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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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Analog Devices Inc. pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Economic Profit
12 months ended: | Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | Nov 2, 2019 | |
---|---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | |||||||
Cost of capital2 | |||||||
Invested capital3 | |||||||
Economic profit4 |
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
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
= – × =
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in accrued special charges.
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 over the six-year period reveal significant fluctuations in the company's profitability metrics, specifically net income and net operating profit after taxes (NOPAT).
- Net Income Trend
- Net income started at approximately 1.36 billion US dollars in 2019, then experienced a decline in 2020 to about 1.22 billion US dollars. It recovered in 2021, increasing to nearly 1.39 billion US dollars, followed by a notable surge in 2022 with net income nearly doubling to approximately 2.75 billion US dollars. This upward momentum continued into 2023, reaching the highest value of around 3.31 billion US dollars. However, in 2024, net income sharply declined to about 1.64 billion US dollars, representing a significant drop compared to the prior two years.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT mirrored similar fluctuations with figures beginning at about 1.51 billion US dollars in 2019. This value decreased consecutively over the next two years to approximately 1.27 billion in 2020 and further down to 1.12 billion in 2021. Then, a dramatic increase occurred in 2022 with NOPAT more than doubling to roughly 2.59 billion US dollars, followed by a further peak at around 3.14 billion US dollars in 2023. In 2024, the metric fell sharply to approximately 1.34 billion US dollars, indicating a considerable reduction in operating profitability compared to the two preceding years.
- Overall Insights
- The data suggest a strong recovery and growth in both net income and NOPAT starting in 2021 through 2023, pointing to improved operational and financial performance during that period. However, the pronounced decline in 2024 highlights potential challenges or one-time events adversely impacting profitability. The parallel movement in net income and NOPAT indicates consistent operating efficiency and tax impact trends as drivers of net profitability throughout these years.
Cash Operating Taxes
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
- Provision for (benefit from) income tax
- The provision for income tax exhibits significant variability including a notable negative value in 2021, which indicates a tax benefit during that year. Specifically, the provision decreased from approximately 122.7 million US dollars in 2019 to 90.9 million in 2020, followed by a drop to -61.7 million in 2021. Subsequently, there was a substantial increase in 2022 to 350.2 million, marking a reversal from the tax benefit to a large tax provision. The provision then decreased to 293.4 million in 2023 and further to 142.1 million in 2024. This pattern indicates volatility in the tax provision, potentially driven by changes in taxable income, tax rates, or tax planning strategies over the years.
- Cash operating taxes
- Cash operating taxes have shown a consistent upward trend from 2019 through 2023. Starting at 262.7 million US dollars in 2019, cash taxes slightly declined to 246.6 million in 2020, but thereafter increased significantly to 385.9 million in 2021. The upward trend continued in 2022, reaching 720.3 million, nearly doubling the prior year's amount. The growth decelerated somewhat but continued to rise, reaching 796.5 million in 2023. However, in 2024, cash operating taxes fell to 563.8 million, indicating a notable reduction compared to the previous two years. This pattern suggests increased cash tax outflows over the majority of the period with a notable decline in the latest year, possibly reflecting changes in operational profitability, tax credits, or tax payment timing.
Invested Capital
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
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 accrued special charges.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of short-term investments.
- Total reported debt & leases
- The total reported debt and leases exhibit an overall increasing trend over the observed periods. Starting at approximately 5.87 billion in 2019, the amount decreased slightly to about 5.47 billion in 2020, then rose sharply to reach a peak of 7.12 billion in 2021. Subsequently, the debt level fluctuated but generally increased, ending at roughly 7.97 billion in 2024. This pattern indicates a growing reliance on debt financing or leases, particularly noticeable with the significant jump between 2020 and 2021, and continued increases thereafter.
- Shareholders’ equity
- Shareholders' equity shows considerable growth from 11.71 billion in 2019 to a substantial rise reaching nearly 38 billion in 2021, more than tripling from the initial value. After 2021, equity values slightly declined but remained relatively stable in the 35 to 36 billion range through to 2024. The considerable increase between 2020 and 2021 suggests significant equity injections or retained earnings accumulation, followed by a moderate correction or stabilization in subsequent years.
- Invested capital
- Invested capital mirrors the pattern observed in shareholders’ equity, starting near 18.35 billion in 2019 and holding steady through 2020. It then undergoes a sharp increase to over 47 billion in 2021, corresponding to the surge in equity, before gradually decreasing over the following years to approximately 43.52 billion by 2024. This trajectory suggests major investments or acquisitions occurring around 2021, with a slight reduction or optimization of capital employed in later periods.
Cost of Capital
Analog Devices Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2024-11-02).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2023-10-28).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2022-10-29).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2021-10-30).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2020-10-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2019-11-02).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | Nov 2, 2019 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Economic profit1 | |||||||
Invested capital2 | |||||||
Performance Ratio | |||||||
Economic spread ratio3 | |||||||
Benchmarks | |||||||
Economic Spread Ratio, Competitors4 | |||||||
Advanced Micro Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Broadcom Inc. | |||||||
Intel Corp. | |||||||
KLA Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Qualcomm Inc. | |||||||
Texas Instruments Inc. |
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
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 Margin
Nov 2, 2024 | Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | Nov 2, 2019 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | |||||||
Economic profit1 | |||||||
Revenue | |||||||
Performance Ratio | |||||||
Economic profit margin2 | |||||||
Benchmarks | |||||||
Economic Profit Margin, Competitors3 | |||||||
Advanced Micro Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Broadcom Inc. | |||||||
Intel Corp. | |||||||
KLA Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Qualcomm Inc. | |||||||
Texas Instruments Inc. |
Based on: 10-K (reporting date: 2024-11-02), 10-K (reporting date: 2023-10-28), 10-K (reporting date: 2022-10-29), 10-K (reporting date: 2021-10-30), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-11-02).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.