Microsoft Excel LibreOffice Calc

Comcast Corp. (CMCSA)

Economic Value Added (EVA)

Difficulty: Advanced

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

Comcast Corp., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net operating profit after taxes (NOPAT)1 15,958  14,825  12,358  11,663  11,441 
Cost of capital2 8.35% 9.56% 9.60% 9.50% 9.73%
Invested capital3 216,534  162,175  155,853  145,651  137,591 
Economic profit4 (2,119) (677) (2,603) (2,169) (1,942)

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

2018 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= 15,958 – 8.35% × 216,534 = -2,119

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Comcast Corp.’s economic profit increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Net Operating Profit after Taxes (NOPAT)

Comcast Corp., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income attributable to Comcast Corporation 11,731  22,714  8,695  8,163  8,380 
Deferred income tax expense (benefit)1 290  (10,655) 1,444  958  1,165 
Increase (decrease) in allowance for doubtful accounts2 64  38  24  21  (16)
Increase (decrease) in deferred revenue3 648  420  (170) 387  17 
Increase (decrease) in equity equivalents4 1,002  (10,197) 1,298  1,366  1,166 
Interest expense 3,542  3,086  2,942  2,702  2,617 
Interest expense, operating lease obligations5 188  162  169  150  115 
Adjusted interest expense 3,730  3,248  3,111  2,852  2,732 
Tax benefit of interest expense6 (783) (1,137) (1,089) (998) (956)
Adjusted interest expense, after taxes7 2,946  2,111  2,022  1,854  1,776 
(Gain) loss on marketable securities 187  17  (12) 47  (142)
Investment income, before taxes 187  17  (12) 47  (142)
Tax expense (benefit) of investment income8 (39) (6) 4  (16) 50 
Investment income, after taxes9 148  11  (8) 31  (92)
Net income (loss) attributable to noncontrolling interest 131  186  350  250  212 
Net operating profit after taxes (NOPAT) 15,958  14,825  12,358  11,663  11,441 

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

2018 Calculations

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 attributable to Comcast Corporation.

5 Addition of interest expense on capitalized operating leases. See Details »

6 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 3,730 × 21.00% = 783

7 Addition of after taxes interest expense to net income attributable to Comcast Corporation.

8 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= -187 × 21.00% = -39

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Comcast Corp.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

Comcast Corp., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Income tax expense (benefit) 3,380  (7,578) 5,308  4,959  3,873 
Less: Deferred income tax expense (benefit) 290  (10,655) 1,444  958  1,165 
Add: Tax savings from interest expense 783  1,137  1,089  998  956 
Less: Tax imposed on investment income (39) (6) 4  (16) 50 
Cash operating taxes 3,912  4,220  4,949  5,016  3,614 

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Comcast Corp.’s cash operating taxes declined from 2016 to 2017 and from 2017 to 2018.

Invested Capital

Comcast Corp., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current portion of long-term debt 4,398  5,134  5,480  3,627  4,217 
Long-term debt, less current portion 107,345  59,422  55,566  48,994  44,017 
PV of operating lease payments1 4,384  3,335  3,189  2,730  1,855 
Total reported debt & leases 116,127  67,891  64,235  55,351  50,089 
Total Comcast Corporation shareholders’ equity 71,613  68,606  53,943  52,269  52,711 
Net deferred tax (assets) liabilities2 26,369  24,202  34,813  33,566  32,764 
Allowance for doubtful accounts3 352  288  250  226  205 
Deferred revenue4 2,832  1,552  1,132  1,302  915 
Equity equivalents5 29,553  26,042  36,195  35,094  33,884 
Accumulated other comprehensive (income) loss, net of tax6 368  (379) (98) 174  146 
Redeemable noncontrolling interests and redeemable subsidiary preferred stock 1,316  1,357  1,446  1,221  1,066 
Noncontrolling interests 889  843  2,231  1,709  357 
Adjusted total Comcast Corporation shareholders’ equity 103,739  96,469  93,717  90,467  88,164 
Construction in process7 (2,991) (1,752) (1,901) —  — 
Marketable equity securities8 (341) (433) (198) (167) (662)
Invested capital 216,534  162,175  155,853  145,651  137,591 

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

1 Addition of capitalized operating leases. See Details »

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 total Comcast Corporation shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in process.

8 Subtraction of marketable equity securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Comcast Corp.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Cost of Capital

Comcast Corp., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 165,514  165,514  ÷ 283,998  = 0.58 0.58 × 12.19% = 7.11%
Debt3 114,100  114,100  ÷ 283,998  = 0.40 0.40 × 3.77% × (1 – 21.00%) = 1.20%
PV of operating lease payments4 4,384  4,384  ÷ 283,998  = 0.02 0.02 × 3.77% × (1 – 21.00%) = 0.05%
Total: 283,998  1.00 8.35%

Based on: 10-K (filing date: 2019-01-31).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 197,531  197,531  ÷ 272,566  = 0.72 0.72 × 12.19% = 8.84%
Debt3 71,700  71,700  ÷ 272,566  = 0.26 0.26 × 4.04% × (1 – 35.00%) = 0.69%
PV of operating lease payments4 3,335  3,335  ÷ 272,566  = 0.01 0.01 × 4.04% × (1 – 35.00%) = 0.03%
Total: 272,566  1.00 9.56%

Based on: 10-K (filing date: 2018-01-31).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 178,803  178,803  ÷ 248,292  = 0.72 0.72 × 12.19% = 8.78%
Debt3 66,300  66,300  ÷ 248,292  = 0.27 0.27 × 4.50% × (1 – 35.00%) = 0.78%
PV of operating lease payments4 3,189  3,189  ÷ 248,292  = 0.01 0.01 × 4.50% × (1 – 35.00%) = 0.04%
Total: 248,292  1.00 9.60%

Based on: 10-K (filing date: 2017-02-03).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 145,127  145,127  ÷ 205,857  = 0.70 0.70 × 12.19% = 8.60%
Debt3 58,000  58,000  ÷ 205,857  = 0.28 0.28 × 4.70% × (1 – 35.00%) = 0.86%
PV of operating lease payments4 2,730  2,730  ÷ 205,857  = 0.01 0.01 × 4.70% × (1 – 35.00%) = 0.04%
Total: 205,857  1.00 9.50%

Based on: 10-K (filing date: 2016-02-05).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 150,889  150,889  ÷ 208,044  = 0.73 0.73 × 12.19% = 8.84%
Debt3 55,300  55,300  ÷ 208,044  = 0.27 0.27 × 4.95% × (1 – 35.00%) = 0.86%
PV of operating lease payments4 1,855  1,855  ÷ 208,044  = 0.01 0.01 × 4.95% × (1 – 35.00%) = 0.03%
Total: 208,044  1.00 9.73%

Based on: 10-K (filing date: 2015-02-27).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Economic Spread

Comcast Corp., economic spread calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Economic profit1 (2,119) (677) (2,603) (2,169) (1,942)
Invested capital2 216,534  162,175  155,853  145,651  137,591 
Ratio
Economic spread3 -0.98% -0.42% -1.67% -1.49% -1.41%

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × -2,119 ÷ 216,534 = -0.98%

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Comcast Corp.’s economic spread improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Economic Profit Margin

Comcast Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (USD $ in millions)
Economic profit1 (2,119) (677) (2,603) (2,169) (1,942)
Revenue 94,507  84,526  80,403  74,510  68,775 
Add: Increase (decrease) in deferred revenue 648  420  (170) 387  17 
Adjusted revenue 95,155  84,946  80,233  74,897  68,792 
Ratio
Economic profit margin2 -2.23% -0.80% -3.24% -2.90% -2.82%

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-31), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-05), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -2,119 ÷ 95,155 = -2.23%

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Comcast Corp.’s economic profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.