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 exhibited a generally upward trend over the observed periods, increasing from 3,979 million USD in 2019 to 7,032 million USD in 2024. Notably, there was a slight decline in 2023 to 5,694 million USD before rebounding strongly the following year. This pattern indicates overall growth in operating profitability with a temporary dip in the penultimate period.
- Cost of capital
- The cost of capital rose gradually over the years, moving from 12.1% in 2019 to 12.52% in 2024. This steady increase suggests a slight rise in the company’s required rate of return or perceived risk associated with its capital structure.
- Invested capital
- Invested capital showed an overall increasing pattern from 23,959 million USD in 2019 to a peak of 34,903 million USD in 2023, followed by a decrease to 32,993 million USD in 2024. This reflects active capital deployment and investment growth up to 2023, with a subsequent reduction indicating either divestment or optimization of capital use in the final year.
- Economic profit
- Economic profit fluctuated notably, starting at 1,080 million USD in 2019, dropping to 758 million USD in 2020, then rising significantly to 2,539 million USD by 2022. The figure fell again to 1,381 million USD in 2023 before surging to 2,902 million USD in 2024. This volatility suggests that while the company has been generally successful in generating returns above its cost of capital, there were periods of reduced efficiency or increased capital cost impacts affecting economic profitability.
- Summary
- Overall, the data indicates improving operating profitability alongside increasing capital costs. The invested capital trends suggest strategic adjustments in asset investment, and the economic profit series reflects the dynamic interplay between operational performance and cost of capital. The temporary declines in both NOPAT and economic profit in 2023 point to possible external or internal challenges, but the strong recovery in 2024 suggests resilience and effective management of capital and operational efficiency.
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.
The analysis of the financial data reveals several notable trends and fluctuations over the six-year period under consideration.
- Economic Profit
- Economic profit exhibited variability across the years, initially declining from 1,080 million US dollars in 2019 to 758 million in 2020. This was followed by a significant rebound, peaking at 2,539 million in 2022. A decline ensued in 2023, dropping to 1,381 million, before rising sharply again to 2,902 million in 2024. Overall, economic profit demonstrates a pattern of volatility with strong recoveries after downturns.
- Invested Capital
- The invested capital generally increased over the period, starting at 23,959 million US dollars in 2019 and rising to a peak of 34,903 million in 2023. Notably, there was a reduction in 2024, where invested capital decreased to 32,993 million. This suggests expansionary investments up to 2023 followed by a slight contraction or divestiture in the final year assessed.
- Economic Spread Ratio
- The economic spread ratio fluctuated markedly during the period. Beginning at 4.51% in 2019, it plunged to 2.61% in 2020, followed by a robust rise to 8.02% in 2022. After decreasing to 3.96% in 2023, it surged to the highest value observed, 8.8%, in 2024. This ratio's fluctuations signify variability in the company’s efficiency or profitability relative to its invested capital.
In summary, economic profit and economic spread ratio both show cyclical behavior with significant improvements following downturns, especially evident in 2022 and 2024. Invested capital generally increased, reflecting growth or investment strategies, although it slightly contracted in the latest year available. These dynamics indicate a company navigating periods of fluctuating profitability and capital allocation, with notable recoveries in economic performance metrics after periods of decline.
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 displayed fluctuations over the six-year period. Starting at 1,080 million USD in 2019, it experienced a decline to 758 million USD in 2020, followed by a significant increase to 1,824 million USD in 2021. The upward trend continued, reaching 2,539 million USD in 2022. In 2023, economic profit decreased substantially to 1,381 million USD, but then rebounded strongly to 2,902 million USD in 2024, marking the highest value in the period analyzed.
- Net Sales
- Net sales showed consistent growth throughout the years, increasing steadily from 149,351 million USD in 2019 to 249,625 million USD in 2024. The growth was uninterrupted year over year, with no declines recorded, indicating sustained expansion in revenue generation over the entire period.
- Economic Profit Margin
- The economic profit margin mirrored some of the volatility seen in economic profit. It began at 0.72% in 2019 and dropped to 0.46% in 2020, reflecting a compression in profitability relative to sales during that year. Subsequently, there was a recovery with the margin rising to 0.95% in 2021 and further to 1.14% in 2022. In 2023, the margin declined sharply to 0.58%, but rebounded once again to 1.16% in 2024, surpassing previous highs and indicating improved efficiency or profitability relative to sales in the latest period.
- Summary of Trends
- The data illustrates a strong growth trajectory in net sales over the six years, suggesting successful revenue expansion. Economic profit, however, exhibited more fluctuation, with notable dips in 2020 and 2023, likely reflecting periods of increased costs, lower operational efficiency, or other external factors impacting profitability. The economic profit margin’s pattern aligns with these findings. The rebounds in both economic profit and margin in 2024 indicate a recovery phase where profitability improved considerably despite the challenges experienced in prior years.