Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Abiomed Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 140,811 – 21.78% × 693,367 = -10,186
The financial performance from 2017 to 2022 is characterized by an initial phase of aggressive value creation followed by a period of diminishing returns, culminating in a transition to negative economic profit by the end of the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trajectory is observed between 2017 and 2019, with NOPAT increasing from 79,888 thousand to 253,605 thousand. Profitability remained relatively stable through 2021, peaking at 259,982 thousand. However, a significant contraction occurred in 2022, where NOPAT fell to 140,811 thousand, representing a decrease of approximately 46% from the previous year.
- Invested Capital and Cost of Capital
- The capital base expanded consistently from 226,723 thousand in 2017 to a peak of 737,876 thousand in 2021. This indicates a period of significant investment in the business operations. Throughout this expansion, the cost of capital remained remarkably constant, fluctuating minimally between 21.72% and 21.79%, establishing a high and stable hurdle rate for value creation.
- Economic Profit Trends
- Economic profit grew rapidly in the early stages, peaking in 2019 at 145,295 thousand. Despite NOPAT remaining high through 2021, economic profit began a steady decline after 2019, as the growth in invested capital began to outpace the growth in operating profits. This trend reached a critical point in 2022, where the combination of declining NOPAT and a high capital base resulted in a negative economic profit of -10,186 thousand, indicating that the company failed to generate returns in excess of its cost of capital for that fiscal year.
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Net Operating Profit after Taxes (NOPAT)
Abiomed Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 9,507 × 1.61% = 153
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 153 × 21.00% = 32
8 Addition of after taxes interest expense to net income.
The financial performance from March 31, 2017, through March 31, 2022, is characterized by a period of rapid expansion followed by a period of volatility and a subsequent contraction in profitability.
- Growth Phase (2017-2019)
- A strong upward trajectory is observed in both Net Income and Net Operating Profit After Taxes (NOPAT) between 2017 and 2019. Net income increased from 52,116 thousand dollars to 259,016 thousand dollars, while NOPAT grew from 79,888 thousand dollars to 253,605 thousand dollars. This period represents the most significant scaling of operational profitability within the analyzed timeframe.
- Operational Stability and Bottom-Line Volatility (2020-2021)
- Between 2020 and 2021, NOPAT remained relatively stable, fluctuating slightly between 239,725 thousand dollars and 259,982 thousand dollars. In contrast, Net Income exhibited more volatility, decreasing to 203,009 thousand dollars in 2020 before recovering to 225,525 thousand dollars in 2021. The divergence suggests that while core operating profitability was maintained, non-operating factors impacted the final net earnings.
- Profitability Contraction (2022)
- A sharp decline in performance is evident for the period ending March 31, 2022. NOPAT decreased to 140,811 thousand dollars, and Net Income fell to 136,505 thousand dollars. This represents a significant reversal from the peak levels achieved in 2019 and 2021, indicating a reduction in the efficiency of generating operating profit after taxes.
- Comparative Analysis of NOPAT and Net Income
- Throughout most of the observed period, NOPAT remained higher than Net Income, particularly in 2017, 2018, 2020, and 2021. This gap indicates that the company's operating performance, when adjusted for the effects of financing and capital structure, was stronger than its final net profit. The narrowing of this gap in 2019 and 2022 suggests shifts in the impact of non-operating expenses or tax treatments relative to operational gains.
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Cash Operating Taxes
Abiomed Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
The analysis of tax-related expenditures from 2017 to 2022 reveals a significant divergence between accounting tax provisions and actual cash tax outflows, with a notable trend toward convergence in the later years of the period.
- Cash Operating Taxes Trend
- A sustained upward trajectory is observed in cash operating taxes beginning after March 31, 2018. Following a low of 5,738 thousand US$, cash tax payments increased consistently every year, reaching 51,674 thousand US$ by March 31, 2022. This indicates a substantial and steady increase in the actual cash liquidity dedicated to tax obligations over the five-year span.
- Income Tax Provision Volatility
- The income tax provision exhibited considerable volatility compared to the steady rise in cash payments. A sharp decline occurred on March 31, 2019, where the provision dropped to 4,344 thousand US$, while cash operating taxes simultaneously increased to 12,089 thousand US$. This decoupling suggests the impact of non-cash tax adjustments or the utilization of deferred tax assets during that fiscal year.
- Relationship Between Provision and Cash Outflows
- A progressive alignment between reported tax expenses and cash payments is evident. In 2017, the income tax provision significantly exceeded cash operating taxes. However, by 2022, the cash operating taxes of 51,674 thousand US$ nearly equaled the total income tax provision of 54,055 thousand US$. This convergence implies that the company's tax accounting has moved closer to a cash-basis realization, reducing the gap between book tax expense and actual cash outflows.
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Invested Capital
Abiomed Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of product warranty.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
The financial trajectory from March 31, 2017, to March 31, 2022, is characterized by a substantial expansion of the capital base, driven primarily by equity growth and a minimal reliance on external debt.
- Stockholders' Equity Growth
- A consistent and strong upward trend is observed in stockholders' equity, which increased from 452,071 thousand US$ in 2017 to 1,503,326 thousand US$ by 2022. This steady growth indicates a significant accumulation of net assets over the six-year period.
- Debt and Lease Obligations
- Total reported debt and leases remained low and exhibited volatility without a sustained upward trend. From a high of 23,800 thousand US$ in 2017, obligations declined to a low of 6,116 thousand US$ in 2021, ending at 9,507 thousand US$ in 2022. The negligible size of debt relative to the total equity balance suggests a highly conservative leverage profile.
- Invested Capital Trends
- Invested capital demonstrated an aggressive growth pattern between 2017 and 2021, rising from 226,723 thousand US$ to 737,876 thousand US$. However, the period concluded with a contraction in 2022, where invested capital fell to 693,367 thousand US$. This shift indicates that after several years of capital expansion, the company experienced a reduction in its invested capital base in the final fiscal year analyzed.
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Cost of Capital
Abiomed Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,741,698) | 10,741,698) | ÷ | 10,751,205) | = | 1.00 | 1.00 | × | 21.80% | = | 21.78% | ||
| Capital lease obligation3 | —) | —) | ÷ | 10,751,205) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 9,507) | 9,507) | ÷ | 10,751,205) | = | 0.00 | 0.00 | × | 1.61% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 10,751,205) | 1.00 | 21.78% | ||||||||||
Based on: 10-K (reporting date: 2022-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,682,874) | 12,682,874) | ÷ | 12,688,990) | = | 1.00 | 1.00 | × | 21.80% | = | 21.78% | ||
| Capital lease obligation3 | —) | —) | ÷ | 12,688,990) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 6,116) | 6,116) | ÷ | 12,688,990) | = | 0.00 | 0.00 | × | 1.96% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 12,688,990) | 1.00 | 21.79% | ||||||||||
Based on: 10-K (reporting date: 2021-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,825,950) | 8,825,950) | ÷ | 8,838,170) | = | 1.00 | 1.00 | × | 21.80% | = | 21.77% | ||
| Capital lease obligation3 | —) | —) | ÷ | 8,838,170) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 12,220) | 12,220) | ÷ | 8,838,170) | = | 0.00 | 0.00 | × | 3.12% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 8,838,170) | 1.00 | 21.77% | ||||||||||
Based on: 10-K (reporting date: 2020-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 11,851,559) | 11,851,559) | ÷ | 11,865,833) | = | 1.00 | 1.00 | × | 21.80% | = | 21.77% | ||
| Capital lease obligation3 | —) | —) | ÷ | 11,865,833) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 14,274) | 14,274) | ÷ | 11,865,833) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 11,865,833) | 1.00 | 21.77% | ||||||||||
Based on: 10-K (reporting date: 2019-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,544,728) | 17,544,728) | ÷ | 17,554,817) | = | 1.00 | 1.00 | × | 21.80% | = | 21.78% | ||
| Capital lease obligation3 | —) | —) | ÷ | 17,554,817) | = | 0.00 | 0.00 | × | 0.00% × (1 – 31.50%) | = | 0.00% | ||
| Operating lease liability4 | 10,089) | 10,089) | ÷ | 17,554,817) | = | 0.00 | 0.00 | × | 0.00% × (1 – 31.50%) | = | 0.00% | ||
| Total: | 17,554,817) | 1.00 | 21.78% | ||||||||||
Based on: 10-K (reporting date: 2018-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,954,171) | 5,954,171) | ÷ | 5,977,971) | = | 1.00 | 1.00 | × | 21.80% | = | 21.71% | ||
| Capital lease obligation3 | 16,338) | 16,338) | ÷ | 5,977,971) | = | 0.00 | 0.00 | × | 2.99% × (1 – 35.00%) | = | 0.01% | ||
| Operating lease liability4 | 7,462) | 7,462) | ÷ | 5,977,971) | = | 0.00 | 0.00 | × | 2.99% × (1 – 35.00%) | = | 0.00% | ||
| Total: | 5,977,971) | 1.00 | 21.72% | ||||||||||
Based on: 10-K (reporting date: 2017-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Abiomed Inc., economic spread ratio calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (10,186) | 99,230) | 110,230) | 145,295) | 100,254) | 30,652) | |
| Invested capital2 | 693,367) | 737,876) | 594,867) | 497,537) | 273,719) | 226,723) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -1.47% | 13.45% | 18.53% | 29.20% | 36.63% | 13.52% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Abbott Laboratories | -2.43% | -1.95% | — | — | — | — | |
| Elevance Health Inc. | 0.14% | 1.46% | — | — | — | — | |
| Intuitive Surgical Inc. | -3.21% | 12.41% | — | — | — | — | |
| Medtronic PLC | -5.06% | -6.71% | — | — | — | — | |
| UnitedHealth Group Inc. | 4.06% | 3.91% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -10,186 ÷ 693,367 = -1.47%
4 Click competitor name to see calculations.
The financial trajectory between March 2017 and March 2022 is characterized by an initial phase of rapid growth in economic value creation followed by a sustained contraction, culminating in a negative economic position by the final year of the period.
- Economic Profit Trends
- Economic profit exhibited significant growth in the early years, rising from $30.65 million in 2017 to a peak of $145.30 million in 2019. Following this peak, a consistent decline occurred, with figures falling to $99.23 million in 2021 and ultimately transitioning to a negative value of -$10.19 million in 2022.
- Invested Capital Dynamics
- A steady and aggressive expansion of invested capital is observed from 2017 through 2021, increasing from $226.72 million to a peak of $737.88 million. A marginal reduction was recorded in 2022, bringing the total to $693.37 million, although the capital base remained significantly elevated compared to the 2017 baseline.
- Economic Spread Ratio Analysis
- The economic spread ratio peaked at 36.63% in 2018, reflecting high efficiency in generating returns exceeding the cost of capital. A subsequent and persistent downward trend followed, with the ratio contracting to 29.20% in 2019, 18.53% in 2020, and 13.45% in 2021. The ratio reached a negative value of -1.47% in 2022, indicating that the returns on invested capital were no longer sufficient to cover the cost of that capital, resulting in economic value destruction.
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Economic Profit Margin
Abiomed Inc., economic profit margin calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (10,186) | 99,230) | 110,230) | 145,295) | 100,254) | 30,652) | |
| Revenue | 1,031,753) | 847,522) | 840,883) | 769,432) | 593,749) | 445,304) | |
| Add: Increase (decrease) in deferred revenue | 2,040) | 5,175) | 2,754) | 1,423) | 4,475) | 1,717) | |
| Adjusted revenue | 1,033,793) | 852,697) | 843,637) | 770,855) | 598,224) | 447,021) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -0.99% | 11.64% | 13.07% | 18.85% | 16.76% | 6.86% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Abbott Laboratories | -3.41% | -2.81% | — | — | — | — | |
| Elevance Health Inc. | 0.06% | 0.68% | — | — | — | — | |
| Intuitive Surgical Inc. | -2.77% | 9.76% | — | — | — | — | |
| Medtronic PLC | -11.11% | -16.09% | — | — | — | — | |
| UnitedHealth Group Inc. | 2.08% | 1.92% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -10,186 ÷ 1,033,793 = -0.99%
3 Click competitor name to see calculations.
Between March 31, 2017, and March 31, 2022, a significant divergence emerged between revenue growth and economic value creation. While adjusted revenue demonstrated a consistent upward trajectory, increasing from 447,021 thousand US$ to 1,033,793 thousand US$, economic profit followed a bell-shaped curve, peaking in 2019 before declining into negative territory by 2022.
- Revenue Performance
- Adjusted revenue grew steadily throughout the six-year period, maintaining a positive growth rate every year. The most substantial expansion occurred between 2017 and 2019, with the total volume exceeding 1 billion US$ for the first time in the 2022 fiscal year.
- Economic Profit Trends
- Economic profit experienced rapid growth in the early part of the period, rising from 30,652 thousand US$ in 2017 to a peak of 145,295 thousand US$ in 2019. However, this trend reversed after 2019, with profit figures declining sequentially to 110,230 thousand US$ in 2020 and 99,230 thousand US$ in 2021, ultimately falling to a deficit of 10,186 thousand US$ in 2022.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the absolute profit trends, expanding from 6.86% in 2017 to a maximum of 18.85% in 2019. A sustained contraction followed, with the margin dropping to 13.07% in 2020 and 11.64% in 2021. The period concluded with a sharp decline to -0.99% in 2022, indicating that the returns generated were insufficient to cover the cost of capital during that fiscal year.
- Correlation Between Revenue and Economic Value
- A critical decoupling is observed in 2022, where the highest recorded adjusted revenue coincided with the only instance of negative economic profit. This suggests that the increase in scale did not translate into additional economic value and that expenses or the cost of capital grew at a rate that outpaced revenue gains toward the end of the analyzed period.
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