DuPont Analysis decomposes ROE into three drivers — profit margin, asset turnover, and leverage — revealing how companies actually generate their returns. You’ll learn the classic three-factor formula, understand what each component measures, and see how the math connects back to standard ROE. I walk through a side-by-side comparison of two retailers with identical ROE but completely different business models — one relying on pricing power, the other on volume and leverage. I also cover the key limitations, including why DuPont Analysis can mislead when equity is negative or when comparing across industries. Whether you’re analyzing individual stocks or preparing for the CFA exam, this video gives you everything you need to master DuPont Analysis.
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Chapters
0:00 – Why ROE Can Be Misleading
0:18 – What is DuPont Analysis?
0:33 – The Three-Factor Formula
1:09 – Profit Margin, Asset Turnover & Equity Multiplier
2:35 – DuPont Example: Luxury vs Discount Retailer
3:17 – How to Apply DuPont Analysis
3:38 – Limitations & Key Takeaways
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*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
