Evaluating performance ratios is a key component in determining the success of a company

Evaluating performance ratios is a key component in determining the success of a company. From the analysis above Hikma profitability has declined, despite a 35.42% sales increase in 2016. It has 56.8% declined of gross profit margin in 2015 to 50.6% in 2016 and decline further to 49.9 in 2017 even thou gross profit increased from $818m in 2015 to $967m in 2017. As gross profit is made up of sales less cost of sales, this must mean either that sales prices fell, or cost of sales increased relative to each other from 2015 to 2017. It seems highly possible that the company’s management engaged in price cutting strategies to increase sales.
The most obvious symptom of trouble is the profit margin. Here we see the net profit % has declined from 22.8% in 2015 to 15.49% in 2016 and to a great loss of -38.58% in 2017, even thou the actual expenses figure is up from $437 in 2015 to $1.7b in 2017, due to upgrade of technology systems and the consolidation of an additional two months of West-Ward Columbus.
The Asset Turnover is a measure of how efficiently the net assets of the business are generating sales. The higher this ratio is the better. In 2016 the asset turnover decrease to 0.81 from 1.07 in 2015 then it marginally increased to 1.27 in 2017.
However, ROCE declined marginally all through the years, from 19.0% in 2015 to 8.8% in 2016 and further decline to -28.8% in 2017.
ROCE should be adequate to reward the investor for investing their money but on this basis, -28.8% is a terrible pre-tax return on money invested.