Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Activision Blizzard Inc. (NASDAQ:ATVI)

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Economic Value Added (EVA)

Advanced level

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

Activision Blizzard Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Activision Blizzard Inc.’s economic profit increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Net Operating Profit after Taxes (NOPAT)

Activision Blizzard Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in allowances2
Increase (decrease) in deferred revenues3
Increase (decrease) in accrued restructuring and related costs4
Increase (decrease) in equity equivalents5
Interest expense from debt and amortization of debt discount and deferred financing costs
Interest expense, operating lease liability6
Adjusted interest expense from debt and amortization of debt discount and deferred financing costs
Tax benefit of interest expense from debt and amortization of debt discount and deferred financing costs7
Adjusted interest expense from debt and amortization of debt discount and deferred financing costs, after taxes8
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances.

3 Addition of increase (decrease) in deferred revenues.

4 Addition of increase (decrease) in accrued restructuring and related costs.

5 Addition of increase (decrease) in equity equivalents to net income.

6 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2019 Calculation
Tax benefit of interest expense from debt and amortization of debt discount and deferred financing costs = Adjusted interest expense from debt and amortization of debt discount and deferred financing costs × Statutory income tax rate
= × 21.00% =

8 Addition of after taxes interest expense to net income.

9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

10 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Activision Blizzard Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cash Operating Taxes

Activision Blizzard Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income tax expense
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense from debt and amortization of debt discount and deferred financing costs
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Activision Blizzard Inc.’s cash operating taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Invested Capital

Activision Blizzard Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Long-term debt, net
Operating lease liability1
Total reported debt & leases
Shareholders’ equity
Net deferred tax (assets) liabilities2
Allowances3
Deferred revenues4
Accrued restructuring and related costs5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Adjusted shareholders’ equity
U.S. treasuries and government agency securities8
Invested capital

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

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 revenues.

5 Addition of accrued restructuring and related costs.

6 Addition of equity equivalents to shareholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of u.S. treasuries and government agency securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Activision Blizzard Inc.’s invested capital decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Cost of Capital

Activision Blizzard Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2020-02-27).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2019-02-28).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2018-02-27).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-02-28).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-02-29).

1 US$ in millions

2 Equity. See details »

3 Long-term debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Activision Blizzard Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Activision Blizzard Inc.’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Economic Profit Margin

Activision Blizzard Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
 
Net revenues
Add: Increase (decrease) in deferred revenues
Adjusted net revenues
Performance Ratio
Economic profit margin2

Based on: 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-29).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × ÷ =

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Activision Blizzard Inc.’s economic profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.