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.
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- Income Statement
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Aggregate Accruals
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Economic Profit
Align Technology Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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
= – × =
The financial data reveals several notable trends over the five-year period from 2018 to 2022. Net operating profit after taxes (NOPAT) exhibits fluctuations, with an increase from 520,148 thousand US dollars in 2018 to a peak of 1,236,388 thousand US dollars in 2021, followed by a significant decline to 536,671 thousand US dollars in 2022. This indicates a period of growth in operating profitability up until 2021, succeeded by a sharp reduction in the final year.
Cost of capital remains relatively stable throughout the period, consistently around 20%, with minor variations between 20.04% and 20.11%. This stability suggests a consistent required rate of return for invested capital without significant changes in the company's risk profile or market conditions affecting the cost of financing.
Invested capital shows a clear upward trend, increasing steadily each year from 1,516,250 thousand US dollars in 2018 to 3,344,477 thousand US dollars in 2022. The most substantial growth occurred between 2019 and 2020, where the invested capital surged from 1,524,413 to 2,459,204 thousand US dollars. This indicates continued investment in assets or operations, possibly supporting growth initiatives.
Economic profit exhibits volatility: it increased from 216,367 thousand US dollars in 2018 to a high of 323,122 thousand US dollars in 2019, then dropped sharply to 37,408 thousand US dollars in 2020. There was a recovery in 2021 with economic profit reaching 635,764 thousand US dollars, the highest in the period, before turning negative in 2022 with a loss of 133,703 thousand US dollars. The negative economic profit in 2022 suggests that the company did not generate sufficient returns above its cost of capital that year.
Overall, the data indicates a period of growth in operating profits and invested capital, but with significant fluctuations in economic profit, particularly marked by a downturn in 2022. The stable cost of capital suggests external financial conditions remained constant, implying that changes in economic profit were largely driven by operating performance and capital investment efficiency.
Net Operating Profit after Taxes (NOPAT)
Align Technology Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in accrued 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
= × =
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Income
- Net income exhibited significant fluctuations over the analyzed period. Starting at 400,235 thousand USD in 2018, it increased moderately to 442,776 thousand USD in 2019. A substantial rise occurred in 2020, reaching a peak of 1,775,888 thousand USD. However, this peak was followed by a sharp decline in 2021 to 772,020 thousand USD, and the downward trend continued in 2022, with net income lowering further to 361,573 thousand USD. This pattern indicates a peak in profitability in 2020, followed by notable reductions in subsequent years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a generally variable pattern with less extreme fluctuations compared to net income. It started at 520,148 thousand USD in 2018, growing to 629,227 thousand USD in 2019. Subsequently, it declined to 531,854 thousand USD in 2020 but then experienced a marked increase in 2021, reaching 1,236,388 thousand USD. In 2022, NOPAT decreased significantly to 536,671 thousand USD, approximating earlier levels. This suggests the company experienced variations in operational efficiency and profitability, with a notable peak in 2021 before retreating the following year.
- Overall Observations
- Both net income and NOPAT peaked at different points within the timeframe, with net income reaching its highest in 2020 and NOPAT peaking in 2021. The trends highlight a period of exceptional profitability followed by sharp declines that suggest potential challenges in maintaining earnings growth or operational efficiency in recent years. The divergence in peak timings between net income and NOPAT may indicate differences in non-operating factors affecting profitability versus core operating performance.
Cash Operating Taxes
Align Technology Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data reveals notable fluctuations in the provision for income taxes and cash operating taxes over the five-year period ending in 2022. A detailed examination of these figures uncovers several trends and significant changes.
- Provision for (benefit from) Income Taxes
-
The provision demonstrates high volatility across the analyzed years. It started at approximately $57.7 million in 2018 and showed a significant increase to $112.3 million in 2019, indicating a rising tax expense or provision for that year.
In 2020, there is a dramatic decrease resulting in a benefit recorded at about -$1.4 billion. This negative figure suggests the presence of substantial tax benefits or credits, which significantly reduced the company's tax expense for that year.
Following this, the provision reverted to positive figures in 2021 and 2022, at $240.4 million and $237.5 million respectively, stabilizing around these levels but still significantly higher than the initial years.
- Cash Operating Taxes
-
Cash operating taxes showed a generally increasing trend throughout the period. Beginning at $66.3 million in 2018, there was a modest rise to $111.9 million in 2019.
In 2020, despite the large benefit observed in the provision for income taxes, cash operating taxes decreased to $93.7 million, which could reflect timing differences, tax deferrals, or other operational tax management strategies.
From 2020 onward, cash operating taxes increased substantially to $228.6 million in 2021 and further to $279.0 million in 2022, indicating an increasing cash outflow related to income taxes consistent with the return to positive provisions.
In summary, the provision for income taxes shows significant year-to-year volatility with a major tax benefit recorded in 2020, whereas cash operating taxes have increased steadily over the latter part of the period. The divergence in 2020 between the provision and cash taxes suggests the influence of non-cash tax benefits or deferred tax assets impacting the provision without corresponding immediate cash tax relief.
Invested Capital
Align Technology Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 revenues.
5 Addition of accrued 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.
Over the five-year period ending December 31, 2022, several notable trends can be observed in the financial metrics analyzed.
- Total reported debt & leases
-
This metric exhibited some volatility during the period. Initially, there was a significant decrease from approximately 106.7 million in 2018 to 59.2 million in 2019. However, starting from 2020, the debt levels began to rise again, reaching approximately 86.2 million, then increasing substantially to around 125.4 million by 2021, and stabilizing close to this level at approximately 126.9 million in 2022. This pattern indicates a strategic increase in leveraging after 2019, potentially to finance growth or investments.
- Stockholders’ equity
-
There was a consistent and strong upward trend in stockholders’ equity throughout the period, with values growing steadily each year. The value increased from approximately 1.25 billion in 2018 to roughly 1.35 billion in 2019, then surged considerably to about 3.23 billion in 2020. The growth continued, albeit at a slower pace, reaching around 3.62 billion in 2021 and slightly declining to near 3.60 billion in 2022. This indicates significant capital accumulation and possibly successful retained earnings or equity financing activities over the period, with a minor contraction in the last year.
- Invested capital
-
Invested capital showed a steady and marked increase over the five-year timeframe. Starting at about 1.52 billion in both 2018 and 2019, invested capital rose sharply to approximately 2.46 billion in 2020. The upward trend persisted, with invested capital reaching approximately 2.99 billion in 2021 and continuing to climb to around 3.34 billion in 2022. This increase suggests ongoing investments into the company’s assets, operations, or growth initiatives, reflecting expansion or scaling efforts.
Cost of Capital
Align Technology Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
Economic Spread Ratio
Align Technology Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the analyzed period. It increased from approximately 216 million USD in 2018 to a peak of 635.8 million USD in 2021. However, a dramatic decline occurred in 2020, followed by a strong rebound in 2021 before turning negative in 2022, with a loss of approximately 133.7 million USD. This pattern indicates volatility in the company's ability to generate returns above its cost of capital, with a notable deterioration in the latest year.
- Invested Capital
- Invested capital showed a steady and substantial upward trend throughout the period. Beginning at about 1.52 billion USD in 2018, the capital base increased each year, reaching approximately 3.34 billion USD by the end of 2022. This consistent growth suggests ongoing investments and asset accumulation, potentially aimed at supporting business expansion or innovation.
- Economic Spread Ratio
- The economic spread ratio, representing the percentage return on invested capital above the cost of capital, generally correlated with economic profit trends. It peaked at over 21% in 2019 and 2021, reflecting strong value creation during those years. In contrast, the ratio dropped sharply in 2020 to about 1.5%, indicating near breakeven performance. The ratio turned negative in 2022, at -4%, indicating that the company’s returns were below its cost of capital, consistent with the negative economic profit for that year.
Economic Profit Margin
Align Technology Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the analyzed period. It increased from 216,367 thousand USD in 2018 to a peak of 635,764 thousand USD in 2021, indicating an improvement in value generation. However, in 2022, economic profit turned negative to -133,703 thousand USD, representing a notable decline and potential challenges in profitability during the last reported year.
- Adjusted Net Revenues
- Adjusted net revenues exhibited a general upward trend from 2,104,380 thousand USD in 2018 to 4,401,700 thousand USD in 2021, more than doubling over four years. In 2022, there was a decline to 3,949,386 thousand USD, showing a reduction in revenues compared to the previous year but still higher than earlier years before 2021.
- Economic Profit Margin
- The economic profit margin varied alongside economic profit, starting at 10.28% in 2018 and increasing to 14.44% in 2021. This suggests improving efficiency and value creation relative to adjusted net revenues during these years. However, in 2022, the margin dropped sharply to -3.39%, reflecting the negative economic profit and indicating diminished profitability and possibly increased costs or lower returns relative to revenues.