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 – 12.18% × 18,201,900 = -594,831
The financial performance between January 2017 and January 2022 is characterized by a consistent failure to generate positive economic profit, indicating that the return on invested capital remained below the cost of capital throughout the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, beginning at 1.19 billion USD in 2017 and reaching a peak of 1.69 billion USD in 2021. A severe contraction is observed in February 2019, where NOPAT fell to -1.11 billion USD, before recovering to levels exceeding 1.1 billion USD in subsequent years.
- Cost of Capital
- A steady upward trend is observed in the cost of capital, which climbed from 9.98% in January 2017 to 12.18% by January 2022. This persistent increase raises the financial hurdle required to achieve positive economic value added.
- Invested Capital
- Invested capital remained relatively stable across the six-year period, fluctuating between a high of 19.85 billion USD in 2018 and a low of 16.99 billion USD in 2020. The period closed with invested capital at 18.20 billion USD.
- Economic Profit
- Economic profit remained negative for every reported year, signaling consistent value destruction. The most substantial deficit occurred in February 2019, reaching -3.06 billion USD, which aligns with the sharp decline in NOPAT. While there was a notable improvement in January 2021, where the deficit narrowed to -368 million USD, the economic profit declined again to -594 million USD by January 2022.
The combination of rising capital costs and unstable operating profits has prevented the transition to positive economic value creation. The data indicates that despite recoveries in operating profit after 2019, the earnings were insufficient to cover the cost of the capital employed.
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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 | × | 14.98% | = | 11.55% | ||
| 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 | 12.18% | ||||||||||
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 | × | 14.98% | = | 10.73% | ||
| 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 | 11.61% | ||||||||||
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 | × | 14.98% | = | 9.52% | ||
| 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 | 10.72% | ||||||||||
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 | × | 14.98% | = | 10.52% | ||
| 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 | 11.45% | ||||||||||
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 | × | 14.98% | = | 9.78% | ||
| 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 | 10.88% | ||||||||||
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 | × | 14.98% | = | 8.80% | ||
| 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 | 9.98% | ||||||||||
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 | (594,831) | (368,075) | (643,825) | (3,060,383) | (522,259) | (725,856) | |
| 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 | -3.27% | -2.08% | -3.79% | -17.99% | -2.63% | -3.79% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | 5.78% | 4.18% | 0.42% | — | — | — | |
| Target Corp. | 8.82% | -0.66% | — | — | — | — | |
| Walmart Inc. | -0.81% | 0.65% | — | — | — | — | |
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 × -594,831 ÷ 18,201,900 = -3.27%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2022 is characterized by a persistent inability to generate positive economic value. Throughout the observed period, economic profit remained consistently negative, signifying that the company's returns did not exceed its cost of capital.
- Economic Profit Volatility
- Economic profit exhibited significant fluctuations, starting at -725.8 million US$ in 2017. A severe contraction occurred in 2019, where losses widened to -3.06 billion US$. This was followed by a notable recovery period, with losses narrowing to -368.1 million US$ by 2021, before increasing again to -594.8 million US$ in 2022.
- Invested Capital Trends
- The capital base remained relatively stable over the six-year period, oscillating between a peak of approximately 19.85 billion US$ in 2018 and a trough of 16.99 billion US$ in 2020. In the final two years, invested capital showed a gradual upward trend, ending at 18.2 billion US$ in 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio remained in negative territory for the entire duration, reflecting a consistent deficit between the actual return on invested capital and the cost of that capital. The ratio reached its lowest point in 2019 at -17.99%, aligning with the period of maximum economic loss. The most efficient performance was recorded in 2021, when the spread narrowed to its least negative value of -2.08%.
The correlation between the economic profit and the economic spread ratio suggests that the 2019 downturn was a significant anomaly relative to the overall trend. While the company improved its economic position between 2020 and 2021, the return to a wider negative spread in 2022 indicates ongoing challenges in achieving economic value added.
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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 | (594,831) | (368,075) | (643,825) | (3,060,383) | (522,259) | (725,856) | |
| 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 | -2.26% | -1.44% | -2.73% | -13.41% | -2.35% | -3.50% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | 0.82% | 0.62% | 0.07% | — | — | — | |
| Target Corp. | 2.51% | -0.21% | — | — | — | — | |
| Walmart Inc. | -0.22% | 0.19% | — | — | — | — | |
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 × -594,831 ÷ 26,309,800 = -2.26%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2017 to 2022 reveals a sustained period of economic value erosion, as economic profit remained consistently negative throughout the observed timeframe. Despite a steady and uninterrupted increase in net sales, which grew from $20.72 billion in 2017 to $26.31 billion in 2022, the company failed to generate returns exceeding its cost of capital.
- Economic Profit Volatility
- Economic profit exhibited significant fluctuations, characterized by a severe contraction in 2019, where losses reached $3.06 billion. This represented the lowest point in the analyzed period. A partial recovery followed in 2020 and 2021, with the deficit narrowing to $368.1 million in 2021, before widening again to $594.8 million in 2022.
- Economic Profit Margin Trends
- The economic profit margin remained negative for all six years, reflecting a systemic inability to create economic value relative to sales. The margin experienced a sharp decline to -13.41% in 2019, coinciding with the peak in economic loss. The most favorable margin was recorded in 2021 at -1.44%, though it subsequently deteriorated to -2.26% by 2022.
- Sales Growth vs. Value Creation
- A clear divergence is observable between revenue expansion and economic profitability. While net sales increased by approximately 27% over the period, the persistence of a negative economic profit margin indicates that the growth in scale did not translate into a positive economic return. The inability to shift the margin into positive territory suggests that the capital employed to drive sales growth is not yielding returns sufficient to cover the cost of that capital.
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