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 – 12.19% × 18,201,900 = -597,660
An analysis of the financial performance from 2017 to 2022 reveals a consistent inability to generate positive economic profit. Throughout the six-year period, the economic profit remained negative, indicating that the returns generated by the company were insufficient to cover its cost of capital, thereby destroying shareholder value in real terms.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, characterized by a severe contraction in 2019 where it fell to negative 1.11 billion US dollars. Following this trough, a recovery was observed, with NOPAT returning to positive territory in 2020 and peaking at 1.69 billion US dollars in 2021, before slightly declining to 1.62 billion US dollars in 2022.
- Cost of Capital
- The cost of capital demonstrated a general upward trend over the analyzed period. Starting at 9.99% in 2017, the rate climbed to a peak of 12.19% by 2022. This increasing trend suggests a rising hurdle rate, which places additional pressure on the company to generate higher operating profits to achieve economic value addition.
- Invested Capital
- Invested capital peaked in 2018 at approximately 19.85 billion US dollars before experiencing a decline that bottomed out at 16.99 billion US dollars in 2020. A subsequent gradual increase is observed in 2021 and 2022, with the capital base reaching 18.20 billion US dollars by the end of the period.
- Economic Profit Trends
- The economic profit remained negative for all reported years, reflecting a persistent gap between NOPAT and the capital charge. The most significant value erosion occurred in 2019, with an economic loss of 3.06 billion US dollars, coinciding with the negative NOPAT reported that year. While there was a notable recovery in 2021, where the loss narrowed to 370.63 million US dollars, the economic profit deteriorated again to 597.66 million US dollars in 2022.
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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).
The financial performance between 2017 and 2022 is characterized by substantial volatility, with a notable period of contraction in 2019 followed by a multi-year recovery phase. Both net income and net operating profit after taxes (NOPAT) exhibit highly correlated movements, indicating that the primary drivers of profitability fluctuations were operational in nature.
- Net Income Trajectory
- A significant increase was observed between 2017 and 2018, where net income rose from 896,200 thousand to 1,714,300 thousand. This was followed by a sharp reversal in 2019, resulting in a substantial loss of 1,590,800 thousand. Recovery commenced in 2020, with figures returning to positive territory and stabilizing between 2021 and 2022 at levels approximately 1.3 billion.
- NOPAT Performance
- Operating profitability mirrored the trend of net income. NOPAT increased from 1,187,252 thousand in 2017 to 1,636,265 thousand in 2018. The negative pivot in 2019 saw NOPAT drop to -1,112,626 thousand. A strong recovery followed, with NOPAT reaching a peak of 1,686,673 thousand in 2021 before experiencing a marginal decline to 1,622,053 thousand in 2022.
- Comparative Analysis of Profitability Metrics
- NOPAT consistently remained higher than net income during all profitable years, suggesting that non-operating expenses or interest costs impacted the final net income. During the 2019 downturn, the operating loss represented by NOPAT was less severe than the reported net loss, indicating that non-operating factors further exacerbated the financial decline during that specific fiscal period.
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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).
An analysis of tax expenditures from 2017 to 2022 reveals a general contraction in cash tax outflows alongside significant volatility in accounting tax provisions.
- Cash Operating Taxes Trend
- Cash operating taxes exhibited a consistent downward trend from Jan 28, 2017, through Feb 1, 2020, decreasing from US$ 786.2 million to US$ 353.3 million. This represents a substantial reduction in cash outflows during this period. A partial reversal occurred in Jan 30, 2021, with cash taxes rising to US$ 450.6 million, followed by a slight moderation to US$ 411.9 million in Jan 29, 2022.
- Provision for Income Taxes Volatility
- The provision for income taxes demonstrated significant instability over the six-year period. A tax benefit was recorded on Feb 3, 2018, reflected by a negative provision of US$ 10.3 million. Subsequent years showed a recovery and growth phase, with the provision reaching a peak of US$ 397.9 million in Jan 30, 2021, before receding to US$ 304.3 million in Jan 29, 2022.
- Correlation Between Cash Outflows and Accruals
- A persistent divergence is observed between the provision for income taxes and cash operating taxes. Throughout the analyzed timeframe, cash tax payments consistently exceeded the reported tax provision. This variance was most pronounced in 2017 and 2018, indicating that the actual cash impact of taxes on the organization was significantly higher than the accrual-based expense recognized in the financial statements.
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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.
The analysis of invested capital and its underlying components from 2017 to 2022 reveals a period of strategic deleveraging followed by a gradual increase in the total capital base. Total invested capital peaked in 2018 before experiencing a notable contraction in 2019, subsequently maintaining a steady upward trajectory through 2022.
- Total Reported Debt and Leases
- A consistent downward trend is observed from 2017 through 2021, with obligations decreasing from approximately 12.4 billion USD to 9.6 billion USD. This indicates a sustained reduction in leverage over a five-year period. However, this trend reversed slightly in 2022, with debt and leases increasing to approximately 10.0 billion USD.
- Shareholders' Equity
- Equity levels exhibited volatility during the analyzed period. A significant increase occurred between 2017 and 2018, followed by a sharp decline in 2019. From 2020 onward, a consistent growth pattern emerged, with equity rising from 6.3 billion USD in 2020 to 7.7 billion USD by 2022, suggesting a strengthening of the internal capital position.
- Invested Capital Trends
- The total invested capital reached a maximum of approximately 19.8 billion USD in 2018. A substantial reduction occurred in 2019, bringing the figure down to 17.0 billion USD, where it remained relatively stagnant through 2020. Between 2021 and 2022, invested capital grew moderately, ending the period at 18.2 billion USD. The overall movement reflects a shift in the capital structure, where the growth in shareholders' equity began to offset the reduction in reported debt and leases.
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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 | × | 15.00% | = | 11.56% | ||
| 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 | 12.19% | ||||||||||
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 | × | 15.00% | = | 10.75% | ||
| 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 | 11.63% | ||||||||||
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 | × | 15.00% | = | 9.53% | ||
| 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 | 10.73% | ||||||||||
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 | × | 15.00% | = | 10.53% | ||
| 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 | 11.46% | ||||||||||
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 | × | 15.00% | = | 9.79% | ||
| 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 | 10.89% | ||||||||||
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 | × | 15.00% | = | 8.81% | ||
| 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 | 9.99% | ||||||||||
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 | (597,660) | (370,632) | (646,001) | (3,062,792) | (524,873) | (728,127) | |
| 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 | -3.28% | -2.09% | -3.80% | -18.00% | -2.64% | -3.80% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | 5.07% | 3.48% | — | — | — | — | |
| Target Corp. | 8.83% | -0.64% | — | — | — | — | |
| Walmart Inc. | -0.85% | 0.61% | — | — | — | — | |
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 × -597,660 ÷ 18,201,900 = -3.28%
4 Click competitor name to see calculations.
The analyzed period from 2017 to 2022 is characterized by a consistent failure to generate positive economic value added, as economic profit remained negative throughout the entire timeframe. Performance was marked by significant volatility, particularly during the 2019 fiscal year, followed by a period of partial recovery and a subsequent slight decline in 2022.
- Economic Profit
- A persistent negative trend is observed, indicating that the returns generated did not cover the cost of capital. A severe contraction occurred in the period ending February 2, 2019, where economic profit fell to -3.06 billion US dollars. This was followed by a recovery phase, reaching the lowest deficit of -370.6 million US dollars by January 30, 2021, before deteriorating again to -597.7 million US dollars by January 29, 2022.
- Invested Capital
- Invested capital exhibited moderate fluctuations. After peaking at 19.8 billion US dollars in February 2018, the capital base contracted to approximately 17 billion US dollars during 2019 and 2020. A gradual upward trend resumed thereafter, with invested capital increasing to 18.2 billion US dollars by the end of the period.
- Economic Spread Ratio
- The economic spread ratio remained negative across all six years, confirming that the return on invested capital was consistently lower than the cost of capital. The ratio experienced an extreme trough of -18.00% in 2019, aligning with the peak in economic losses. The most favorable position was reached in 2021 at -2.09%, though this improved position was not sustained, as the ratio slipped to -3.28% in 2022.
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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 | (597,660) | (370,632) | (646,001) | (3,062,792) | (524,873) | (728,127) | |
| 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 | -2.27% | -1.45% | -2.74% | -13.42% | -2.36% | -3.51% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | 0.72% | 0.52% | — | — | — | — | |
| Target Corp. | 2.51% | -0.21% | — | — | — | — | |
| Walmart Inc. | -0.23% | 0.18% | — | — | — | — | |
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 × -597,660 ÷ 26,309,800 = -2.27%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2017 to 2022 reveals a consistent expansion in net sales alongside persistent negative economic profit, indicating that the cost of capital has consistently exceeded the net operating profit after tax.
- Net Sales Trajectory
- A steady upward trend in revenue is evident, with net sales increasing annually from $20.7 billion in 2017 to $26.3 billion by 2022. This growth represents a consistent expansion in top-line performance over the six-year period.
- Economic Profit Volatility
- Economic profit remained negative throughout the analyzed period, characterized by significant volatility. While there was a moderate improvement between 2017 and 2018, a substantial decline occurred in 2019, where economic profit dropped to negative $3.06 billion. A recovery trend followed in 2020 and 2021, reaching its highest point at negative $370.6 million, before retreating to negative $597.7 million in 2022.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the fluctuations of absolute economic profit. The margin moved from -3.51% in 2017 to a sharp low of -13.42% in 2019. The most favorable margin was recorded in 2021 at -1.45%, though this improved position weakened to -2.27% by 2022.
The divergence between increasing net sales and the inability to achieve a positive economic profit margin suggests that revenue growth has not been sufficient to offset the capital charges associated with operations during this period.
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