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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- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Cisco Systems Inc., economic profit calculation
US$ in millions
| 12 months ended: | Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | Jul 25, 2020 | Jul 27, 2019 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
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
= – × =
The analysis of annual financial data reveals several noteworthy trends and changes over the examined periods.
- Net Operating Profit After Taxes (NOPAT)
- There is an overall increase in NOPAT from 9,686 million USD in 2019 to a peak of 12,636 million USD in 2023, followed by a slight decline to 12,178 million USD in 2024. The peak in 2023 represents the highest profitability observed during the period, indicating improved operational efficiency or revenue performance before experiencing a moderate reduction.
- Cost of Capital
- The cost of capital shows an upward trend from 12.27% in 2019 to 13.17% in 2023, indicating an increasing expected return rate by investors or rising funding costs. However, in 2024, there is a notable decrease to 12.21%, which may reflect changes in market conditions, risk assessments, or capital structure adjustments.
- Invested Capital
- Invested capital remains relatively stable from 2019 to 2023, ranging between approximately 53,000 and 59,000 million USD. However, there is a significant increase to 91,785 million USD in 2024, marking a substantial deployment of capital or asset base expansion. This sharp rise suggests major investments, acquisitions, or changes in financing strategy.
- Economic Profit
- Economic profit shows a large increase from 3,123 million USD in 2019 to a peak of 6,219 million USD in 2020, followed by a decline through 2021 (4,248 million USD) and fluctuating around the mid-4,800 million USD mark in 2022 and 2023. There is a sharp drop to 969 million USD in 2024. This trend indicates that although the company improved its value creation initially, its economic profit weakened significantly in the latest period, despite higher invested capital, possibly due to lower relative returns or increased capital costs.
In summary, the company experienced growth in profitability and capital efficiency in the earlier years, alongside a rising cost of capital. The substantial increase in invested capital in 2024 did not correspond to proportional increases in economic profit, reflecting challenges in generating returns exceeding the cost of capital in that year. This suggests a need for evaluation of investment effectiveness and capital allocation strategies.
Net Operating Profit after Taxes (NOPAT)
Cisco Systems Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit loss.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in restructuring liability.
6 Addition of increase (decrease) in equity equivalents to net income.
7 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income.
10 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
- Net Income
- Net income demonstrates a fluctuating pattern over the six-year period. It starts at 11,621 million USD in 2019, experiencing a slight decrease to 11,214 million USD in 2020. The downward trend continues in 2021, reaching a low of 10,591 million USD. However, there is a recovery in 2022 and 2023, with net income increasing to 11,812 million USD and 12,613 million USD respectively. In 2024, net income declines significantly to 10,320 million USD.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a trend distinct from net income, initially increasing from 9,686 million USD in 2019 to a peak of 12,905 million USD in 2020. It then declines to 11,686 million USD in 2021 but rebounds to 12,468 million USD in 2022. Following this, NOPAT remains relatively stable with a slight increase to 12,636 million USD in 2023 before decreasing to 12,178 million USD in 2024. Overall, NOPAT exhibits more resilience compared to net income, maintaining higher levels throughout most periods.
- Comparative Insights
- While net income declines sharply in the final year, NOPAT shows only a moderate reduction, indicating possible differences in operating performance versus overall profitability. The divergence suggests potential factors such as variations in non-operating items, tax impacts, or extraordinary items influencing net income more than operational profitability. The stability and higher levels of NOPAT relative to net income during several years point to consistent operating efficiency despite fluctuations in reported net income.
Cash Operating Taxes
Cisco Systems Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
The financial data reveals trends in the company's provision for income taxes and cash operating taxes over a six-year period.
- Provision for income taxes
- This metric shows a declining trend from 2019 to 2024. Starting at 2950 million USD in 2019, it decreased steadily each year with slight fluctuations, reaching 1914 million USD in 2024. The most notable drop appears between 2023 and 2024, signifying a significant reduction in the provision for income taxes.
- Cash operating taxes
- The cash operating taxes exhibit more variability over the same period. The value began at 3216 million USD in 2019, decreased to 2718 million USD in 2020, then rose again to 3009 million USD in 2021. It stabilized somewhat in 2022 at 2953 million USD, before sharply increasing to a peak of 4688 million USD in 2023. In 2024, it dropped back down to 2835 million USD. This fluctuation suggests variability in the company's cash tax payments, with a notable spike in 2023 followed by a substantial decrease the following year.
In summary, the provision for income taxes has experienced a consistent downward trajectory, while cash operating taxes have been more volatile, peaking significantly in 2023 before falling in 2024. These trends could indicate changes in the company's tax strategy, tax benefits, or earnings before tax over the years analyzed.
Invested Capital
Cisco Systems Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
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 product warranty liability.
6 Addition of restructuring liability.
7 Addition of equity equivalents to equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of marketable securities.
- Total reported debt & leases
- The total reported debt and leases exhibit a notable volatility over the analyzed period. Initially, there is a significant reduction from 25,761 million USD in July 2019 to 9,411 million USD by July 2023, reflecting a consistent deleveraging trend from year to year. However, in the latest period ending July 2024, the debt level sharply increases to 32,232 million USD, surpassing the initial figure of 2019 by a large margin. This marked spike suggests a substantial rise in financial liabilities or lease obligations in the most recent year.
- Equity
- Equity shows a steady upward trajectory throughout the years. Starting at 33,571 million USD in July 2019, it gradually increases with minor fluctuations, reaching 44,457 million USD in July 2024. This consistent growth indicates strengthening shareholders’ value and an accumulation of retained earnings or capital injections, reflecting an overall positive equity trend despite fluctuations in debt levels.
- Invested capital
- Invested capital experiences moderate growth from 53,469 million USD in July 2019 to around 58,979 million USD in July 2023, indicating stable investment activities or reinvestment of returns during this timeframe. In the final period ending July 2024, invested capital surges substantially to 91,785 million USD, mirroring the sharp increase in total reported debt and leases. This jump suggests a major expansion or acquisition, likely funded by increased leverage, resulting in a significantly larger asset base or capital investment.
Cost of Capital
Cisco Systems 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: 2024-07-27).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-07-29).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-07-30).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-07-31).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-07-25).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-07-27).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cisco Systems Inc., economic spread ratio calculation, comparison to benchmarks
| Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | Jul 25, 2020 | Jul 27, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
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 exhibits notable fluctuations over the analyzed periods. Starting at 3,123 million USD in 2019, it nearly doubles to 6,219 million USD in 2020, indicating a strong improvement. However, it declines to 4,248 million USD in 2021, before gradually increasing to 4,811 million USD in 2022 and 4,869 million USD in 2023. A significant downturn is observed in 2024, where economic profit drops sharply to 969 million USD, suggesting a deterioration in profitability or value creation in the most recent year.
- Invested Capital
- The invested capital demonstrates a generally increasing trend across the periods. From 53,469 million USD in 2019, it remains stable through 2020, then shows steady growth to 57,460 million USD in 2021, 59,063 million USD in 2022, and marginally declines to 58,979 million USD in 2023. A marked increase occurs in 2024, with invested capital rising sharply to 91,785 million USD, representing a substantial expansion in the capital base during the latest fiscal year.
- Economic Spread Ratio
- The economic spread ratio follows a pattern similar to economic profit, with some volatility. It starts relatively low at 5.84% in 2019, peaks at 11.62% in 2020, indicating high returns over cost of capital during that year, then declines to 7.39% in 2021. A modest improvement occurs in 2022 and 2023, with ratios of 8.14% and 8.26% respectively. However, in 2024 there is a steep decline to 1.06%, signaling significantly reduced economic value added per unit of invested capital.
- Overall Insights
- The data suggest that while invested capital increased steadily with a substantial jump in the most recent period, the economic profit and economic spread ratio experienced considerable volatility, peaking in 2020 followed by declines and a pronounced drop in 2024. This indicates that despite the growing capital base, the efficiency and profitability of investments have deteriorated recently. The sharp decrease in economic profit and spread ratio in 2024 points to potential challenges in generating returns that exceed capital costs, warranting further investigation into operational effectiveness and market conditions impacting performance.
Economic Profit Margin
Cisco Systems Inc., economic profit margin calculation, comparison to benchmarks
| Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | Jul 25, 2020 | Jul 27, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Revenue | |||||||
| Add: Increase (decrease) in deferred revenue | |||||||
| Adjusted revenue | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Apple Inc. | |||||||
| Arista Networks Inc. | |||||||
| Dell Technologies Inc. | |||||||
| Super Micro Computer Inc. | |||||||
Based on: 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27).
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 experienced significant fluctuations over the analyzed periods. It showed a substantial increase from 3,123 million US dollars in 2019 to a peak of 6,219 million in 2020. Subsequently, it declined to 4,248 million in 2021, followed by a moderate recovery to around 4,800 million in 2022 and 2023. However, in 2024, there was a pronounced drop to 969 million, indicating a notable reduction in profitability.
- Adjusted Revenue
- The adjusted revenue demonstrated a generally upward trend from 2019 through 2023, increasing from approximately 50,686 million US dollars to a high of 59,284 million in 2023. Nevertheless, in 2024, adjusted revenue decreased to 56,728 million, representing a decline after several years of growth, which may imply challenges in sustaining revenue growth or market conditions affecting sales.
- Economic Profit Margin
- The economic profit margin closely mirrored the profitability trend observed in economic profit. It rose sharply from 6.16% in 2019 to 12.13% in 2020, then declined to 8.24% in 2021. Following a slight improvement to 9.14% in 2022, it decreased again to 8.21% in 2023, and then sharply dropped to 1.71% in 2024. This suggests a significant decline in the firm's efficiency at converting revenue into profit in the most recent period analyzed.