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.
Economic Profit
Celgene Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,676 – 17.74% × 27,773 = -252
An analysis of the economic performance from 2014 to 2018 reveals a consistent failure to generate positive economic profit, although a significant recovery trend emerged in the final year of the period. The organization operated with a negative economic value added (EVA) throughout the five-year window, indicating that the net operating profit after taxes (NOPAT) was insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability remained relatively stagnant between 2014 and 2017, fluctuating within a narrow range of 1,787 million to 1,954 million US dollars. However, a substantial increase occurred in 2018, where NOPAT rose to 4,676 million US dollars, representing a growth of approximately 144% over the previous year.
- Invested Capital and Cost of Capital
- Invested capital experienced aggressive growth, nearly tripling from 9,844 million US dollars in 2014 to 27,773 million US dollars by 2018. A sharp increase is particularly noted between 2014 and 2015, where capital nearly doubled. Concurrently, the cost of capital exhibited a steady downward trend, decreasing from 20.97% in 2014 to 17.74% in 2018, suggesting a reduction in the weighted average cost of financing over time.
- Economic Profit Trends
- Economic profit remained negative across the entire duration. The deficit widened sharply in 2015, dropping from -238 million US dollars to -1,697 million US dollars, driven primarily by the massive expansion of the invested capital base without a corresponding immediate increase in NOPAT. This negative trend persisted through 2017. By 2018, the economic profit improved significantly to -252 million US dollars, as the surge in operating profit and the declining cost of capital began to offset the capital charges associated with the expanded asset base.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Celgene Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
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 equity equivalents to net income.
5 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 375 × 3.82% = 14
6 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 755 × 21.00% = 159
7 Addition of after taxes interest expense to net income.
8 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 45 × 21.00% = 9
9 Elimination of after taxes investment income.
The financial trajectory from 2014 to 2018 reflects a period of significant expansion in profitability, characterized by a marked acceleration in operating performance during the final year of the observed period.
- Net Income Trends
- Net income exhibited moderate volatility between 2014 and 2016, declining to US$ 1,602 million in 2015 before recovering. From 2016 onward, a consistent and accelerating growth trend is observed, culminating in a peak of US$ 4,046 million in 2018, representing a substantial increase over the five-year span.
- NOPAT Performance
- Net operating profit after taxes remained relatively stagnant between 2014 and 2017, fluctuating within a narrow range between US$ 1,787 million and US$ 1,954 million. However, a sharp inflection point occurred in 2018, where NOPAT surged to US$ 4,676 million, indicating a significant improvement in core operational efficiency and profitability.
- Comparative Analysis
- Throughout the 2014 to 2017 period, net income generally exceeded NOPAT, suggesting that non-operating items or financing structures influenced the final net earnings. By 2018, this relationship inverted; NOPAT surpassed net income by US$ 630 million, indicating that operational performance became the primary driver of value creation, while non-operating expenses or tax adjustments may have impacted the net income figure.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
Celgene Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The tax expenditure profile from 2014 to 2018 is characterized by significant volatility, with a pronounced peak occurring in the 2017 fiscal year. A consistent discrepancy is observed between the accrual-based tax provisions and the actual cash outflows for operating taxes throughout the analyzed period.
- Provision for Taxes on Income
- The provision for taxes on income remained relatively stable between 2014 and 2016, fluctuating between 328 million and 422 million US dollars. A substantial increase occurred in 2017, where the provision rose to 1,374 million US dollars, marking the period's peak. This was followed by a contraction to 786 million US dollars in 2018, although this value remained elevated compared to the 2014-2016 baseline.
- Cash Operating Taxes
- Cash operating taxes followed a similar trajectory but at a significantly higher magnitude. After a slight decrease in 2015, cash taxes grew from 884 million US dollars in 2016 to a peak of 2,853 million US dollars in 2017. In 2018, cash taxes experienced a sharp decline to 903 million US dollars, nearly returning to the levels observed in 2016.
- Variance Analysis
- Cash operating taxes consistently exceeded the provision for taxes on income across all five years. This gap was most extreme in 2017, when cash tax payments were more than double the reported provision. Such a pattern indicates significant timing differences between tax accounting and actual cash settlements, which directly impacts the calculation of economic value added by increasing the cash tax burden relative to the reported income tax expense.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
Celgene Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
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 construction in progress.
8 Subtraction of debt securities available-for-sale and equity investments with readily determinable fair values.
The company experienced a substantial increase in its invested capital base between 2014 and 2018, rising from US$ 9,844 million to US$ 27,773 million. This growth indicates a significant expansion in the total capital deployed to generate economic value over the five-year period.
- Debt and Lease Obligations
- A consistent upward trend is observed in total reported debt and leases, which grew from US$ 7,068 million in 2014 to US$ 20,645 million by 2018. The most significant surge occurred between 2014 and 2015, during which debt levels more than doubled, followed by a steady climb in subsequent years.
- Stockholders' Equity
- Stockholders' equity remained relatively stagnant and displayed volatility throughout the analyzed period. After a decline in 2015 to US$ 5,919 million, the value peaked in 2017 at US$ 6,921 million before decreasing again to US$ 6,161 million in 2018. This suggests that equity contributions did not provide a meaningful driver for the expansion of the capital base.
- Composition of Invested Capital
- The increase in invested capital is primarily attributable to the accumulation of debt rather than equity infusions. By 2018, total reported debt and leases constituted the vast majority of the invested capital, reflecting a strategic shift toward a more leveraged capital structure to fund corporate activities.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
Celgene Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 62,991) | 62,991) | ÷ | 82,667) | = | 0.76 | 0.76 | × | 22.34% | = | 17.03% | ||
| Debt3 | 19,300) | 19,300) | ÷ | 82,667) | = | 0.23 | 0.23 | × | 3.82% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 375) | 375) | ÷ | 82,667) | = | 0.00 | 0.00 | × | 3.82% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 82,667) | 1.00 | 17.74% | ||||||||||
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 | 71,577) | 71,577) | ÷ | 88,387) | = | 0.81 | 0.81 | × | 22.34% | = | 18.09% | ||
| Debt3 | 16,600) | 16,600) | ÷ | 88,387) | = | 0.19 | 0.19 | × | 3.82% × (1 – 35.00%) | = | 0.47% | ||
| Operating lease liability4 | 209) | 209) | ÷ | 88,387) | = | 0.00 | 0.00 | × | 3.82% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 88,387) | 1.00 | 18.57% | ||||||||||
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 | 89,941) | 89,941) | ÷ | 104,703) | = | 0.86 | 0.86 | × | 22.34% | = | 19.19% | ||
| Debt3 | 14,572) | 14,572) | ÷ | 104,703) | = | 0.14 | 0.14 | × | 3.68% × (1 – 35.00%) | = | 0.33% | ||
| Operating lease liability4 | 191) | 191) | ÷ | 104,703) | = | 0.00 | 0.00 | × | 3.68% × (1 – 35.00%) | = | 0.00% | ||
| Total: | 104,703) | 1.00 | 19.53% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 77,846) | 77,846) | ÷ | 92,351) | = | 0.84 | 0.84 | × | 22.34% | = | 18.83% | ||
| Debt3 | 14,299) | 14,299) | ÷ | 92,351) | = | 0.15 | 0.15 | × | 3.68% × (1 – 35.00%) | = | 0.37% | ||
| Operating lease liability4 | 206) | 206) | ÷ | 92,351) | = | 0.00 | 0.00 | × | 3.68% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 92,351) | 1.00 | 19.21% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
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 | 98,817) | 98,817) | ÷ | 106,101) | = | 0.93 | 0.93 | × | 22.34% | = | 20.81% | ||
| Debt3 | 7,088) | 7,088) | ÷ | 106,101) | = | 0.07 | 0.07 | × | 3.51% × (1 – 35.00%) | = | 0.15% | ||
| Operating lease liability4 | 197) | 197) | ÷ | 106,101) | = | 0.00 | 0.00 | × | 3.51% × (1 – 35.00%) | = | 0.00% | ||
| Total: | 106,101) | 1.00 | 20.97% | ||||||||||
Based on: 10-K (reporting date: 2014-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Celgene Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (252) | (1,588) | (1,692) | (1,697) | (238) | |
| Invested capital2 | 27,773) | 18,857) | 18,672) | 18,136) | 9,844) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -0.91% | -8.42% | -9.06% | -9.36% | -2.42% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -252 ÷ 27,773 = -0.91%
4 Click competitor name to see calculations.
The analysis of economic value added indicates a period of sustained negative economic profit between 2014 and 2018, although a significant recovery trend emerged toward the end of the period.
- Economic Profit
- Economic profit remained negative throughout the five-year period, signaling that returns did not exceed the cost of capital. A substantial decline occurred between 2014 and 2015, with losses expanding from -238 million to -1,697 million. This level of deficit remained relatively stable through 2017 before a marked recovery occurred in 2018, where the negative value narrowed to -252 million.
- Invested Capital
- Invested capital exhibited significant growth, increasing from 9,844 million in 2014 to 27,773 million by 2018. The most pronounced expansions were observed in 2015 and 2018, indicating substantial capital deployment or asset acquisition during these intervals.
- Economic Spread Ratio
- The economic spread ratio followed a trajectory of initial deterioration followed by a steady recovery. After shifting from -2.42% in 2014 to a low of -9.36% in 2015, the ratio improved incrementally over the subsequent three years. By December 31, 2018, the ratio reached -0.91%, reflecting a near-neutralization of the spread between the return on invested capital and the cost of capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Economic Profit Margin
Celgene Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (252) | (1,588) | (1,692) | (1,697) | (238) | |
| Net product sales | 15,265) | 12,973) | 11,185) | 9,161) | 7,564) | |
| Add: Increase (decrease) in deferred revenue | 37) | 26) | (8) | 34) | 5) | |
| Adjusted net product sales | 15,302) | 12,999) | 11,177) | 9,195) | 7,569) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.65% | -12.22% | -15.14% | -18.45% | -3.15% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 Economic profit. See details »
2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net product sales
= 100 × -252 ÷ 15,302 = -1.65%
3 Click competitor name to see calculations.
The financial performance from 2014 to 2018 is characterized by a stark divergence between consistent revenue growth and the ability to generate positive economic value. While sales increased steadily, the organization consistently operated with a negative economic profit, although a significant recovery trend emerged toward the end of the period.
- Adjusted Net Product Sales
- A consistent upward trajectory is observed in sales, which grew from 7,569 million US$ in 2014 to 15,302 million US$ in 2018. This represents a sustained expansion of the top line over the five-year duration.
- Economic Profit
- Economic profit remained negative throughout the entire period, indicating that the entity did not generate returns in excess of its cost of capital. A sharp decline occurred between 2014 and 2015, where the deficit widened from 238 million US$ to 1,697 million US$. After remaining relatively stagnant through 2017, a substantial recovery was recorded in 2018, with the deficit narrowing to 252 million US$.
- Economic Profit Margin
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin plummeted from -3.15% in 2014 to a low of -18.45% in 2015. From 2016 onward, a steady improvement is evident, with the margin narrowing to -15.14% in 2016, -12.22% in 2017, and finally reaching -1.65% in 2018. This trend suggests an increasing efficiency in capital utilization or an improvement in operational profitability relative to the cost of capital as the period concluded.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?