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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Cadence Design Systems Inc. pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Analysis of Debt
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Economic Profit
Cadence Design Systems Inc., economic profit calculation
US$ in thousands
| 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT has shown a consistent upward trend from 2020 through 2024. It increased from approximately 708 million USD in 2020 to over 1 billion USD in 2023 and further to approximately 1.03 billion USD in 2024. This steady growth indicates improving operational profitability over the analyzed periods.
- Cost of Capital
- The cost of capital remained relatively stable over the five years, fluctuating minimally around 15%. It started at 15.1% in 2020, showed a slight decrease to 14.85% in 2024, indicating some improvement in the company’s capital efficiency or market conditions reducing the cost of financing.
- Invested Capital
- Invested capital displayed a significant upward trajectory, especially in the most recent year. It grew steadily from approximately 2.83 billion USD in 2020 to about 4.06 billion USD in 2023, followed by a sharp rise to over 7.25 billion USD in 2024. This suggests increased resource deployment or expansion activities within the company in the latest period.
- Economic Profit
- Economic profit increased from 281 million USD in 2020 to a peak of 387 million USD in 2023 indicating value creation above the cost of capital. However, in 2024, there was a notable decline, resulting in a negative economic profit of approximately 42 million USD. This reversal implies that although profits grew, the substantial increase in invested capital adversely affected the company’s economic value added, indicating potential overinvestment or reduced efficiency in capital deployment in 2024.
Net Operating Profit after Taxes (NOPAT)
Cadence Design Systems Inc., NOPAT calculation
US$ in thousands
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 doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in restructuring plans balance.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
The financial data reveals an upward trend in both net income and net operating profit after taxes (NOPAT) over the five-year period ending December 31, 2024. Both metrics demonstrate consistent growth year over year, reflecting improved profitability and operational efficiency.
- Net Income
- The net income exhibits a steady increase from 590,644 thousand US dollars in 2020 to 1,055,484 thousand US dollars in 2024. This represents an overall growth of approximately 79% over the period. The growth appears to accelerate from 2021 onwards, with a notable jump between 2021 and 2023, showing the company's enhanced ability to generate profits from its operations.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also shows consistent growth, starting at 708,432 thousand US dollars in 2020 and increasing to 1,034,183 thousand US dollars by the end of 2024. This upward trajectory indicates an improvement in core operating performance after accounting for taxes, rising approximately 46% over the five-year span. The growth pattern aligns closely with the net income trend, suggesting strong operational management and control over tax expenses.
Overall, the data suggests significant positive momentum in profitability and operational efficiency. Both net income and NOPAT have grown at a robust pace, highlighting sustained financial health and effective management strategies contributing to the company’s expanding earnings profile.
Cash Operating Taxes
Cadence Design Systems Inc., cash operating taxes calculation
US$ in thousands
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).
- Provision for Income Taxes
- Over the five-year period, there is a notable upward trend in the provision for income taxes, increasing substantially from 42,104 thousand US dollars in 2020 to 340,335 thousand US dollars in 2024. This represents more than an eightfold increase. The most significant year-over-year increases occur between 2021 and 2022, and then between 2023 and 2024, indicating rising tax liabilities or changes in taxable income levels.
- Cash Operating Taxes
- Cash operating taxes have similarly shown a considerable increase, rising from 72,956 thousand US dollars in 2020 to 473,174 thousand US dollars in 2024. Notably, there was an exceptional spike between 2023 and 2024, with cash taxes paid increasing by approximately 69%. The variance between provision for income taxes and cash operating taxes remains evident, especially in years 2022 and 2024, suggesting timing differences, adjustments, or cash flow implications related to tax settlements.
- Overall Tax Trends
- Both the provision for income taxes and cash operating taxes exhibit strong growth trajectories, with cash operating taxes consistently higher than provisions, implying the company is possibly managing tax payments in a way that impacts cash flow distinctly from reported tax expense. The escalating tax figures may reflect increasing profitability, changes in tax legislation, or other fiscal factors influencing tax obligations over time.
Invested Capital
Cadence Design Systems Inc., invested capital calculation (financing approach)
US$ in thousands
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 restructuring plans balance.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of in-process capital assets.
9 Subtraction of short-term investments.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate an overall increasing trend over the five-year period. Initially, debt and leases decreased slightly from 494,629 thousand USD in 2020 to 479,980 thousand USD in 2021. However, in the subsequent years, the figure rose significantly, particularly between 2021 and 2022, jumping to 924,152 thousand USD. This was followed by a moderate decrease to 806,033 thousand USD in 2023. A sharp increase occurred again in 2024, reaching 2,626,630 thousand USD, nearly tripling the previous year’s amount. This pattern indicates significant fluctuations in the company's leverage, with a marked increase in obligations by the end of the period.
- Stockholders' Equity
- Stockholders' equity shows a consistent upward trajectory throughout the period. Starting at 2,493,018 thousand USD in 2020, it increased steadily each year, reaching 2,740,675 thousand USD in 2021, and maintaining a similar level in 2022 at 2,745,113 thousand USD. The equity then rose substantially in 2023 to 3,404,271 thousand USD and continued this growth trend, climbing to 4,673,578 thousand USD in 2024. This consistent increase suggests a strengthening equity base and possibly improved retention of earnings or fresh equity infusion over time.
- Invested Capital
- The invested capital exhibits a robust growth trend over the reported years, rising from 2,827,971 thousand USD in 2020 to 3,138,367 thousand USD in 2021. The upward momentum accelerates in the following years with invested capital reaching 3,680,162 thousand USD in 2022 and further increasing to 4,056,689 thousand USD in 2023. The most significant jump occurs between 2023 and 2024, where it almost doubles to 7,246,546 thousand USD. This indicates a substantial increase in the company's total capital employed, reflecting either expansion activities or considerable investment initiatives.
Cost of Capital
Cadence Design Systems Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cadence Design Systems 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Fair Isaac Corp. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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
- The economic profit showed an increasing trend from 2020 through 2023, rising from 281,456 thousand US dollars in 2020 to a peak of 386,553 thousand US dollars in 2023, indicating improving profitability during this period. However, in 2024, there was a significant decline resulting in a negative economic profit of -42,264 thousand US dollars, signaling a substantial downturn in value creation for that year.
- Invested Capital
- Invested capital increased steadily year-over-year from 2,827,971 thousand US dollars in 2020 to 4,056,689 thousand US dollars in 2023, reflecting ongoing capital deployment and asset growth. In 2024, invested capital saw a sharp rise to 7,246,546 thousand US dollars, nearly doubling the previous year's figure, which may indicate major investments or acquisitions undertaken during that period.
- Economic Spread Ratio
- The economic spread ratio demonstrated a slight downward trend from 9.95% in 2020 to 9.15% in 2021 and further to 8.92% in 2022, suggesting a moderate compression in the return on invested capital relative to the cost of capital. It partially recovered to 9.53% in 2023. However, in 2024, it turned negative to -0.58%, consistent with the negative economic profit and suggesting that the return on invested capital fell below the cost of capital in that year.
Economic Profit Margin
Cadence Design Systems 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 thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Fair Isaac Corp. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed a general upward trend from 2020 to 2023, increasing from 281,456 thousand US dollars in 2020 to 386,553 thousand US dollars in 2023. However, in 2024, there was a significant decline, with the economic profit turning negative and reaching -42,264 thousand US dollars, indicating a considerable deterioration in profitability.
- Adjusted Revenue
- Adjusted revenue consistently increased over the entire period, rising from 2,807,929 thousand US dollars in 2020 to 4,729,890 thousand US dollars in 2024. This reflects a steady growth in the company's top-line performance without any observed downturns or plateaus.
- Economic Profit Margin
- The economic profit margin started at 10.02% in 2020 and experienced a gradual decrease in the following years, dropping to 8.9% by 2022. It slightly recovered to 9.49% in 2023 before sharply declining to a negative margin of -0.89% in 2024. This negative margin aligns with the overall negative economic profit observed that year, signaling reduced efficiency in generating economic value relative to revenue.
- Overall Insight
- The data reveals a pattern of strong revenue growth across the period, but this growth did not consistently translate into increased economic profit or profitability margins. The negative economic profit and margin in 2024 represent a significant deviation from prior years, suggesting either higher costs, investments, or other factors adversely affecting economic returns despite growing sales. Monitoring cost management and the drivers behind the declining profit margin would be critical in addressing this downturn.