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, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net operating profit after taxes (NOPAT)1 41,262  32,894  29,841  12,948  19,452 
Cost of capital2 12.19% 12.23% 12.24% 12.24% 12.20%
Invested capital3 122,733  100,542  86,977  65,705  72,287 
 
Economic profit4 26,295  20,594  19,198  4,908  10,635 

Based on: 10-K (filing date: 2021-02-03), 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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 41,26212.19% × 122,733 = 26,295

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 2018 to 2019 and from 2019 to 2020.

Net Operating Profit after Taxes (NOPAT)

Alphabet Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income 40,269  34,343  30,736  12,662  19,478 
Deferred income tax expense (benefit)1 1,337  145  773  177  (120)
Increase (decrease) in allowance for credit losses on accounts receivable2 514  24  55  207  171 
Increase (decrease) in deferred revenue3 758  86  408  471  362 
Increase (decrease) in equity equivalents4 2,609  255  1,236  855  413 
Interest expense 135  100  114  109  124 
Interest expense, operating lease liability5 334  320  256  222  199 
Adjusted interest expense 469  420  370  331  323 
Tax benefit of interest expense6 (98) (88) (78) (116) (113)
Adjusted interest expense, after taxes7 370  331  293  215  210 
(Gain) loss on marketable securities (650) (149) (1,190) 105  221 
Interest income (1,865) (2,427) (1,878) (1,312) (1,220)
Investment income, before taxes (2,515) (2,576) (3,068) (1,207) (999)
Tax expense (benefit) of investment income8 528  541  644  422  350 
Investment income, after taxes9 (1,987) (2,035) (2,424) (785) (649)
Net operating profit after taxes (NOPAT) 41,262  32,894  29,841  12,948  19,452 

Based on: 10-K (filing date: 2021-02-03), 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).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for credit losses on accounts receivable.

3 Addition of increase (decrease) in deferred revenue.

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

5 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 12,840 × 2.60% = 334

6 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 469 × 21.00% = 98

7 Addition of after taxes interest expense to net income.

8 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 2,515 × 21.00% = 528

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 2018 to 2019 and from 2019 to 2020.

Cash Operating Taxes

Alphabet Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Provision for income taxes 7,813  5,282  4,177  14,531  4,672 
Less: Deferred income tax expense (benefit) 1,337  145  773  177  (120)
Add: Tax savings from interest expense 98  88  78  116  113 
Less: Tax imposed on investment income 528  541  644  422  350 
Cash operating taxes 6,046  4,684  2,838  14,048  4,555 

Based on: 10-K (filing date: 2021-02-03), 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).

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 increased from 2018 to 2019 and from 2019 to 2020.

Invested Capital

Alphabet Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Current portion of Notes 999  —  —  —  — 
Current portion future finance lease payments, net 101  115  —  —  — 
Long-term debt, excluding current portion 13,932  4,554  4,012  3,969  3,935 
Operating lease liability1 12,840  11,413  8,872  7,693  6,884 
Total reported debt & leases 27,872  16,082  12,884  11,662  10,819 
Stockholders’ equity 222,544  201,442  177,628  152,502  139,036 
Net deferred tax (assets) liabilities2 2,477  980  527  (250) (157)
Allowance for credit losses on accounts receivable3 789  753  729  674  467 
Deferred revenue4 3,024  2,266  2,180  1,772  1,301 
Equity equivalents5 6,290  3,999  3,436  2,196  1,611 
Accumulated other comprehensive (income) loss, net of tax6 (633) 1,232  2,306  992  2,402 
Adjusted stockholders’ equity 228,201  206,673  183,370  155,690  143,049 
Construction in progress7 (23,111) (21,036) (16,838) (10,491) (8,166)
Marketable securities8 (110,229) (101,177) (92,439) (91,156) (73,415)
Invested capital 122,733  100,542  86,977  65,705  72,287 

Based on: 10-K (filing date: 2021-02-03), 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).

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 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Alphabet Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 1,395,510  1,395,510  ÷ 1,423,551  = 0.98 0.98 × 12.40% = 12.15%
Debt3 15,201  15,201  ÷ 1,423,551  = 0.01 0.01 × 2.73% × (1 – 21.00%) = 0.02%
Operating lease liability4 12,840  12,840  ÷ 1,423,551  = 0.01 0.01 × 2.60% × (1 – 21.00%) = 0.02%
Total: 1,423,551  1.00 12.19%

Based on: 10-K (filing date: 2021-02-03).

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 994,551  994,551  ÷ 1,010,775  = 0.98 0.98 × 12.40% = 12.20%
Debt3 4,811  4,811  ÷ 1,010,775  = 0.00 0.00 × 2.89% × (1 – 21.00%) = 0.01%
Operating lease liability4 11,413  11,413  ÷ 1,010,775  = 0.01 0.01 × 2.80% × (1 – 21.00%) = 0.02%
Total: 1,010,775  1.00 12.23%

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 × 12.40% = 12.20%
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 12.24%

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 × 12.40% = 12.21%
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 12.24%

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 × 12.40% = 12.16%
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 12.20%

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 »


Economic Spread Ratio

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

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 26,295  20,594  19,198  4,908  10,635 
Invested capital2 122,733  100,542  86,977  65,705  72,287 
Performance Ratio
Economic spread ratio3 21.42% 20.48% 22.07% 7.47% 14.71%
Benchmarks
Economic Spread Ratio, Competitors4
Adobe Inc. 9.76% 7.84% 5.45% 10.15% 9.26%
Autodesk Inc. 1.74% -19.34% -31.30% -29.08% -10.55%
Facebook Inc. 19.90% 12.87% 21.82% 22.11% 10.11%
International Business Machines Corp. -3.04% -3.37% -6.14% -2.08%
Intuit Inc. 8.02% 21.83% 19.51% 24.12% 22.35%
Microsoft Corp. 36.93% 30.34% 9.74% 24.84% 41.98%
Oracle Corp. 2.94% 5.83% -3.21% 3.68% 6.41%
salesforce.com inc. -9.53% -5.42% -4.84% -6.27% -4.85%
ServiceNow Inc. 8.25% 7.65% 3.63% 4.03% -22.82%

Based on: 10-K (filing date: 2021-02-03), 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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 26,295 ÷ 122,733 = 21.42%

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 deteriorated from 2018 to 2019 but then improved from 2019 to 2020 not reaching 2018 level.

Economic Profit Margin

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

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 26,295  20,594  19,198  4,908  10,635 
 
Revenues 182,527  161,857  136,819  110,855  90,272 
Add: Increase (decrease) in deferred revenue 758  86  408  471  362 
Adjusted revenues 183,285  161,943  137,227  111,326  90,634 
Performance Ratio
Economic profit margin2 14.35% 12.72% 13.99% 4.41% 11.73%
Benchmarks
Economic Profit Margin, Competitors3
Adobe Inc. 14.00% 11.79% 8.92% 13.23% 12.02%
Autodesk Inc. 2.30% -31.53% -45.57% -43.38% -13.30%
Facebook Inc. 18.62% 11.87% 23.57% 22.62% 14.15%
International Business Machines Corp. -5.19% -4.73% -8.36% -2.78%
Intuit Inc. 9.02% 14.53% 12.96% 13.41% 12.63%
Microsoft Corp. 24.35% 20.43% 6.41% 18.98% 21.63%
Oracle Corp. 6.69% 10.62% -5.80% 7.55% 11.11%
salesforce.com inc. -23.28% -10.62% -7.64% -11.00% -6.97%
ServiceNow Inc. 6.75% 5.62% 3.07% 3.25% -17.14%

Based on: 10-K (filing date: 2021-02-03), 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).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 26,295 ÷ 183,285 = 14.35%

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 deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.