Stock Analysis on Net

Amazon.com Inc. (NASDAQ:AMZN)

Economic Value Added (EVA)

Microsoft Excel LibreOffice Calc

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.


Economic Profit

Amazon.com 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 24,183  16,097  13,690  4,698  4,480 
Cost of capital2 12.37% 12.23% 12.17% 12.12% 12.30%
Invested capital3 150,160  127,843  103,096  79,125  43,073 
 
Economic profit4 5,611  466  1,139  (4,889) (817)

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

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
= 24,18312.37% × 150,160 = 5,611

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. Amazon.com Inc. economic profit decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Net Operating Profit after Taxes (NOPAT)

Amazon.com 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 21,331  11,588  10,073  3,033  2,371 
Deferred income tax expense (benefit)1 (554) 796  441  (29) (246)
Increase (decrease) in allowance for doubtful accounts2 382  223  147  111  48 
Increase (decrease) in unearned revenue3 1,418  2,254  1,839  830  1,905 
Increase (decrease) in equity equivalents4 1,246  3,273  2,427  912  1,707 
Interest expense 1,647  1,600  1,417  848  484 
Interest expense, operating lease liability5 977  801  523  507  227 
Adjusted interest expense 2,624  2,401  1,940  1,355  711 
Tax benefit of interest expense6 (551) (504) (407) (474) (249)
Adjusted interest expense, after taxes7 2,073  1,897  1,533  880  462 
(Gain) loss on marketable securities (36) (4)
Interest income (555) (832) (440) (202) (100)
Investment income, before taxes (591) (836) (433) (196) (92)
Tax expense (benefit) of investment income8 124  176  91  69  32 
Investment income, after taxes9 (467) (660) (342) (127) (60)
Net operating profit after taxes (NOPAT) 24,183  16,097  13,690  4,698  4,480 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Elimination of deferred tax expense. See details »

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

3 Addition of increase (decrease) in unearned 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
= 39,099 × 2.50% = 977

6 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 2,624 × 21.00% = 551

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
= 591 × 21.00% = 124

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. Amazon.com Inc. NOPAT increased from 2018 to 2019 and from 2019 to 2020.

Cash Operating Taxes

Amazon.com 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, net 2,863  2,374  1,197  769  1,425 
Less: Deferred income tax expense (benefit) (554) 796  441  (29) (246)
Add: Tax savings from interest expense 551  504  407  474  249 
Less: Tax imposed on investment income 124  176  91  69  32 
Cash operating taxes 3,844  1,907  1,072  1,204  1,888 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

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. Amazon.com Inc. cash operating taxes increased from 2018 to 2019 and from 2019 to 2020.

Invested Capital

Amazon.com 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 lease liabilities, finance leases 10,374  9,884  7,720  5,839  3,997 
Current portion of long-term debt 1,155  1,305  1,371  100  1,056 
Long-term lease liabilities, finance leases, excluding current portion 18,060  17,095  9,650  8,438  5,080 
Long-term debt, excluding current portion 31,816  23,414  23,495  24,743  7,694 
Operating lease liability1 39,099  25,835  23,662  19,712  8,378 
Total reported debt & leases 100,504  77,533  65,898  58,832  26,205 
Stockholders’ equity 93,404  62,060  43,549  27,709  19,285 
Net deferred tax (assets) liabilities2 866  1,321  544  197  (454)
Allowance for doubtful accounts3 1,100  718  495  348  237 
Unearned revenue4 11,608  10,190  7,936  6,097  5,267 
Equity equivalents5 13,574  12,229  8,975  6,642  5,050 
Accumulated other comprehensive (income) loss, net of tax6 180  986  1,035  484  985 
Adjusted stockholders’ equity 107,158  75,275  53,559  34,835  25,320 
Construction in progress7 (15,228) (6,036) (6,861) (4,078) (1,805)
Marketable securities8 (42,274) (18,929) (9,500) (10,464) (6,647)
Invested capital 150,160  127,843  103,096  79,125  43,073 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

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 unearned 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. Amazon.com Inc. invested capital increased from 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Amazon.com Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 1,668,073  1,668,073  ÷ 1,774,230  = 0.94 0.94 × 13.01% = 12.23%
Debt3 67,058  67,058  ÷ 1,774,230  = 0.04 0.04 × 3.06% × (1 – 21.00%) = 0.09%
Operating lease liability4 39,099  39,099  ÷ 1,774,230  = 0.02 0.02 × 2.50% × (1 – 21.00%) = 0.04%
Total: 1,774,230  1.00 12.37%

Based on: 10-K (reporting date: 2020-12-31).

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 999,962  999,962  ÷ 1,080,546  = 0.93 0.93 × 13.01% = 12.04%
Debt3 54,749  54,749  ÷ 1,080,546  = 0.05 0.05 × 3.17% × (1 – 21.00%) = 0.13%
Operating lease liability4 25,835  25,835  ÷ 1,080,546  = 0.02 0.02 × 3.10% × (1 – 21.00%) = 0.06%
Total: 1,080,546  1.00 12.23%

Based on: 10-K (reporting date: 2019-12-31).

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 798,809  798,809  ÷ 864,856  = 0.92 0.92 × 13.01% = 12.02%
Debt3 42,385  42,385  ÷ 864,856  = 0.05 0.05 × 2.80% × (1 – 21.00%) = 0.11%
Operating lease liability4 23,662  23,662  ÷ 864,856  = 0.03 0.03 × 2.21% × (1 – 21.00%) = 0.05%
Total: 864,856  1.00 12.17%

Based on: 10-K (reporting date: 2018-12-31).

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 692,249  692,249  ÷ 752,630  = 0.92 0.92 × 13.01% = 11.97%
Debt3 40,669  40,669  ÷ 752,630  = 0.05 0.05 × 2.99% × (1 – 35.00%) = 0.11%
Operating lease liability4 19,712  19,712  ÷ 752,630  = 0.03 0.03 × 2.57% × (1 – 35.00%) = 0.04%
Total: 752,630  1.00 12.12%

Based on: 10-K (reporting date: 2017-12-31).

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 394,840  394,840  ÷ 421,583  = 0.94 0.94 × 13.01% = 12.19%
Debt3 18,365  18,365  ÷ 421,583  = 0.04 0.04 × 2.73% × (1 – 35.00%) = 0.08%
Operating lease liability4 8,378  8,378  ÷ 421,583  = 0.02 0.02 × 2.71% × (1 – 35.00%) = 0.04%
Total: 421,583  1.00 12.30%

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Amazon.com 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 5,611  466  1,139  (4,889) (817)
Invested capital2 150,160  127,843  103,096  79,125  43,073 
Performance Ratio
Economic spread ratio3 3.74% 0.36% 1.10% -6.18% -1.90%
Benchmarks
Economic Spread Ratio, Competitors4
Booking Holdings Inc. -18.49% 28.78% 44.98% 25.36% 19.79%
Home Depot Inc. 25.09% 25.54% 17.83% 15.61% 13.27%
Lowe’s Cos. Inc. 7.51% 0.20% 3.75% 2.67% 0.72%
Target Corp. 5.60% 5.65% 3.87% 4.87% 3.50%
TJX Cos. Inc. 10.34% 9.65% 7.60% 7.63% 9.55%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,611 ÷ 150,160 = 3.74%

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. Amazon.com Inc. economic spread ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Economic Profit Margin

Amazon.com 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 5,611  466  1,139  (4,889) (817)
 
Net sales 386,064  280,522  232,887  177,866  135,987 
Add: Increase (decrease) in unearned revenue 1,418  2,254  1,839  830  1,905 
Adjusted net sales 387,482  282,776  234,726  178,696  137,892 
Performance Ratio
Economic profit margin2 1.45% 0.16% 0.49% -2.74% -0.59%
Benchmarks
Economic Profit Margin, Competitors3
Booking Holdings Inc. -40.67% 21.36% 22.97% 12.84% 12.21%
Home Depot Inc. 8.33% 8.07% 6.20% 5.67% 5.06%
Lowe’s Cos. Inc. 2.79% 0.07% 1.52% 1.12% 0.30%
Target Corp. 1.98% 1.98% 1.46% 1.90% 1.36%
TJX Cos. Inc. 4.51% 4.20% 3.42% 3.43% 4.16%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 5,611 ÷ 387,482 = 1.45%

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 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. Amazon.com Inc. economic profit margin deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.