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
Dollar Tree Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
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
= 1,622,053 – 12.08% × 18,201,900 = -577,390
The analysis of economic profit reveals a consistent failure to generate value above the cost of capital throughout the observed period from 2017 to 2022. Economic profit remained negative in every fiscal year, indicating that the return on invested capital was insufficient to cover the required return for the shareholders and debt holders.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, characterized by a severe contraction in 2019, where it fell to negative 1,112,626 thousand. A subsequent recovery occurred between 2020 and 2021, with profits peaking at 1,686,673 thousand before experiencing a slight decline to 1,622,053 thousand in 2022.
- Cost of Capital
- A general upward trajectory is observed in the cost of capital, which rose from 9.91% in 2017 to 12.08% by 2022. This increasing trend effectively raised the minimum return required to achieve a positive economic profit, placing additional pressure on operational performance.
- Invested Capital
- Invested capital reached a peak of 19,846,068 thousand in 2018, followed by a decrease that bottomed out in 2020 at 16,987,300 thousand. A gradual expansion of the capital base followed, reaching 18,201,900 thousand by 2022, although it remained below the 2018 levels.
- Economic Profit Performance
- The most significant destruction of economic value occurred in 2019, with economic profit dropping to negative 3,045,534 thousand, driven by the simultaneous occurrence of negative NOPAT and a rising cost of capital. Although the economic loss narrowed to its lowest point of negative 352,315 thousand in 2021, the trend reversed in 2022, with the loss widening again to negative 577,390 thousand.
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Net Operating Profit after Taxes (NOPAT)
Dollar Tree Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income (loss).
3 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 6,553,300 × 3.40% = 222,812
4 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 401,712 × 21.00% = 84,360
5 Addition of after taxes interest expense to net income (loss).
- Net Income (Loss) Trend
- The net income exhibited significant fluctuations over the observed periods. Initially, there was a substantial increase from approximately $896.2 million in early 2017 to about $1.714 billion in early 2018. However, this positive trend was interrupted by a reversal in early 2019, where the net income turned negative, with a loss of approximately $1.59 billion. Subsequently, the company recovered, returning to positive net income values, rising to around $827 million in 2020, followed by further increases to $1.342 billion and $1.328 billion in 2021 and 2022, respectively. This pattern indicates a volatile earnings performance with a notable setback in 2019 but a steady recovery thereafter.
- Net Operating Profit After Taxes (NOPAT) Trend
- The net operating profit after taxes mirrored a similar trajectory to net income. It rose from about $1.187 billion in 2017 to $1.636 billion in 2018, before experiencing a substantial downturn to a negative $1.11 billion in 2019. Following this decline, NOPAT rebounded to approximately $1.177 billion in 2020 and continued to improve to $1.687 billion in 2021. In 2022, there was a slight decrease to around $1.622 billion, although levels remained strong relative to the earlier years except for 2019. The NOPAT trend reflects the operational challenges faced in 2019 and subsequent recovery, showcasing operational resilience in the following years.
- Insights and Observations
- The financial performance over the six-year span reveals a company experiencing cyclical volatility, with 2019 marking a particularly challenging year, featuring declines in both net income and operational profitability into negative territory. The recovery phase post-2019 was marked by restored profitability and an ability to sustain high levels of operating profit, suggesting effective management responses and operational adjustments. The relative stability of net income and NOPAT in the last two periods indicates a stabilization phase, with strong earnings sustained despite minor fluctuations. Overall, the patterns suggest responsiveness to external or internal challenges and a capacity for financial recovery and growth.
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Cash Operating Taxes
Dollar Tree Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
- Provision for Income Taxes
- The provision for income taxes shows considerable fluctuation over the six-year period. It started at a high value of 433,200 thousand US dollars in early 2017, then sharply declined to a negative figure of -10,300 thousand US dollars in early 2018, indicating a possible tax benefit or adjustment during that year. Subsequently, the provision increased again, reaching 281,800 thousand US dollars in early 2019 and maintaining similarly elevated levels in the following years, with values of 271,700, 397,900, and 304,300 thousand US dollars in early 2020, 2021, and 2022 respectively. Overall, the provision exhibits volatility, but generally remains in the positive range, with a notable exception in 2018.
- Cash Operating Taxes
- Cash operating taxes demonstrate a clear declining trend from 2017 through 2020. Initially, the amount stood at 786,228 thousand US dollars in early 2017 and decreased steadily over the next three years to 664,515, 424,099, and 353,258 thousand US dollars by early 2018, 2019, and 2020 respectively. After 2020, this figure experienced a rebound, increasing to 450,561 thousand US dollars in early 2021, before slightly decreasing again to 411,860 thousand US dollars in early 2022. This suggests a reduction in cash operating tax outflows mid-period, followed by partial recovery in subsequent years.
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Invested Capital
Dollar Tree Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
- Total reported debt & leases
-
The total reported debt and leases show a consistent downward trend from January 28, 2017, to January 30, 2021, decreasing from approximately 12.43 billion US dollars to about 9.64 billion US dollars. This indicates a concerted effort towards debt reduction over this period. However, there is a slight increase in the debt level in the latest period, ending on January 29, 2022, rising to roughly 9.97 billion US dollars.
- Shareholders’ equity
-
Shareholders’ equity exhibits fluctuations over the analyzed periods but generally trends upward. It increased substantially between January 28, 2017, and February 3, 2018, rising from approximately 5.39 billion to 7.18 billion US dollars. This was followed by a decline in the following year to around 5.64 billion US dollars, and then a steady recovery and growth through January 29, 2022, reaching about 7.72 billion US dollars. The overall increase suggests strengthening equity positions over the long term.
- Invested capital
-
Invested capital shows a pattern characterized by an initial increase from January 28, 2017, to February 3, 2018, peaking at approximately 19.85 billion US dollars. Subsequently, there is a decline over the next two years, bottoming out at about 16.99 billion US dollars in February 1, 2020, before a gradual increase resumes, reaching approximately 18.20 billion US dollars by January 29, 2022. This trend suggests a period of contraction followed by renewed investment activities or asset accumulation.
- Overall analysis
-
The data portray a company that has actively managed its capital structure, notably reducing total reported debt over a significant period while recovering from a dip in shareholders’ equity. The invested capital trend aligns with these dynamics, showcasing initial growth, mid-term contraction, and later resurgence. The slight uptick in debt in the most recent reporting period warrants monitoring, although the continuous increase in equity and invested capital indicates a potentially improving financial position.
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Cost of Capital
Dollar Tree Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 34,005,166) | 34,005,166) | ÷ | 44,123,366) | = | 0.77 | 0.77 | × | 14.86% | = | 11.45% | ||
| Long-term debt3 | 3,564,900) | 3,564,900) | ÷ | 44,123,366) | = | 0.08 | 0.08 | × | 3.68% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 6,553,300) | 6,553,300) | ÷ | 44,123,366) | = | 0.15 | 0.15 | × | 3.40% × (1 – 21.00%) | = | 0.40% | ||
| Total: | 44,123,366) | 1.00 | 12.08% | ||||||||||
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,452,218) | 25,452,218) | ÷ | 35,525,618) | = | 0.72 | 0.72 | × | 14.86% | = | 10.64% | ||
| Long-term debt3 | 3,659,700) | 3,659,700) | ÷ | 35,525,618) | = | 0.10 | 0.10 | × | 3.98% × (1 – 21.00%) | = | 0.32% | ||
| Operating lease liability4 | 6,413,700) | 6,413,700) | ÷ | 35,525,618) | = | 0.18 | 0.18 | × | 3.90% × (1 – 21.00%) | = | 0.56% | ||
| Total: | 35,525,618) | 1.00 | 11.52% | ||||||||||
Based on: 10-K (reporting date: 2021-01-30).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,990,520) | 17,990,520) | ÷ | 28,321,520) | = | 0.64 | 0.64 | × | 14.86% | = | 9.44% | ||
| Long-term debt3 | 4,072,200) | 4,072,200) | ÷ | 28,321,520) | = | 0.14 | 0.14 | × | 3.96% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 6,258,800) | 6,258,800) | ÷ | 28,321,520) | = | 0.22 | 0.22 | × | 4.30% × (1 – 21.00%) | = | 0.75% | ||
| Total: | 28,321,520) | 1.00 | 10.64% | ||||||||||
Based on: 10-K (reporting date: 2020-02-01).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,825,657) | 24,825,657) | ÷ | 35,359,544) | = | 0.70 | 0.70 | × | 14.86% | = | 10.43% | ||
| Long-term debt3 | 4,208,800) | 4,208,800) | ÷ | 35,359,544) | = | 0.12 | 0.12 | × | 3.96% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 6,325,087) | 6,325,087) | ÷ | 35,359,544) | = | 0.18 | 0.18 | × | 3.96% × (1 – 21.00%) | = | 0.56% | ||
| Total: | 35,359,544) | 1.00 | 11.36% | ||||||||||
Based on: 10-K (reporting date: 2019-02-02).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,724,922) | 22,724,922) | ÷ | 34,806,790) | = | 0.65 | 0.65 | × | 14.86% | = | 9.70% | ||
| Long-term debt3 | 5,884,800) | 5,884,800) | ÷ | 34,806,790) | = | 0.17 | 0.17 | × | 4.76% × (1 – 33.70%) | = | 0.53% | ||
| Operating lease liability4 | 6,197,068) | 6,197,068) | ÷ | 34,806,790) | = | 0.18 | 0.18 | × | 4.76% × (1 – 33.70%) | = | 0.56% | ||
| Total: | 34,806,790) | 1.00 | 10.80% | ||||||||||
Based on: 10-K (reporting date: 2018-02-03).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,088,607) | 18,088,607) | ÷ | 30,785,785) | = | 0.59 | 0.59 | × | 14.86% | = | 8.73% | ||
| Long-term debt3 | 6,593,100) | 6,593,100) | ÷ | 30,785,785) | = | 0.21 | 0.21 | × | 4.40% × (1 – 35.00%) | = | 0.61% | ||
| Operating lease liability4 | 6,104,078) | 6,104,078) | ÷ | 30,785,785) | = | 0.20 | 0.20 | × | 4.40% × (1 – 35.00%) | = | 0.57% | ||
| Total: | 30,785,785) | 1.00 | 9.91% | ||||||||||
Based on: 10-K (reporting date: 2017-01-28).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dollar Tree Inc., economic spread ratio calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (577,390) | (352,315) | (630,408) | (3,045,534) | (506,150) | (711,855) | |
| Invested capital2 | 18,201,900) | 17,693,200) | 16,987,300) | 17,010,987) | 19,846,068) | 19,165,878) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -3.17% | -1.99% | -3.71% | -17.90% | -2.55% | -3.71% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | 5.90% | 4.30% | 0.53% | — | — | — | |
| Target Corp. | 8.87% | -0.61% | — | — | — | — | |
| Walmart Inc. | -0.67% | 0.79% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -577,390 ÷ 18,201,900 = -3.17%
4 Click competitor name to see calculations.
The analysis of economic value generation reveals a consistent failure to achieve a positive economic spread across the observed period. The organization has consistently operated with a negative economic profit, indicating that the returns generated on invested capital remained below the required cost of capital.
- Economic Spread Ratio Trends
- The economic spread ratio exhibited significant volatility, characterized by a severe contraction in 2019 when the ratio reached its lowest point of -17.90%. This represents a substantial deviation from the relative stability seen in 2017 (-3.71%) and 2018 (-2.55%). While a recovery occurred in 2020 (-3.71%) and peaked in 2021 at -1.99%, the ratio declined again to -3.17% by 2022, indicating a persistent inability to create economic value.
- Economic Profit Analysis
- Economic profit remained negative for all six reporting years. A critical decline is observed in 2019, with economic profit falling to -3.045 billion USD. This sharp downturn aligns with the collapse in the economic spread ratio for the same period. Subsequent years showed an upward trend toward recovery, with the deficit narrowing to its lowest level of -352 million USD in 2021, before widening again to -577 million USD in 2022.
- Invested Capital Dynamics
- Invested capital showed a fluctuating pattern, peaking at approximately 19.8 billion USD in 2018 before declining to a low of 16.9 billion USD in 2020. Following this trough, capital investment trended upward, reaching 18.2 billion USD by 2022. The fact that the economic spread remained negative despite the increase in invested capital from 2020 to 2022 suggests that capital expansion has not yet translated into returns that exceed the cost of capital.
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Economic Profit Margin
Dollar Tree Inc., economic profit margin calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (577,390) | (352,315) | (630,408) | (3,045,534) | (506,150) | (711,855) | |
| Net sales | 26,309,800) | 25,508,400) | 23,610,800) | 22,823,300) | 22,245,500) | 20,719,200) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -2.19% | -1.38% | -2.67% | -13.34% | -2.28% | -3.44% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | 0.84% | 0.64% | 0.09% | — | — | — | |
| Target Corp. | 2.52% | -0.20% | — | — | — | — | |
| Walmart Inc. | -0.18% | 0.23% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -577,390 ÷ 26,309,800 = -2.19%
3 Click competitor name to see calculations.
The financial performance between January 2017 and January 2022 is characterized by persistent negative economic profit despite a consistent upward trajectory in net sales. The inability to generate a positive economic profit indicates that the returns on invested capital remained below the company's cost of capital throughout the entire six-year period.
- Net Sales Growth
- A steady increase in revenue is observed, with net sales rising from 20.7 billion US dollars in January 2017 to 26.3 billion US dollars by January 2022. This represents a continuous expansion of the top line across every reporting period.
- Economic Profit Margin Volatility
- The economic profit margin remained negative for all periods, exhibiting significant volatility. The margin improved from -3.44% in 2017 to -2.28% in 2018, before experiencing a severe contraction to -13.34% in February 2019. This sharp decline coincides with a substantial increase in economic loss, which reached approximately 3.05 billion US dollars in that fiscal year.
- Recovery and Recent Trends
- Following the 2019 decline, a recovery phase occurred, with the economic profit margin improving to -2.67% in 2020 and reaching its peak performance of -1.38% in January 2021. However, this trend reversed slightly by January 2022, as the margin widened again to -2.19% and economic profit fell to -577.39 million US dollars.
The divergence between growing net sales and consistently negative economic profit suggests that the scale of operations expanded without achieving the necessary efficiency or returns to cover the cost of capital. The extreme fluctuation observed in 2019 represents a period of significant value erosion, while the subsequent years indicate a partial stabilization that has yet to reach a positive economic value threshold.
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