# DuPont ROE Decomposition

_Corporate Finance . 2026-05-24 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

Saturday afternoon. Friend forwards a screenshot of three Nifty 200 stocks. Three different sectors. Three names you would never put in the same WhatsApp group. All three printed 20 pct Return on Equity last year. He asks, "all three are good then, no?"

Opened a fourth column on the same spreadsheet. The 20 pct came from three completely different income statements.

DuPont, the same identity Donaldson Brown wrote at the chemicals company in the 1920s, splits ROE into three honest levers. Net Margin times Asset Turnover times Equity Multiplier. Three numbers that multiply to the same headline by three different routes.

The compounder. FMCG sleeve. 15 pct net margin, 1.20 asset turnover, 1.10 equity multiplier. ROE 19.8 pct. The headline is earned by pricing power and brand loyalty.

The volume engine. Asset-light retailer. 4.5 pct net margin, 3.20 asset turnover, 1.40 equity multiplier. ROE 20.2 pct. The headline is earned by spinning the same store three times a year and clipping a thin slice every spin.

The leveraged play. Capital-intensive industrial. 5 pct net margin, 1.00 asset turnover, 4.00 equity multiplier. ROE 20.0 pct. The headline is earned by financing the equity base with debt.

The lever decides what happens to the next year. A 4x equity multiplier in a flat year is fine. In a 20 pct revenue drop on the same operating base, that same multiplier turns earnings down 40 pct. Leverage amplifies the cycle. Both directions.

Asset turnover is the slowest-moving lever. Rolling 10Y standard deviation on the Nifty 200 cohorts sits near 40 bps for turnover, 250 bps for margin, 80 bps for leverage. Margins can be padded with cost cuts. Leverage can be ratcheted up in a year. Turnover requires real operating discipline year after year. It is the lever that earns the right to be called quality.

ROE is the headline. The decomposition is the verdict. Two companies with the same 20 pct can be a compounder and a hand grenade