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

Alphabet Inc. (NASDAQ:GOOG)

Economic Value Added (EVA)

Advanced level

Economic Profit

Alphabet 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 32,894  29,841  12,948  19,452  15,883 
Cost of capital2 12.79% 12.79% 12.79% 12.75% 12.67%
Invested capital3 100,427  86,977  65,705  72,287  71,467 
 
Economic profit4 20,047  18,713  4,542  10,234  6,827 

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

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
= 32,89412.79% × 100,427 = 20,047

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. Alphabet Inc.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Alphabet 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 34,343  30,736  12,662  19,478  16,348 
Deferred income tax expense (benefit)1 145  773  177  (120) (258)
Increase (decrease) in allowance for doubtful accounts and sales credits2 24  55  207  171  71 
Increase (decrease) in deferred revenue3 86  408  471  362  83 
Increase (decrease) in equity equivalents4 255  1,236  855  413  (104)
Interest expense 100  114  109  124  104 
Interest expense, operating lease liability5 320  256  222  199  131 
Adjusted interest expense 420  370  331  323  235 
Tax benefit of interest expense6 (88) (78) (116) (113) (82)
Adjusted interest expense, after taxes7 331  293  215  210  153 
(Gain) loss on marketable securities (149) (1,190) 105  221  208 
Interest income (2,427) (1,878) (1,312) (1,220) (999)
Investment income, before taxes (2,576) (3,068) (1,207) (999) (791)
Tax expense (benefit) of investment income8 541  644  422  350  277 
Investment income, after taxes9 (2,035) (2,424) (785) (649) (514)
Net operating profit after taxes (NOPAT) 32,894  29,841  12,948  19,452  15,883 

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts and sales credits.

3 Addition of increase (decrease) in deferred revenue.

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

5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 11,413 × 2.80% = 320

6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 420 × 21.00% = 88

7 Addition of after taxes interest expense to net income.

8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 2,576 × 21.00% = 541

9 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. Alphabet Inc.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Alphabet 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
Provision for income taxes 5,282  4,177  14,531  4,672  3,303 
Less: Deferred income tax expense (benefit) 145  773  177  (120) (258)
Add: Tax savings from interest expense 88  78  116  113  82 
Less: Tax imposed on investment income 541  644  422  350  277 
Cash operating taxes 4,684  2,838  14,048  4,555  3,366 

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

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. Alphabet Inc.’s cash operating taxes decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Invested Capital

Alphabet 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
Short-term debt —  —  —  —  3,225 
Long-term debt, excluding short-term portion 4,554  4,012  3,969  3,935  1,995 
Operating lease liability1 11,413  8,872  7,693  6,884  6,710 
Total reported debt & leases 15,967  12,884  11,662  10,819  11,930 
Stockholders’ equity 201,442  177,628  152,502  139,036  120,331 
Net deferred tax (assets) liabilities2 980  527  (250) (157) (62)
Allowance for doubtful accounts and sales credits3 753  729  674  467  296 
Deferred revenue4 2,266  2,180  1,772  1,301  939 
Equity equivalents5 3,999  3,436  2,196  1,611  1,173 
Accumulated other comprehensive (income) loss, net of tax6 1,232  2,306  992  2,402  1,874 
Adjusted stockholders’ equity 206,673  183,370  155,690  143,049  123,378 
Construction in progress7 (21,036) (16,838) (10,491) (8,166) (7,324)
Marketable securities8 (101,177) (92,439) (91,156) (73,415) (56,517)
Invested capital 100,427  86,977  65,705  72,287  71,467 

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

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 equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 Subtraction of marketable 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. Alphabet Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Alphabet Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 994,551  994,551  ÷ 1,010,660  = 0.98 0.98 × 12.96% = 12.76%
Debt3 4,696  4,696  ÷ 1,010,660  = 0.00 0.00 × 2.89% × (1 – 21.00%) = 0.01%
Operating lease liability4 11,413  11,413  ÷ 1,010,660  = 0.01 0.01 × 2.80% × (1 – 21.00%) = 0.02%
Total: 1,010,660  1.00 12.79%

Based on: 10-K (filing date: 2020-02-04).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 796,677  796,677  ÷ 809,511  = 0.98 0.98 × 12.96% = 12.76%
Debt3 3,962  3,962  ÷ 809,511  = 0.00 0.00 × 2.89% × (1 – 21.00%) = 0.01%
Operating lease liability4 8,872  8,872  ÷ 809,511  = 0.01 0.01 × 2.89% × (1 – 21.00%) = 0.03%
Total: 809,511  1.00 12.79%

Based on: 10-K (filing date: 2019-02-05).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 751,339  751,339  ÷ 763,058  = 0.98 0.98 × 12.96% = 12.76%
Debt3 4,026  4,026  ÷ 763,058  = 0.01 0.01 × 2.89% × (1 – 35.00%) = 0.01%
Operating lease liability4 7,693  7,693  ÷ 763,058  = 0.01 0.01 × 2.89% × (1 – 35.00%) = 0.02%
Total: 763,058  1.00 12.79%

Based on: 10-K (filing date: 2018-02-06).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 554,166  554,166  ÷ 564,950  = 0.98 0.98 × 12.96% = 12.72%
Debt3 3,900  3,900  ÷ 564,950  = 0.01 0.01 × 2.89% × (1 – 35.00%) = 0.01%
Operating lease liability4 6,884  6,884  ÷ 564,950  = 0.01 0.01 × 2.89% × (1 – 35.00%) = 0.02%
Total: 564,950  1.00 12.75%

Based on: 10-K (filing date: 2017-02-03).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 470,198  470,198  ÷ 482,233  = 0.98 0.98 × 12.96% = 12.64%
Debt3 5,325  5,325  ÷ 482,233  = 0.01 0.01 × 1.95% × (1 – 35.00%) = 0.01%
Operating lease liability4 6,710  6,710  ÷ 482,233  = 0.01 0.01 × 1.95% × (1 – 35.00%) = 0.02%
Total: 482,233  1.00 12.67%

Based on: 10-K (filing date: 2016-02-11).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Alphabet Inc., economic spread ratio calculation, comparison to benchmarks

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 20,047  18,713  4,542  10,234  6,827 
Invested capital2 100,427  86,977  65,705  72,287  71,467 
Performance Ratio
Economic spread ratio3 19.96% 21.51% 6.91% 14.16% 9.55%
Benchmarks
Economic Spread Ratio, Competitors4
Adobe Inc. 5.55% 3.18% 7.85% 7.00% -2.22%
Autodesk Inc. -20.15% -32.11% -29.87% -11.30% -10.65%
Facebook Inc. 14.52% 23.63% 23.96% 11.97% -3.89%
International Business Machines Corp. -3.33% -3.68% -6.46% -2.43% 1.37%
Intuit Inc. 21.60% 19.28% 23.90% 22.13% 15.45%
Microsoft Corp. 30.17% 9.57% 24.68% 41.82% 18.09%
Oracle Corp. 5.74% -3.29% 3.60% 6.32% 4.98%
salesforce.com inc. -5.78% -5.20% -6.62% -5.20% -7.77%
ServiceNow Inc. 3.32% -0.67% -0.11% -27.03% -14.99%

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 20,047 ÷ 100,427 = 19.96%

4 Click competitor name to see calculations.

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. Alphabet Inc.’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Economic Profit Margin

Alphabet Inc., economic profit margin calculation, comparison to benchmarks

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 20,047  18,713  4,542  10,234  6,827 
 
Revenues 161,857  136,819  110,855  90,272  74,989 
Add: Increase (decrease) in deferred revenue 86  408  471  362  83 
Adjusted revenues 161,943  137,227  111,326  90,634  75,072 
Performance Ratio
Economic profit margin2 12.38% 13.64% 4.08% 11.29% 9.09%
Benchmarks
Economic Profit Margin, Competitors3
Adobe Inc. 8.35% 5.21% 10.24% 9.09% -3.39%
Autodesk Inc. -32.85% -46.75% -44.55% -14.26% -12.76%
Facebook Inc. 13.48% 25.52% 24.52% 16.75% -6.87%
International Business Machines Corp. -5.68% -5.17% -8.79% -3.24% 1.71%
Intuit Inc. 14.38% 12.81% 13.28% 12.51% 9.79%
Microsoft Corp. 20.31% 6.30% 18.86% 21.55% 7.95%
Oracle Corp. 10.46% -5.95% 7.38% 10.96% 8.79%
salesforce.com inc. -11.32% -8.21% -11.62% -7.47% -11.98%
ServiceNow Inc. 2.43% -0.57% -0.09% -20.30% -13.20%

Based on: 10-K (filing date: 2020-02-04), 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 20,047 ÷ 161,943 = 12.38%

3 Click competitor name to see calculations.

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. Alphabet Inc.’s economic profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.