is why PEG ratios can run into trouble, as it assumes that all growth is growth, generated with the same amount of risk and same amount of relative capital.
Not to self: tie in the notes from the McKinsey valuation book and the FSA (Financial Statement Analysis) class at Cornell to this section.
Saurabh – what is ‘FSA’ in the FSA class? I have tried to find it via google… sorry in advance for such a simple/dumb question!!!
It’s Financial Statement Analysis. I will edit to page to clarify. Thank you.
Can I please read your research on industry sector which is password protected?
Saurabh, I respect the fact it is private content, thus please ignore my request and kindly delete my post. 🙂