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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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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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 reflects several key trends over the five-year period ending December 31, 2024. There is a notable increase in Net Operating Profit After Taxes (NOPAT), which nearly doubles from 41,262 million US dollars in 2020 to 93,781 million US dollars in 2024. This represents significant growth, although there is some fluctuation within the period, particularly a dip in 2022 before subsequent recovery and growth in 2023 and 2024.
The Cost of Capital remains relatively stable across the measured years, fluctuating slightly between 14.51% and 14.62%. The minor variations suggest consistent capital costs with no substantial increase or decrease impacting profitability metrics.
Invested Capital shows an overall upward trajectory, starting at 145,844 million US dollars in 2020 and increasing to 227,952 million US dollars by 2024. Despite a slight decline in 2023 relative to 2022, the general trend indicates expanding investments in the company’s operations or assets.
Economic Profit, a measure derived from the difference between NOPAT and the cost of capital applied to invested capital, also shows an increasing trend over the period. Beginning at 20,099 million US dollars in 2020, it more than doubles to 60,462 million US dollars in 2024. This increase, alongside the growth in NOPAT, indicates improved value creation by the company beyond the cost of capital. The fluctuations mirror those seen in NOPAT, with a dip in 2022 followed by recovery.
- Summary of Trends
- - NOPAT increases substantially over the period, with a temporary decrease in 2022 but strong growth thereafter.
- - Cost of capital remains stable with minimal fluctuation.
- - Invested capital expands overall, indicating increased investment despite a brief decline in 2023.
- - Economic profit grows significantly, suggesting enhanced value creation relative to capital costs.
Overall, the data points to positive financial performance characterized by increased profitability and capital efficiency, notwithstanding some year-to-year variability.
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 | ||||||
| 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.
The analysis of the annual financial data reveals notable fluctuations and trends in the key performance indicators over the five-year period.
- Economic Profit
- Economic profit demonstrates significant variability, with an initial value of 20,099 million US dollars in 2020, followed by a substantial increase to 52,752 million in 2021. This was succeeded by a notable decline to 23,203 million in 2022. Thereafter, economic profit rose again to 37,714 million in 2023 and further increased to 60,462 million by 2024. This pattern suggests considerable volatility but with an overall upward trajectory when comparing the first and last years.
- Invested Capital
- Invested capital exhibited a general growth trend throughout the period. Starting at 145,844 million US dollars in 2020, it increased steadily each year, reaching 171,408 million in 2021 and continuing to 202,355 million in 2022. Although there was a slight dip in 2023 to 189,779 million, the amount rose again to 227,952 million in 2024. This growth indicates ongoing investment and expansion activities, with only a minor contraction during 2023.
- Economic Spread Ratio
- The economic spread ratio showed marked fluctuations over the same timeframe. It commenced at 13.78% in 2020, sharply rising to 30.78% in 2021, reflecting an improvement in return on invested capital relative to the cost of capital. However, the ratio decreased significantly to 11.47% in 2022, before recovering to 19.87% in 2023, and further improving to 26.52% in 2024. This pattern signifies periods of changing profitability efficiency, with the ratio implying a healthier capital return toward the end of the observed period.
Overall, the data suggests a company experiencing fluctuations in economic profitability and efficiency, while maintaining a generally increasing base of invested capital. The recovery in economic profit and spread ratio after declines indicates resilience and potential improvements in capital utilization and profitability management in recent years.
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 | ||||||
| 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 demonstrated significant fluctuations over the observed period. Starting from 20,099 million US dollars in 2020, there was a notable increase to 52,752 million in 2021. This was followed by a decline to 23,203 million in 2022, after which the figure improved again to 37,714 million in 2023, and ultimately rose to 60,462 million in 2024. The data suggests volatility but an overall upward trajectory in economic profit over the five-year span.
- Adjusted Revenues
- Adjusted revenues consistently increased year over year from 183,285 million US dollars in 2020 to 350,970 million in 2024. This steady rise reflects sustained growth in the company's revenue-generating capacity without any intermittent downturns, indicating strong top-line performance across the periods.
- Economic Profit Margin
- The economic profit margin showed substantial variation during the period. Beginning at 10.97% in 2020, it peaked at 20.41% in 2021. The margin then decreased sharply to 8.18% in 2022 before recovering to 12.25% in 2023 and further rising to 17.23% in 2024. Despite the fluctuations, the margin in 2024 remains significantly higher than the initial year, which may point to improved profitability efficiency relative to revenue.
- Overall Insights
- The company experienced notable revenue growth consistently, while economic profit and profit margins showed more variability. The peaks in economic profit and margin in 2021 suggest an exceptional performance that year, with a subsequent correction and gradual recovery. By 2024, both economic profit and margin exhibit strong improvements, implying enhanced operational profitability alongside growing revenues. The data reflects both growth opportunities and periods of adjustment in profitability performance over time.