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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Costco Wholesale Corp. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Analysis of Revenues
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Economic Profit
Costco Wholesale Corp., economic profit calculation
US$ in millions
| 12 months ended: | Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | Sep 1, 2019 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
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 net operating profit after taxes shows an overall upward trend from 2019 to 2024, increasing from 3,979 million USD in 2019 to 7,032 million USD in 2024. There was consistent growth year over year, except in 2023 when NOPAT decreased to 5,694 million USD from the previous year’s 6,421 million USD, before rising again in 2024.
- Cost of Capital
- The cost of capital has gradually increased over the reported periods, starting at 12.09% in 2019 and rising steadily to 12.51% in 2024. This reflects a mild upward pressure on the company’s financing costs or the required return by investors over time.
- Invested Capital
- Invested capital increased notably from 23,959 million USD in 2019 to a peak of 34,903 million USD in 2023, indicating expansion or increased investment activities. In 2024, this value declined to 32,993 million USD, suggesting some divestiture or optimization in asset allocation.
- Economic Profit
- Economic profit exhibited variability, starting at 1,082 million USD in 2019, dipping to a low of 761 million USD in 2020, and then rising significantly to 2,543 million USD in 2022. A decrease followed in 2023, dropping to 1,385 million USD, but economic profit surged again in 2024 to 2,906 million USD. This pattern indicates fluctuations in value creation relative to the cost of capital.
- Overall Analysis
- Despite the rising cost of capital, the company has generally increased its net operating profit and economic profit over the six-year period. The fluctuations in economic profit alongside changes in invested capital suggest periods of strategic adjustment in capital deployment and operational efficiency. The temporary declines in both NOPAT and economic profit in 2023 may warrant further investigation into market or operational challenges during that period.
Net Operating Profit after Taxes (NOPAT)
Costco Wholesale Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net income attributable to Costco.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Costco.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
- Net income attributable to Costco
- The net income demonstrates a consistent upward trend over the six-year period. Starting at 3,659 million USD in 2019, it increased steadily each year, reaching 7,367 million USD by 2024. The growth is particularly notable between 2023 and 2024, showing a substantial increase of approximately 17%. This pattern indicates continuous improvement in profitability and effective management in generating earnings for shareholders.
- Net operating profit after taxes (NOPAT)
- NOPAT also shows a general upward trajectory, reflecting enhanced operational efficiency and after-tax profitability. The figure rose from 3,979 million USD in 2019 to 7,032 million USD in 2024. However, a deviation from the growth trend is observed between 2022 and 2023, where NOPAT declined from 6,421 million USD to 5,694 million USD, representing a decrease of about 11%. Despite this dip, the metric recovered strongly in 2024, exceeding previous highs. This suggests a temporary operational challenge in 2023, followed by a robust rebound.
Cash Operating Taxes
Costco Wholesale Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
The financial data indicates a consistent upward trend in both the provision for income taxes and cash operating taxes over the six-year period examined.
- Provision for income taxes
- This item shows a steady increase each year, starting at 1,061 million US dollars in 2019 and rising to 2,373 million US dollars by 2024. The growth is relatively smooth and continuous, reflecting an increasing tax burden or improved profitability subject to taxation during this period.
- Cash operating taxes
- Similar to the provision for income taxes, cash operating taxes exhibit a continuous rise from 944 million US dollars in 2019 to 2,412 million US dollars in 2024. The increase each year is consistent with growing operational tax payments, slightly exceeding the provision figures each year, which might indicate timely cash outflows related to tax obligations.
The parallel progression of both tax-related metrics suggests a stable and possibly expanding operational base contributing to higher taxable income and ensuing tax payments. The close alignment between provision and cash operating taxes implies effective tax management with minimal discrepancies between accrued and paid taxes over the period.
Invested Capital
Costco Wholesale Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of LIFO reserve. See details »
4 Addition of equity equivalents to total Costco stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of short-term investments.
The analysis of the annual financial data reveals several notable trends over the six-year period.
- Total reported debt & leases
- This liability metric shows a moderate fluctuation, beginning at $9,126 million in 2019, peaking in 2021 at $11,407 million, and then generally declining to $9,949 million by 2024. This suggests a strategy of managing and reducing debt levels following a peak in 2021, potentially improving the company's leverage position.
- Total Costco stockholders’ equity
- This equity measure exhibits a consistent upward trend overall. Starting at $15,243 million in 2019, it rises significantly to $25,058 million by 2023 before declining somewhat to $23,622 million in 2024. The growth in stockholders’ equity indicates accumulation of retained earnings and possible capital infusions over these years, although the slight decrease in the final year may warrant further review.
- Invested capital
- Invested capital mirrors the combined effect of liabilities and equity, showing an overall increases from $23,959 million in 2019 to a peak of $34,903 million in 2023, followed by a decrease to $32,993 million in 2024. This pattern reflects growth in the total capital invested in the business up to 2023, with some withdrawal or reduction in the most recent year.
Overall, the data suggests strengthened equity position alongside careful debt management, with a general trend of growth in invested capital that slightly recedes in the final year observed. These patterns could indicate strategic financial adjustments aimed at optimizing capital structure and supporting company growth.
Cost of Capital
Costco Wholesale Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-09-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-09-03).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-08-28).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-08-29).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-08-30).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-09-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Costco Wholesale Corp., economic spread ratio calculation, comparison to benchmarks
| Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | Sep 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Target Corp. | |||||||
| Walmart Inc. | |||||||
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
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 reported periods. Initially, there is a decline from 1082 million USD in 2019 to 761 million USD in 2020, followed by a sharp increase reaching 1828 million USD in 2021 and further rising to 2543 million USD in 2022. The figure experiences a decline again in 2023 to 1385 million USD before surging to the highest reported value of 2906 million USD in 2024. This pattern denotes periods of variability with a strong recovery and growth trend in the latest year.
- Invested Capital
- Invested capital shows a consistent upward trend from 23,959 million USD in 2019 to a peak of 34,903 million USD in 2023, representing a steady growth in capital investment over the years. In 2024, however, there is a slight decline to 32,993 million USD, indicating a minor reduction in invested capital after years of expansion. Overall, the company's capital base has grown significantly across the examined timeframe.
- Economic Spread Ratio
- The economic spread ratio demonstrates considerable volatility across the periods. Starting at 4.52% in 2019, it declines sharply to 2.62% in 2020, then rebounds strongly to 6.41% in 2021 and continues its ascent to 8.03% in 2022. This ratio dips to 3.97% in 2023 before achieving the highest level of 8.81% in 2024. The fluctuations suggest variable efficiency or return dynamics over the years, with the latest data indicating improved profitability relative to invested capital.
Economic Profit Margin
Costco Wholesale Corp., economic profit margin calculation, comparison to benchmarks
| Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | Sep 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Net sales | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Target Corp. | |||||||
| Walmart Inc. | |||||||
Based on: 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30), 10-K (reporting date: 2019-09-01).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrates a fluctuating but overall increasing trend across the analyzed periods. Starting at 1,082 million USD in 2019, it decreased to 761 million USD in 2020 before surging to 1,828 million USD in 2021. This was followed by a further increase to 2,543 million USD in 2022. A decline to 1,385 million USD occurred in 2023, succeeded by a substantial rise to 2,906 million USD in 2024. The pattern indicates variability with strong rebounds, suggesting periods of improved operational efficiency or profitability after downturns.
- Net Sales
- Net sales exhibit a consistent upward trend throughout the years analyzed. Starting from 149,351 million USD in 2019, sales increased steadily every year, reaching 163,220 million USD in 2020, 192,052 million USD in 2021, 222,730 million USD in 2022, 237,710 million USD in 2023, and finally 249,625 million USD in 2024. The continuous growth in net sales highlights strong revenue expansion and market demand stability over the period.
- Economic Profit Margin
- The economic profit margin shows considerable variability year to year. It began at 0.72% in 2019 and dropped to 0.47% in 2020. Subsequent years saw significant improvements with 0.95% in 2021 and a peak of 1.14% in 2022. This was followed by a dip to 0.58% in 2023, with a recovery to the highest margin of 1.16% in 2024. This fluctuating margin reflects changes in profitability relative to sales, possibly attributable to operational factors or cost management efficiency variations across the periods.