Economic Value Added (EVA)
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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
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Analysis of Debt
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Economic Profit
Alphabet Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals notable trends in profitability, capital efficiency, and economic value creation over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibited significant fluctuations. Starting at $41,262 million in 2020, it experienced a sharp increase to $77,747 million in 2021, followed by a substantial decline to $52,578 million in 2022. The figure rebounded in the subsequent years, growing to $65,370 million in 2023 and further rising to a peak of $93,781 million in 2024. This pattern suggests periods of both strong profitability gains and temporary setbacks, with an overall positive trajectory toward the end of the period.
- Cost of Capital
-
The cost of capital remained relatively stable throughout the analyzed years, fluctuating narrowly between 14.74% and 14.85%. This consistency implies a steady risk and financing environment, without significant volatility in the company's weighted average cost of capital.
- Invested Capital
-
Invested capital showed an upward trend overall, increasing from $145,844 million in 2020 to $227,952 million in 2024. The capital base expanded steadily each year except for a slight decrease in 2023 to $189,779 million from $202,355 million in 2022. This temporary reduction may indicate divestments or capital restructuring during that year. The general increase reflects ongoing investment in assets or business expansion.
- Economic Profit
-
Economic profit, calculated as NOPAT minus the cost of capital charge on invested capital, displayed a dynamic pattern. Beginning at $19,765 million in 2020, it surged to $52,357 million in 2021, then dropped considerably to $22,739 million in 2022. Subsequently, it increased again to $37,277 million in 2023 and reached $59,935 million in 2024, the highest value reported. These fluctuations mirror the changes in NOPAT and suggest that despite variations in operating profit, the company has consistently generated value above its capital cost, with improved performance in the final years.
Net Operating Profit after Taxes (NOPAT)
Alphabet Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data indicates a fluctuating yet generally positive trend in profitability over the observed periods. Net income shows substantial growth from 40,269 million US dollars at the end of 2020 to 76,033 million in 2021, marking a significant increase. However, there is a notable decline in 2022 to 59,972 million, followed by a recovery in 2023 to 73,795 million and further growth reaching 100,118 million by the end of 2024. This pattern suggests some volatility but an overall upward trajectory in net income over the five-year span.
Similarly, the Net Operating Profit After Taxes (NOPAT) mirrors this trend with initial growth from 41,262 million US dollars in 2020 to 77,747 million in 2021. This is followed by a decrease in 2022 to 52,578 million, reflecting a sharper drop compared to net income. The subsequent years in 2023 and 2024 show a recovery and increase to 65,370 million and 93,781 million respectively. This indicates a similar pattern of variability but with a strong recuperation in operating profitability after taxes.
- Overall Trends
- Both net income and NOPAT experienced high growth in the early years, a decline in the middle period (2022), and recovery with substantial growth towards the end of the timeline (2023-2024).
- Volatility and Recovery
- The mid-period decrease in both measures suggests external or internal challenges impacting profitability, but the rebound in later years indicates effective management or favorable market conditions leading to enhanced earnings.
- Profitability Insights
- The data suggests that despite periods of decreased profitability, the company's financial health and earnings capacity improved significantly by 2024, reaching the highest recorded values in both net income and NOPAT within the given timeframe.
Cash Operating Taxes
Alphabet Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The analysis of the financial data indicates significant fluctuations and trends in the provisions and payments related to income taxes over the examined five-year period.
- Provision for Income Taxes
- This item shows an overall increasing trend from 2020 to 2024. It more than doubled from approximately $7.8 billion in 2020 to nearly $14.7 billion in 2021, followed by a decline in 2022 to about $11.4 billion. Subsequently, the provision slightly increased in 2023 to approximately $11.9 billion and then escalated sharply to almost $19.7 billion in 2024. This pattern suggests volatility in tax provisions with a recent marked increase.
- Cash Operating Taxes
- Cash taxes paid display a steady and significant upward trend throughout the entire period. Starting at around $6.0 billion in 2020, the cash operating taxes rose sharply to about $12.6 billion in 2021 and continued to climb to $19.5 billion in 2022. The 2023 figure slightly declined to approximately $19.3 billion but rebounded in 2024 to reach its highest value, about $24.4 billion. This demonstrates a consistent increase in actual cash outflows for tax payments, with minor fluctuation in 2023.
In summary, while provision for income taxes has shown volatility with notable increases and decreases, the cash operating taxes have generally increased robustly over the period. The substantial rise in cash paid taxes indicates increasing tax obligations or payments, which may reflect higher profitability, changes in tax regulation, or shifts in the company’s taxable income profile. The divergence and patterns between provisions and cash taxes merit further examination to understand their drivers and implications on financial strategy and tax planning.
Invested Capital
Alphabet Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of assets not yet in service.
8 Subtraction of marketable securities.
- Total reported debt & leases
-
The total reported debt and leases have exhibited a gradual increase over the observed period. Starting from approximately 27.9 billion US dollars at the end of 2020, this figure rose steadily to reach about 30.4 billion dollars by the end of 2024. The increase is relatively moderate and consistent, without significant fluctuations, indicating stable debt management practices.
- Stockholders’ equity
-
Stockholders’ equity has shown a strong upward trend throughout the years. Beginning at roughly 222.5 billion dollars in 2020, equity increased each year, reaching approximately 325.1 billion dollars by the end of 2024. The growth is particularly notable in the last two years, suggesting either retained earnings accumulation, additional equity infusions, or positive revaluation impacts. This trend points to a strengthening financial position from an equity perspective.
- Invested capital
-
Invested capital experienced initial growth from 145.8 billion dollars in 2020 to over 202.3 billion dollars in 2022. However, there was a decline in 2023, dropping to about 189.8 billion dollars, followed by a substantial rise back to around 228.0 billion dollars in 2024. This pattern indicates some volatility in capital investment or asset base management, with a brief contraction before a strong recovery in the most recent year.
- General observations
-
Overall, the financial data indicates increasing capital structure strength with growing stockholders’ equity outpacing the moderate rise in debt and leases. The company's invested capital shows some fluctuations but trends upwards over the longer term. The stable debt levels alongside rising equity suggest improving solvency and financial robustness. The recent increase in invested capital may reflect new investments or asset expansion initiatives.
Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Alphabet Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Charter Communications Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- Economic profit exhibited considerable fluctuations from 2020 to 2024. It started at 19,765 million US dollars in 2020 and rose sharply to 52,357 million in 2021. This was followed by a notable decline to 22,739 million in 2022. Subsequently, there was a strong recovery in 2023, with economic profit increasing to 37,277 million, and it reached the highest reported value of 59,935 million in 2024, indicating a positive upward trend in the latter years.
- Invested Capital
- Invested capital showed a consistent upward trend over the five-year period. Beginning at 145,844 million US dollars in 2020, it increased steadily each year to reach 171,408 million in 2021, 202,355 million in 2022, slight contraction to 189,779 million in 2023, and then rose again to 227,952 million in 2024. The minor dip in 2023 represents a brief deviation but does not alter the overall growth trajectory of the invested capital base.
- Economic Spread Ratio
- The economic spread ratio, expressed as a percentage, displayed volatility but an overall improving pattern. It moved from 13.55% in 2020 to a peak of 30.55% in 2021, then sharply decreased to 11.24% in 2022. In 2023, the ratio rebounded to 19.64% and further increased to 26.29% in 2024. This indicates that the return on invested capital relative to the cost of capital improved significantly in 2021, fell in 2022, but recovered later, contributing positively to economic profit gains.
- Overall Insights
- The data reveal a pattern of growth and variability in economic profitability. The company expanded its invested capital steadily, aside from a slight contraction in 2023. Economic profit mirrored fluctuations in the economic spread ratio, with profit peaks following improvements in spread ratios. The recovery of the economic spread ratio after 2022 was a key factor supporting the rebound and subsequent growth in economic profit. These trends suggest effective management of capital and an improving ability to generate returns exceeding costs despite mid-term volatility.
Economic Profit Margin
Alphabet Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Charter Communications Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrates a fluctuating but overall increasing trend across the reported periods. It rose significantly from 19,765 million US dollars in 2020 to a peak of 52,357 million US dollars in 2021. Subsequently, there was a decline to 22,739 million in 2022, followed by a recovery to 37,277 million in 2023. The latest figure for 2024 shows a further substantial increase, reaching 59,935 million, surpassing the previous peak. This pattern suggests periods of strong performance interspersed with a notable dip in 2022 before regaining momentum.
- Adjusted Revenues
- The adjusted revenues exhibit a consistent and steady growth over the five-year period. Starting at 183,285 million US dollars in 2020, revenues increased annually to reach 350,970 million in 2024. The growth rate appears relatively smooth, with no significant reversals or declines, indicating robust and sustained revenue expansion.
- Economic Profit Margin
- The economic profit margin reflects the profitability efficiency relative to revenues. It initially increased markedly from 10.78% in 2020 to 20.26% in 2021. However, it experienced a sharp decline to 8.02% in 2022, paralleling the dip observed in economic profit. Thereafter, margins improved to 12.11% in 2023 and further increased to 17.08% in 2024. This indicates a recovery in profitability efficiency following the 2022 downturn, although the margin has not fully returned to the 2021 peak.