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
DexCom Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 352,450 – 17.89% × 1,649,000 = 57,373
The financial performance between 2018 and 2022 demonstrates a volatile transition toward positive economic value creation. While operational profitability grew substantially over the period, the ability to consistently generate returns exceeding the cost of capital remained inconsistent.
- Net Operating Profit After Taxes (NOPAT)
- A significant upward trajectory is observed in operational earnings, transitioning from a loss of $115.4 million in 2018 to a peak of $352.5 million by 2022. Despite a moderate contraction in 2021, the overall trend indicates a strengthening of core operational profitability.
- Cost of Capital
- The cost of capital remained highly stable across the analyzed period, maintaining a narrow range between 17.88% and 18.22%. This consistent and relatively high rate established a rigorous benchmark for achieving positive economic profit.
- Invested Capital
- Invested capital exhibited considerable volatility. A sharp reduction occurred in 2019, reaching $836.3 million, followed by a period of expansion that peaked at $1.899 billion in 2021. A subsequent reduction to $1.649 billion was recorded in 2022.
- Economic Profit
- Economic profit results fluctuated, reflecting the dynamic between NOPAT and the invested capital base. The substantial value deficit of $374.5 million in 2018 improved to near break-even in 2019, with positive economic profit realized in 2020 and 2022. A regression into negative economic profit occurred in 2021; this was driven by the peak in invested capital, which raised the total cost of capital above the operating profit achieved during that year.
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Net Operating Profit after Taxes (NOPAT)
DexCom Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 accrued warranty.
5 Addition of increase (decrease) in equity equivalents to net income (loss).
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 115,100 × 6.00% = 6,906
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 25,506 × 21.00% = 5,356
8 Addition of after taxes interest expense to net income (loss).
Between 2018 and 2022, a significant transition from operational losses to consistent profitability is observed. Both Net Income and Net Operating Profit After Taxes (NOPAT) shifted from negative values in 2018 to positive trajectories, indicating a strengthening of the company's core financial position over the five-year period.
- NOPAT Growth Trajectory
- NOPAT experienced a substantial recovery, moving from a deficit of 115.4 million USD in 2018 to a peak of 352.5 million USD by 2022. Although a moderate contraction occurred in 2021, where NOPAT decreased to 233.0 million USD from 294.1 million USD in 2020, the overall trend demonstrates a robust expansion in operational earning power.
- Net Income Volatility
- Net income exhibited higher volatility than NOPAT. Following a loss of 127.1 million USD in 2018, the figure rose to 101.1 million USD in 2019 and peaked sharply at 493.6 million USD in 2020. This was followed by a significant decline to 154.7 million USD in 2021 before recovering to 341.2 million USD in 2022.
- Operational vs. Bottom-Line Performance
- A divergence between NOPAT and Net Income is evident across different fiscal years. In 2020, Net Income substantially exceeded NOPAT, suggesting the influence of non-operating gains or one-time tax benefits. Conversely, in 2021 and 2022, NOPAT remained higher than Net Income, indicating that core operational performance was stronger than the final bottom-line result, likely due to the impact of interest expenses or other non-operating costs.
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Cash Operating Taxes
DexCom Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
An analysis of the tax-related figures reveals a significant divergence between the accounting provisions for income taxes and the actual cash operating taxes paid over the five-year period ending December 31, 2022.
- Cash Operating Taxes Trend
- A consistent and accelerating upward trend is observed in cash operating taxes. Payments increased from 8,239 thousand US dollars in 2018 to 76,556 thousand US dollars in 2022. This represents a sustained increase in the actual cash outflow for taxes, indicating a growth in the taxable operational base regardless of accounting adjustments.
- Provision for Income Taxes Volatility
- The provision for income taxes exhibits extreme volatility, contrasting sharply with the steady rise in cash taxes. While provisions remained low in 2018 and 2019, a substantial tax benefit of 268,600 thousand US dollars was recorded in 2020. This was followed by a return to positive provisions in 2021 and 2022, reaching 49,600 thousand US dollars by the end of the period.
- Divergence Analysis
- The disconnect between the negative provision in 2020 and the continued increase in cash operating taxes during that same year suggests that the accounting benefit was likely driven by non-cash items, such as deferred tax assets or one-time tax credits, rather than a reduction in current cash tax obligations. The steady growth of cash operating taxes serves as a more reliable indicator of the ongoing cash drain on the entity's economic value added (EVA) than the fluctuating accounting provisions.
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Invested Capital
DexCom Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 deferred revenue.
5 Addition of accrued warranty.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of available-for-sale debt securities.
The analysis of the capital structure from 2018 to 2022 reveals a general expansion of the financial base, though the metric for invested capital exhibits significant volatility relative to the steady increase in debt.
- Total Debt and Leases
- A consistent upward trajectory is observed in total reported debt and leases, which increased from 1,076,497 thousand US dollars in 2018 to 2,149,200 thousand US dollars in 2022. The most substantial growth occurred between 2019 and 2020, during which obligations rose by approximately 58%, suggesting a period of aggressive leveraging or expanded lease commitments.
- Stockholders' Equity
- Equity demonstrated strong growth for most of the analyzed period, rising from 663,300 thousand US dollars in 2018 to a peak of 2,251,500 thousand US dollars in 2021. A notable surge occurred between 2019 and 2020, where equity more than doubled. However, a slight contraction was recorded in 2022, with equity decreasing to 2,131,800 thousand US dollars.
- Invested Capital Trends
- Invested capital followed a non-linear pattern, beginning with a sharp decline from 1,449,197 thousand US dollars in 2018 to 836,300 thousand US dollars in 2019. This was followed by a recovery and growth phase, peaking at 1,899,300 thousand US dollars in 2021. By the end of 2022, invested capital retreated to 1,649,000 thousand US dollars, indicating a reduction in the net capital employed in the business operations.
The divergence between the steadily increasing total debt and the fluctuating levels of invested capital suggests that changes in non-interest-bearing current liabilities or cash balances significantly influenced the net invested capital calculations over this five-year period.
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Cost of Capital
DexCom Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 41,439,004) | 41,439,004) | ÷ | 45,069,004) | = | 0.92 | 0.92 | × | 19.39% | = | 17.83% | ||
| Debt3 | 3,514,900) | 3,514,900) | ÷ | 45,069,004) | = | 0.08 | 0.08 | × | 0.87% × (1 – 21.00%) | = | 0.05% | ||
| Operating lease liability4 | 115,100) | 115,100) | ÷ | 45,069,004) | = | 0.00 | 0.00 | × | 6.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 45,069,004) | 1.00 | 17.89% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
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 | 39,505,713) | 39,505,713) | ÷ | 43,707,613) | = | 0.90 | 0.90 | × | 19.39% | = | 17.53% | ||
| Debt3 | 4,082,800) | 4,082,800) | ÷ | 43,707,613) | = | 0.09 | 0.09 | × | 5.53% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 119,100) | 119,100) | ÷ | 43,707,613) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,707,613) | 1.00 | 17.95% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
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 | 39,451,954) | 39,451,954) | ÷ | 42,788,654) | = | 0.92 | 0.92 | × | 19.39% | = | 17.88% | ||
| Debt3 | 3,218,400) | 3,218,400) | ÷ | 42,788,654) | = | 0.08 | 0.08 | × | 5.53% × (1 – 21.00%) | = | 0.33% | ||
| Operating lease liability4 | 118,300) | 118,300) | ÷ | 42,788,654) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 42,788,654) | 1.00 | 18.22% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
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 | 23,100,043) | 23,100,043) | ÷ | 25,351,843) | = | 0.91 | 0.91 | × | 19.39% | = | 17.67% | ||
| Debt3 | 2,165,800) | 2,165,800) | ÷ | 25,351,843) | = | 0.09 | 0.09 | × | 5.42% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 86,000) | 86,000) | ÷ | 25,351,843) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 25,351,843) | 1.00 | 18.05% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
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 | 13,161,858) | 13,161,858) | ÷ | 14,627,856) | = | 0.90 | 0.90 | × | 19.39% | = | 17.45% | ||
| Debt3 | 1,407,100) | 1,407,100) | ÷ | 14,627,856) | = | 0.10 | 0.10 | × | 5.43% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 58,897) | 58,897) | ÷ | 14,627,856) | = | 0.00 | 0.00 | × | 5.43% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 14,627,856) | 1.00 | 17.88% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
DexCom Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 57,373) | (107,790) | 45,012) | (595) | (374,513) | |
| Invested capital2 | 1,649,000) | 1,899,300) | 1,367,200) | 836,300) | 1,449,197) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 3.48% | -5.68% | 3.29% | -0.07% | -25.84% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -2.43% | -1.95% | — | — | — | |
| Elevance Health Inc. | 0.14% | 1.46% | — | — | — | |
| Intuitive Surgical Inc. | -3.21% | 12.41% | — | — | — | |
| Medtronic PLC | -5.06% | -6.71% | — | — | — | |
| UnitedHealth Group Inc. | 4.06% | 3.91% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 57,373 ÷ 1,649,000 = 3.48%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by significant volatility in value creation, alternating between periods of economic profit and capital destruction. While a stark recovery from the initial 2018 deficit is evident, the inability to maintain a consistent positive spread indicates instability in generating returns that exceed the cost of capital.
- Economic Spread Ratio Trends
- A substantial recovery in the economic spread ratio is observed between 2018 and 2020, moving from a deep negative of -25.84% to a positive 3.29%. This shift suggests a rapid improvement in operational efficiency or a reduction in the cost of capital. However, this trajectory was interrupted in 2021, where the ratio fell to -5.68%, before rebounding to 3.48% in 2022. This cyclical pattern reflects an inconsistent ability to generate economic value added.
- Economic Profit Analysis
- Economic profit exhibited extreme fluctuations over the five-year period. The period opened with a significant loss of 374,513 thousand US dollars in 2018, which narrowed drastically to nearly break-even levels in 2019. Positive economic profit was achieved in 2020 and 2022, though the return to a negative position of 107,790 thousand US dollars in 2021 highlights a periodic failure to cover the imputed cost of invested capital.
- Invested Capital Correlation
- Invested capital showed no linear trend, dropping sharply in 2019 to 836,300 thousand US dollars before climbing to a peak of 1,899,300 thousand US dollars in 2021. Notably, the peak in invested capital in 2021 coincides with a return to negative economic profit and a negative economic spread ratio. This suggests that the expansion of the capital base during that period did not yield proportional increases in returns, thereby eroding the economic spread.
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Economic Profit Margin
DexCom Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 57,373) | (107,790) | 45,012) | (595) | (374,513) | |
| Revenue | 2,909,800) | 2,448,500) | 1,926,700) | 1,476,000) | 1,031,600) | |
| Add: Increase (decrease) in deferred revenue | 10,900) | (100) | 500) | (1,200) | (300) | |
| Adjusted revenue | 2,920,700) | 2,448,400) | 1,927,200) | 1,474,800) | 1,031,300) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 1.96% | -4.40% | 2.34% | -0.04% | -36.31% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -3.41% | -2.81% | — | — | — | |
| Elevance Health Inc. | 0.06% | 0.68% | — | — | — | |
| Intuitive Surgical Inc. | -2.77% | 9.76% | — | — | — | |
| Medtronic PLC | -11.11% | -16.09% | — | — | — | |
| UnitedHealth Group Inc. | 2.08% | 1.92% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 57,373 ÷ 2,920,700 = 1.96%
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by consistent revenue expansion contrasted with significant volatility in economic profit and its associated margin. While adjusted revenue grew steadily every year, the ability to generate economic value above the cost of capital remained inconsistent, fluctuating between negative and positive territory.
- Adjusted Revenue Trend
- A sustained upward trajectory is observed in adjusted revenue, which increased from 1,031,300 thousand US dollars in 2018 to 2,920,700 thousand US dollars by 2022. This represents a continuous growth pattern, indicating a significant expansion in the scale of operations over the five-year period.
- Economic Profit Volatility
- Economic profit exhibited substantial instability. A severe deficit of 374,513 thousand US dollars in 2018 improved sharply to a near-break-even position in 2019 and a positive result of 45,012 thousand US dollars in 2020. However, this trend reversed in 2021 with a loss of 107,790 thousand US dollars, before returning to a positive value of 57,373 thousand US dollars in 2022.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit. The margin began at a deep negative of -36.31% in 2018, reflecting a period where capital costs heavily outweighed economic returns. This figure improved to -0.04% in 2019 and 2.34% in 2020. Despite a contraction to -4.40% in 2021, the margin recovered to 1.96% by the end of 2022, suggesting an overall long-term improvement in capital efficiency and value creation relative to revenue.
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