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
Cintas Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
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
= 1,624,422 – 20.28% × 7,220,061 = 160,394
The financial trajectory from May 31, 2019, to May 31, 2024, is characterized by a transition from value destruction to consistent value creation. A critical inflection point occurred in 2022, when the company shifted from negative to positive economic profit, indicating that operational returns began to exceed the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- An overall upward trend in NOPAT is observed, increasing from US$ 1,006,907 thousand in 2019 to US$ 1,624,422 thousand in 2024. Aside from a slight contraction in 2020, the growth has been consistent, reflecting a strengthening of operational profitability over the six-year period.
- Cost of Capital and Invested Capital
- The cost of capital has risen steadily from 18.95% in 2019 to 20.28% in 2024, increasing the financial hurdle required to generate economic value. During the same period, invested capital grew from US$ 6,499,367 thousand to US$ 7,220,061 thousand. The simultaneous increase in both the capital base and the cost of that capital indicates a more challenging environment for achieving positive economic profit.
- Economic Profit Evolution
- Economic profit remained negative between 2019 and 2021, reaching a low of -US$ 280,765 thousand in 2020. A reversal occurred in May 2022, with economic profit turning positive at US$ 64,940 thousand. This positive momentum accelerated through 2023 and 2024, culminating in an economic profit of US$ 160,394 thousand. This progression demonstrates that the growth in NOPAT has sufficiently outpaced the rising costs associated with the invested capital base.
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Net Operating Profit after Taxes (NOPAT)
Cintas Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 192,551 × 3.48% = 6,701
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 107,441 × 21.00% = 22,563
6 Addition of after taxes interest expense to net income.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 5,742 × 21.00% = 1,206
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
The financial data reveals notable trends in profitability over the six-year period ending May 31, 2024. Both net income and net operating profit after taxes (NOPAT) demonstrate consistent growth, indicating strengthening financial performance.
- Net Income Trends
- Net income experienced minor fluctuations in the early years, with a slight decrease from 884,981 thousand USD in 2019 to 876,037 thousand USD in 2020. From 2020 onwards, net income shows a steady upward trajectory, increasing annually to reach 1,571,592 thousand USD by 2024. This upward trend suggests successful operational and revenue enhancements that have contributed to improved bottom-line results.
- NOPAT Trends
- NOPAT follows a similar pattern but with more pronounced growth. After a slight dip from 1,006,907 thousand USD in 2019 to 973,389 thousand USD in 2020, NOPAT increased significantly each year thereafter, culminating at 1,624,422 thousand USD in 2024. The stronger growth in NOPAT compared to net income may reflect efficiency improvements, effective tax management, or a focus on after-tax operating profitability.
- Comparative Insights
- Over the period analyzed, the gap between NOPAT and net income widened, indicating that operating profitability net of taxes is improving at a faster rate than net income alone. This could suggest improved operational efficiency or changes in financial structure affecting income components outside operating results.
- Overall Pattern
- The data illustrates resilience and gradually accelerating profitability growth following 2020, which may correspond with recovery or strategic initiatives undertaken by the company. The consistent upward movement in these key profitability metrics over multiple years points toward a robust and improving financial profile.
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Cash Operating Taxes
Cintas Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
The financial data demonstrates a noticeable upward trend in income tax expense over the six-year period. Starting at approximately $220 million in 2019, the tax expense decreased slightly in the following two years, reaching a low point of around $177 million in 2021. From 2021 onwards, however, there is a significant increase, peaking at just over $400 million in 2024. This reflects a substantial rise in tax obligations in the most recent years.
Similarly, cash operating taxes exhibit a consistent increase throughout the period. Beginning at about $208 million in 2019, the cash operating taxes experienced a progressive growth, with a minor dip in 2022 around $231 million, followed by a sharp rise in subsequent years. By 2024, cash operating taxes peaked at approximately $454 million, more than doubling the starting figure.
- Income Tax Expense
- Initial decline from 2019 to 2021, followed by a strong upward trajectory through 2024.
- Cash Operating Taxes
- Consistent growth with a slight fluctuation in 2022, culminating in a substantial increase by 2024.
- Overall Trends
- Both income tax expense and cash operating taxes show marked increases over the analyzed period, especially from 2021 onward, indicating rising tax burdens which may reflect higher taxable income or changes in tax rates or regulations.
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Invested Capital
Cintas Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
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 equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
The financial data over the six-year period reveals several notable trends in the company's capital structure and financial position.
- Total reported debt & leases
- Debt levels exhibit some fluctuations but generally show a decreasing trend from 2019 through 2024. The total reported debt decreased from approximately $3.05 billion in 2019 to around $2.67 billion in 2024, with the highest value observed in 2019 and a notable decline by 2020. Debt levels increased slightly during 2021 and 2022 but again decreased in subsequent years.
- Shareholders’ equity
- Shareholders’ equity increases consistently over the period, reflecting growth in net assets attributable to shareholders. It rose from about $3.00 billion in 2019 to approximately $4.32 billion in 2024, with a significant rise between 2019 and 2021, followed by some variability but an overall upward trajectory through to 2024. This suggests strengthening financial stability and retained earnings growth.
- Invested capital
- The invested capital, representing the total amount of capital invested in the company's operations, experiences moderate growth. Starting at roughly $6.50 billion in 2019, it remains relatively stable through 2020 but then steadily increases to about $7.22 billion by 2024. This gradual growth indicates continued investment in business assets or operations, supporting expansion or enhancement efforts.
Overall, the data indicates that the company has been managing its debt prudently while enhancing its equity base and overall capital investment. This pattern implies a strengthening balance sheet and potentially a lower financial risk profile over the analyzed period.
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Cost of Capital
Cintas Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 76,064,420) | 76,064,420) | ÷ | 78,649,771) | = | 0.97 | 0.97 | × | 20.86% | = | 20.17% | ||
| Debt3 | 2,392,800) | 2,392,800) | ÷ | 78,649,771) | = | 0.03 | 0.03 | × | 4.00% × (1 – 21.00%) | = | 0.10% | ||
| Operating lease liability4 | 192,551) | 192,551) | ÷ | 78,649,771) | = | 0.00 | 0.00 | × | 3.48% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 78,649,771) | 1.00 | 20.28% | ||||||||||
Based on: 10-K (reporting date: 2024-05-31).
1 US$ 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 | 51,334,724) | 51,334,724) | ÷ | 53,960,512) | = | 0.95 | 0.95 | × | 20.86% | = | 19.84% | ||
| Debt3 | 2,443,800) | 2,443,800) | ÷ | 53,960,512) | = | 0.05 | 0.05 | × | 4.00% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 181,988) | 181,988) | ÷ | 53,960,512) | = | 0.00 | 0.00 | × | 2.87% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 53,960,512) | 1.00 | 20.00% | ||||||||||
Based on: 10-K (reporting date: 2023-05-31).
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 | 41,410,212) | 41,410,212) | ÷ | 44,445,348) | = | 0.93 | 0.93 | × | 20.86% | = | 19.44% | ||
| Debt3 | 2,862,200) | 2,862,200) | ÷ | 44,445,348) | = | 0.06 | 0.06 | × | 3.70% × (1 – 21.00%) | = | 0.19% | ||
| Operating lease liability4 | 172,936) | 172,936) | ÷ | 44,445,348) | = | 0.00 | 0.00 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 44,445,348) | 1.00 | 19.63% | ||||||||||
Based on: 10-K (reporting date: 2022-05-31).
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 | 40,194,294) | 40,194,294) | ÷ | 43,157,718) | = | 0.93 | 0.93 | × | 20.86% | = | 19.43% | ||
| Debt3 | 2,788,800) | 2,788,800) | ÷ | 43,157,718) | = | 0.06 | 0.06 | × | 3.80% × (1 – 21.00%) | = | 0.19% | ||
| Operating lease liability4 | 174,624) | 174,624) | ÷ | 43,157,718) | = | 0.00 | 0.00 | × | 2.32% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,157,718) | 1.00 | 19.63% | ||||||||||
Based on: 10-K (reporting date: 2021-05-31).
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 | 31,649,998) | 31,649,998) | ÷ | 34,619,924) | = | 0.91 | 0.91 | × | 20.86% | = | 19.07% | ||
| Debt3 | 2,804,200) | 2,804,200) | ÷ | 34,619,924) | = | 0.08 | 0.08 | × | 3.80% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 165,726) | 165,726) | ÷ | 34,619,924) | = | 0.00 | 0.00 | × | 2.66% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 34,619,924) | 1.00 | 19.32% | ||||||||||
Based on: 10-K (reporting date: 2020-05-31).
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 | 26,818,808) | 26,818,808) | ÷ | 30,016,373) | = | 0.89 | 0.89 | × | 20.86% | = | 18.64% | ||
| Debt3 | 2,998,700) | 2,998,700) | ÷ | 30,016,373) | = | 0.10 | 0.10 | × | 3.70% × (1 – 21.00%) | = | 0.29% | ||
| Operating lease liability4 | 198,864) | 198,864) | ÷ | 30,016,373) | = | 0.01 | 0.01 | × | 3.70% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 30,016,373) | 1.00 | 18.95% | ||||||||||
Based on: 10-K (reporting date: 2019-05-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cintas Corp., economic spread ratio calculation
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 160,394 ÷ 7,220,061 = 2.22%
The financial performance over the analyzed six-year period demonstrates a significant transition from value destruction to consistent value creation. A critical inflection point occurred between 2021 and 2022, marking a shift toward positive economic returns and improved capital efficiency.
- Economic Profit Trends
- Economic profit exhibited a period of negative returns from 2019 to 2021, reaching a low of negative 280.8 million US dollars in 2020. A recovery phase began in 2021, leading to a pivot into positive territory in 2022 with a profit of 64.9 million US dollars. This upward trajectory continued through 2024, with economic profit rising to 160.4 million US dollars, signaling a strengthened ability to generate returns exceeding the cost of capital.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2019 and 2022, fluctuating within a narrow band between 6.49 billion and 6.74 billion US dollars. Beginning in 2023, a consistent increase in the capital base is observed, reaching 7.22 billion US dollars by May 31, 2024. The fact that economic profit grew while the capital base expanded indicates that the additional investments were accretive to the company's overall value.
- Economic Spread Ratio Performance
- The economic spread ratio mirrors the trend seen in economic profit, serving as a key indicator of value creation efficiency. The ratio was negative from 2019 through 2021, dipping to -4.33% in 2020, which indicates that the return on invested capital was below the cost of capital during this period. The ratio transitioned to a positive 0.98% in 2022 and expanded steadily to 2.22% by 2024. This progressive increase in the spread highlights an improving margin of excess return, reflecting enhanced operational productivity and financial performance.
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Economic Profit Margin
Cintas Corp., economic profit margin calculation
Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × 160,394 ÷ 9,596,615 = 1.67%
A significant financial turnaround is observed over the six-year period ending May 31, 2024, characterized by a transition from consistent value destruction to sustained value creation. The period is marked by a recovery from negative economic profit levels starting in 2020, culminating in a positive trend that accelerated through 2024.
- Economic Profit Trajectory
- Economic profit remained negative between 2019 and 2021, reaching a trough of negative 280.77 million USD in 2020. A pivotal shift occurred in 2022, when the metric turned positive at 64.94 million USD. This upward momentum continued through 2023 and 2024, with the final year showing a peak economic profit of 160.39 million USD, indicating that the entity is now generating returns in excess of its cost of capital.
- Revenue Growth Patterns
- Revenue exhibited a consistent upward trend throughout the analyzed timeframe. Starting at 6.89 billion USD in 2019, revenue grew steadily to 9.60 billion USD by 2024. While revenue increased even during the years of negative economic profit, the scale of growth accelerated after 2021, aligning with the transition toward positive economic value added.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the trajectory of the absolute economic profit, reflecting an improvement in capital efficiency. The margin declined to a low of negative 3.96% in 2020 before beginning a steady ascent. The transition to a positive margin occurred in 2022 at 0.83%, followed by further expansion to 1.09% in 2023 and 1.67% in 2024. This trend demonstrates a progressive increase in the ability to generate economic surplus relative to total revenue.
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