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
Expand Energy Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
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
= -723 – 10.14% × 22,822 = -3,038
A substantial erosion of economic value is evident over the four-year period analyzed, culminating in a transition from significant value creation to substantial value destruction by the end of 2024. The analysis reveals a critical divergence between the company's capital expansion and its operational profitability.
- Net Operating Profit After Taxes (NOPAT)
- A consistent and severe downward trend is observed in NOPAT. From a peak of US$ 6,263 million in 2021, operating profits declined steadily through 2023 before collapsing into a deficit of US$ 723 million in 2024. This indicates a significant deterioration in operational efficiency or a sharp decline in market demand and pricing power.
- Invested Capital
- Invested capital grew consistently throughout the period, increasing from US$ 7,990 million in 2021 to US$ 11,924 million in 2023. A dramatic escalation occurred in 2024, where invested capital nearly doubled to US$ 22,822 million. This suggests aggressive expansion or significant capital acquisitions during a period of declining operational returns.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 10.06% and 10.48%. The slight peak in 2023 followed by a minor decrease to 10.14% in 2024 suggests that the decline in economic profit was not driven by an increase in the required rate of return, but rather by the underlying operational and capital structure changes.
- Economic Profit
- Economic profit exhibits a sharp decline, moving from US$ 5,458 million in 2021 to a loss of US$ 3,038 million in 2024. The precipitous drop in 2024 is the result of a combined negative effect: the company faced negative NOPAT while simultaneously carrying a significantly larger capital base, which increased the total capital charge.
The data suggests a period of unsuccessful capital deployment. The sharp increase in invested capital in 2024 failed to generate proportional operating returns, instead coinciding with a shift to negative NOPAT. Consequently, the company is no longer covering its cost of capital, leading to a rapid destruction of shareholder wealth.
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Net Operating Profit after Taxes (NOPAT)
Expand Energy Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income (loss).
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 145 × 5.99% = 9
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 132 × 21.00% = 28
6 Addition of after taxes interest expense to net income (loss).
A consistent and significant deterioration in profitability is observed over the four-year period ending December 31, 2024. Both net income and net operating profit after taxes (NOPAT) exhibit a sharp downward trajectory, culminating in negative values by the end of the analyzed period.
- Net Income Trend
- Net income experienced a continuous decline from a peak of US$ 6,328 million in 2021 to a net loss of US$ 714 million in 2024. The most substantial contraction occurred between 2022 and 2023, where income fell by approximately 51%, followed by a transition into negative territory in the final year.
- NOPAT Performance
- Net operating profit after taxes followed a similar decelerating pattern, decreasing from US$ 6,263 million in 2021 to US$ -723 million in 2024. This represents a total erosion of operating profitability, with the most severe drop occurring between 2021 and 2022, and a final shift to an operating loss in 2024.
- Operational Profitability Analysis
- The convergence of net income and NOPAT into negative values in 2024 indicates a critical decline in the company's core operational efficiency. Because NOPAT is a primary component in calculating Economic Value Added (EVA), the shift to a negative NOPAT suggests that the company is failing to generate sufficient operating profit to cover its tax obligations, let alone provide a return on the capital employed.
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Cash Operating Taxes
Expand Energy Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The analysis of tax-related metrics indicates a period of high volatility and a notable divergence between accrual-based tax expenses and actual cash tax payments.
- Income Tax Expense Volatility
- Income tax expenses exhibited significant fluctuations between 2021 and 2024. The company recorded substantial tax benefits in 2021 and 2022, with the benefit peaking at 1,285 million US dollars in 2022. A reversal occurred in 2023, as the company recognized a positive tax expense of 698 million US dollars, before returning to a tax benefit of 127 million US dollars in 2024.
- Cash Operating Tax Trends
- Cash operating taxes followed an upward trajectory from 2021 through 2023, increasing from 18 million US dollars to a peak of 293 million US dollars. This growth trend was sharply reversed in 2024, where cash operating taxes decreased to 24 million US dollars, indicating a significant reduction in actual cash outflows for tax obligations in the final year of the period.
- Accrual versus Cash Divergence
- A consistent disconnect is observed between the reported income tax expense and the actual cash taxes paid. In 2022, a massive tax benefit was recognized for accounting purposes, yet 82 million US dollars in cash taxes were paid. Similarly, in 2024, a tax benefit was reported while 24 million US dollars in cash taxes were expended. This pattern suggests the influence of significant non-cash tax adjustments or the utilization of deferred tax assets, which is a critical consideration when adjusting accounting figures to determine economic value added.
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Invested Capital
Expand Energy Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
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 equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
Invested capital exhibits a consistent upward trajectory from 2021 through 2024, characterized by a period of moderate growth followed by a significant expansion in the final reporting year. Total invested capital rose from 7,990 million US$ in 2021 to 22,822 million US$ in 2024, reflecting a substantial increase in the capital base utilized to generate economic value.
- Equity Growth Analysis
- Stockholders' equity shows a continuous and strong positive trend, growing from 5,671 million US$ in 2021 to 17,565 million US$ by the end of 2024. This consistent rise suggests a strengthening of the company's net asset position and an increasing reliance on equity financing or retained earnings to support operations.
- Debt and Lease Obligations
- The trend for total reported debt and leases was inconsistent between 2021 and 2023, with a peak in 2022 at 3,212 million US$ followed by a contraction to 2,127 million US$ in 2023. This stability was interrupted in 2024 by a sharp increase to 5,825 million US$, indicating a significant shift toward leveraged financing in the most recent period.
- Invested Capital Acceleration
- While invested capital grew by approximately 49% between 2021 and 2023, the period between 2023 and 2024 saw an accelerated increase of 91.4%. This leap to 22,822 million US$ indicates a massive expansion of the firm's asset base, funded by a combination of the highest recorded levels of both debt and equity within the observed timeframe.
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Cost of Capital
Expand Energy Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 23,835) | 23,835) | ÷ | 29,528) | = | 0.81 | 0.81 | × | 11.52% | = | 9.30% | ||
| Debt3 | 5,548) | 5,548) | ÷ | 29,528) | = | 0.19 | 0.19 | × | 5.55% × (1 – 21.00%) | = | 0.82% | ||
| Operating lease liability4 | 145) | 145) | ÷ | 29,528) | = | 0.00 | 0.00 | × | 5.99% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 29,528) | 1.00 | 10.14% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,967) | 10,967) | ÷ | 13,009) | = | 0.84 | 0.84 | × | 11.52% | = | 9.71% | ||
| Debt3 | 1,943) | 1,943) | ÷ | 13,009) | = | 0.15 | 0.15 | × | 6.21% × (1 – 21.00%) | = | 0.73% | ||
| Operating lease liability4 | 99) | 99) | ÷ | 13,009) | = | 0.01 | 0.01 | × | 7.02% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 13,009) | 1.00 | 10.48% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,737) | 10,737) | ÷ | 13,783) | = | 0.78 | 0.78 | × | 11.52% | = | 8.97% | ||
| Debt3 | 2,927) | 2,927) | ÷ | 13,783) | = | 0.21 | 0.21 | × | 7.10% × (1 – 21.00%) | = | 1.19% | ||
| Operating lease liability4 | 119) | 119) | ÷ | 13,783) | = | 0.01 | 0.01 | × | 6.64% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 13,783) | 1.00 | 10.21% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,407) | 8,407) | ÷ | 10,758) | = | 0.78 | 0.78 | × | 11.52% | = | 9.00% | ||
| Debt3 | 2,313) | 2,313) | ÷ | 10,758) | = | 0.22 | 0.22 | × | 6.21% × (1 – 21.00%) | = | 1.05% | ||
| Operating lease liability4 | 38) | 38) | ÷ | 10,758) | = | 0.00 | 0.00 | × | 3.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 10,758) | 1.00 | 10.06% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Expand Energy Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (3,038) | 1,683) | 2,615) | 5,458) | |
| Invested capital2 | 22,822) | 11,924) | 10,988) | 7,990) | |
| Performance Ratio | |||||
| Economic spread ratio3 | -13.31% | 14.11% | 23.80% | 68.31% | |
| Benchmarks | |||||
| Economic Spread Ratio, Competitors4 | |||||
| Chevron Corp. | -3.16% | -3.78% | 6.72% | -2.40% | |
| ConocoPhillips | 0.90% | 6.55% | 19.29% | 4.98% | |
| ExxonMobil Holdings Corp. | -1.04% | 3.07% | 11.83% | 3.21% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,038 ÷ 22,822 = -13.31%
4 Click competitor name to see calculations.
The financial trajectory from 2021 to 2024 indicates a severe deterioration in value creation, characterized by a transition from substantial economic surplus to value destruction. This decline is marked by a simultaneous collapse in economic profit and a significant expansion of the capital base.
- Economic Profit Performance
- Economic profit experienced a consistent and accelerating decline over the analyzed period. From a peak of US$ 5,458 million in 2021, the figure dropped to US$ 2,615 million in 2022 and further to US$ 1,683 million in 2023. By December 31, 2024, economic profit transitioned into a deficit of US$ 3,038 million, signaling that the company ceased generating returns in excess of its cost of capital.
- Invested Capital Growth
- Invested capital demonstrated a strong upward trend, increasing from US$ 7,990 million in 2021 to US$ 11,924 million in 2023. A disproportionate surge occurred in 2024, where invested capital rose to US$ 22,822 million. This rapid expansion of the asset base occurred while profitability was declining, suggesting an inefficient allocation of capital or an acquisition-led expansion that has yet to yield economic returns.
- Economic Spread Ratio Analysis
- The economic spread ratio shows a dramatic contraction, falling from 68.31% in 2021 to 14.11% in 2023. The ratio reached a critical inflection point in 2024, dropping to -13.31%. This negative spread confirms that the return on invested capital is now lower than the cost of capital, leading to a net destruction of shareholder value during the final fiscal year.
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Economic Profit Margin
Expand Energy Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (3,038) | 1,683) | 2,615) | 5,458) | |
| Revenues | 4,259) | 6,047) | 14,123) | 7,301) | |
| Performance Ratio | |||||
| Economic profit margin2 | -71.33% | 27.83% | 18.52% | 74.76% | |
| Benchmarks | |||||
| Economic Profit Margin, Competitors3 | |||||
| Chevron Corp. | -3.41% | -4.08% | 6.05% | -2.98% | |
| ConocoPhillips | 1.76% | 9.48% | 18.56% | 8.30% | |
| ExxonMobil Holdings Corp. | -1.16% | 2.82% | 8.82% | 3.16% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -3,038 ÷ 4,259 = -71.33%
3 Click competitor name to see calculations.
The financial performance from 2021 to 2024 reflects a severe deterioration in the ability to generate economic value. The company transitioned from a position of high economic profitability to significant economic value destruction by the end of the period.
- Economic Profit
- A steady decline in economic profit is observed, falling from US$ 5,458 million in 2021 to US$ 2,615 million in 2022 and US$ 1,683 million in 2023. This trend culminated in a deficit of US$ 3,038 million in 2024, signifying that the net operating profit after tax is insufficient to cover the cost of invested capital.
- Revenue Performance
- Revenues displayed significant volatility, peaking at US$ 14,123 million in 2022 before entering a period of rapid contraction. By December 31, 2024, revenues had decreased to US$ 4,259 million, representing a substantial decline from the 2022 peak and a decrease relative to 2021 levels.
- Economic Profit Margin
- The economic profit margin showed extreme fluctuations, starting at 74.76% in 2021 and dropping sharply to 18.52% in 2022. Despite a temporary improvement to 27.83% in 2023, the margin crashed to -71.33% in 2024. The inverse relationship between the revenue peak in 2022 and the corresponding drop in margin suggests that the expansion in scale during that year did not translate into efficient economic value creation.
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