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
Expedia Group Inc., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,614 – 19.65% × 17,498 = -824
The analysis of economic value added between 2017 and 2021 reveals a consistent failure to generate positive economic profit, indicating that the returns on invested capital did not exceed the company's cost of capital throughout the period. While there was a general trajectory toward value creation prior to 2020 and a significant recovery in 2021, the organization remained in a state of economic value destruction.
- Net Operating Profit After Taxes (NOPAT)
- A growth trend was observed from 2017 to 2019, with NOPAT increasing from 1,026 million to 1,922 million. This positive momentum was abruptly reversed in 2020, where NOPAT fell to a deficit of 5,503 million. A sharp recovery occurred in 2021, with NOPAT reaching a period high of 2,614 million, signaling a return to operational profitability.
- Invested Capital and Cost of Capital
- Invested capital exhibited a steady upward trend, growing from 14,039 million in 2017 to 17,498 million in 2021, despite a marginal contraction in 2020. The cost of capital remained relatively stable, fluctuating within a narrow range between 17.95% and 20.98%. The combination of a high cost of capital and an increasing capital base created a significant financial hurdle for achieving a positive economic profit.
- Economic Profit Trajectory
- Economic profit remained negative for all five years. From 2017 to 2019, the economic loss narrowed from 1,733 million to 1,239 million, suggesting improving capital efficiency. This progress was erased in 2020, when the economic loss widened dramatically to 8,332 million. By 2021, the economic loss was reduced to 824 million, the lowest level in the analyzed period, although the result still indicates that the operational returns were insufficient to cover the cost of the capital employed.
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Net Operating Profit after Taxes (NOPAT)
Expedia Group Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in deferred merchant bookings and deferred revenue.
4 Addition of increase (decrease) in restructuring and related reorganization accrued liability.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Expedia Group, Inc..
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437 × 3.50% = 15
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 366 × 21.00% = 77
8 Addition of after taxes interest expense to net income (loss) attributable to Expedia Group, Inc..
9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9 × 21.00% = 2
10 Elimination of after taxes investment income.
The financial performance from 2017 through 2021 is characterized by a period of steady expansion, a severe contraction in 2020, and a divergent recovery in 2021. The data reveals a significant volatility in both bottom-line profitability and core operating performance, with the latter showing a more robust rebound following the 2020 downturn.
- Net Income Trends
- A consistent growth pattern was observed between 2017 and 2019, with net income increasing from 378 million US$ to 565 million US$. This trend was abruptly reversed in 2020, resulting in a substantial loss of 2,612 million US$. By 2021, the company returned to a positive position, although the net income of 12 million US$ represents only a marginal recovery compared to pre-2020 levels.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT exhibited a strong upward trajectory in the initial three years, rising from 1,026 million US$ in 2017 to a peak of 1,922 million US$ in 2019. The contraction in 2020 was more pronounced for NOPAT than for net income, with a deficit reaching 5,503 million US$. However, a significant recovery occurred in 2021, with NOPAT climbing to 2,614 million US$, surpassing all previous years in the analyzed period.
- Comparative Operating Performance
- A significant divergence is observed between operating profitability and net income, particularly in 2021. While NOPAT reached its five-year high of 2,614 million US$, net income remained near the break-even point at 12 million US$. This discrepancy indicates that while the core operations regained and exceeded their previous profitability, non-operating expenses or other financial obligations continued to exert substantial downward pressure on the final net profit.
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Cash Operating Taxes
Expedia Group Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
An analysis of tax dynamics from 2017 to 2021 reveals a significant divergence between accrual-based income tax expenses and actual cash operating tax outflows. While income tax expenses transitioned from positive charges to tax benefits in the latter portion of the period, cash tax payments remained positive, indicating a decoupling of accounting tax figures from immediate cash liquidity requirements.
- Income Tax Expense Trends
- From 2017 to 2019, income tax expenses demonstrated a consistent upward trajectory, increasing from US$ 45 million to US$ 203 million. This trend reversed sharply in 2020, when the company recorded a tax benefit of US$ 423 million, followed by a smaller benefit of US$ 53 million in 2021.
- Cash Operating Tax Patterns
- Cash operating taxes experienced a peak in 2018 at US$ 427 million. Following this peak, a downward trend occurred, with outflows decreasing to US$ 323 million in 2019 and reaching a period low of US$ 142 million in 2020, before slightly recovering to US$ 167 million in 2021.
- Analysis of Accrual vs. Cash Divergence
- A pronounced disparity between the two metrics is evident in 2020 and 2021. During these years, the company reported negative income tax expenses (tax benefits), yet continued to incur positive cash operating tax payments. This gap suggests that the accounting benefits were driven by non-cash adjustments, such as the recognition of deferred tax assets or valuation allowances, which did not translate into cash inflows during those fiscal years.
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Invested Capital
Expedia Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
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 merchant bookings and deferred revenue.
5 Addition of restructuring and related reorganization accrued liability.
6 Addition of equity equivalents to total Expedia Group, Inc. stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of projects in progress.
9 Subtraction of investments.
The overall trajectory of invested capital exhibits a general upward trend between 2017 and 2021, increasing from US$ 14,039 million to US$ 17,498 million. While there was a marginal contraction in 2020, the capital base reached its peak at the end of the analysis period, indicating an expansion in the total resources deployed to generate economic value.
- Debt and Lease Obligations
- A significant increase in total reported debt and leases is observed, particularly starting in 2020. After remaining relatively stable between 2017 and 2019, debt levels surged from US$ 5,589 million in 2019 to US$ 8,855 million in 2020, maintaining a high plateau of US$ 8,887 million by 2021. This represents an approximate 80% increase over the five-year period.
- Stockholders' Equity
- A consistent downward trend is evident in stockholders' equity. The balance declined from US$ 4,522 million in 2017 to US$ 2,057 million in 2021. The most pronounced reductions occurred between 2019 and 2021, where equity fell by more than 48%, signaling a substantial reduction in the equity portion of the capital structure.
- Capital Structure Composition
- The growth in total invested capital was primarily driven by debt accumulation rather than equity contributions. An inverse relationship is observable between debt and equity; as stockholders' equity eroded, the organization increasingly relied on debt and leases to sustain and expand its invested capital base. This shift indicates a transition toward a more highly leveraged financial position by the end of 2021.
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Cost of Capital
Expedia Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,924) | 29,924) | ÷ | 39,561) | = | 0.76 | 0.76 | × | 25.07% | = | 18.96% | ||
| Series A Preferred Stock | —) | —) | ÷ | 39,561) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 9,200) | 9,200) | ÷ | 39,561) | = | 0.23 | 0.23 | × | 3.57% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 437) | 437) | ÷ | 39,561) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 39,561) | 1.00 | 19.65% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 21,078) | 21,078) | ÷ | 31,839) | = | 0.66 | 0.66 | × | 25.07% | = | 16.60% | ||
| Series A Preferred Stock | 1,022) | 1,022) | ÷ | 31,839) | = | 0.03 | 0.03 | × | 7.34% | = | 0.24% | ||
| Long-term debt, including current maturities3 | 9,100) | 9,100) | ÷ | 31,839) | = | 0.29 | 0.29 | × | 4.68% × (1 – 21.00%) | = | 1.06% | ||
| Operating lease liability4 | 639) | 639) | ÷ | 31,839) | = | 0.02 | 0.02 | × | 3.60% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 31,839) | 1.00 | 17.95% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,191) | 17,191) | ÷ | 22,961) | = | 0.75 | 0.75 | × | 25.07% | = | 18.77% | ||
| Series A Preferred Stock | —) | —) | ÷ | 22,961) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 5,119) | 5,119) | ÷ | 22,961) | = | 0.22 | 0.22 | × | 4.05% × (1 – 21.00%) | = | 0.71% | ||
| Operating lease liability4 | 651) | 651) | ÷ | 22,961) | = | 0.03 | 0.03 | × | 3.50% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 22,961) | 1.00 | 19.56% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,252) | 19,252) | ÷ | 23,739) | = | 0.81 | 0.81 | × | 25.07% | = | 20.33% | ||
| Series A Preferred Stock | —) | —) | ÷ | 23,739) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 3,728) | 3,728) | ÷ | 23,739) | = | 0.16 | 0.16 | × | 4.31% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 759) | 759) | ÷ | 23,739) | = | 0.03 | 0.03 | × | 4.31% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 23,739) | 1.00 | 20.98% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,791) | 15,791) | ÷ | 20,941) | = | 0.75 | 0.75 | × | 25.07% | = | 18.90% | ||
| Series A Preferred Stock | —) | —) | ÷ | 20,941) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 4,458) | 4,458) | ÷ | 20,941) | = | 0.21 | 0.21 | × | 4.66% × (1 – 35.00%) | = | 0.64% | ||
| Operating lease liability4 | 692) | 692) | ÷ | 20,941) | = | 0.03 | 0.03 | × | 4.66% × (1 – 35.00%) | = | 0.10% | ||
| Total: | 20,941) | 1.00 | 19.65% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Expedia Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (824) | (8,332) | (1,239) | (1,676) | (1,733) | |
| Invested capital2 | 17,498) | 15,765) | 16,161) | 14,424) | 14,039) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.71% | -52.85% | -7.67% | -11.62% | -12.34% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Amazon.com Inc. | -1.96% | — | — | — | — | |
| Home Depot Inc. | 12.21% | — | — | — | — | |
| Lowe’s Cos. Inc. | 9.18% | — | — | — | — | |
| TJX Cos. Inc. | -12.60% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -824 ÷ 17,498 = -4.71%
4 Click competitor name to see calculations.
The analysis of the economic value added metrics reveals a period of consistent value destruction, as economic profit remained negative from 2017 through 2021. While there were fluctuations in the magnitude of these losses, the entity failed to generate returns exceeding its cost of capital throughout the observed timeframe.
- Economic Profit Trends
- Economic profit exhibited a gradual improvement between 2017 and 2019, with losses narrowing from US$ 1,733 million to US$ 1,239 million. However, a severe contraction occurred in 2020, where economic profit plummeted to a deficit of US$ 8,332 million. A significant recovery was observed by the end of 2021, as the loss narrowed to US$ 824 million, the lowest deficit recorded in the five-year period.
- Invested Capital Growth
- Invested capital demonstrated a general upward trajectory, increasing from US$ 14,039 million in 2017 to US$ 17,498 million in 2021. Despite a marginal decrease in 2020 to US$ 15,765 million, the overall trend indicates a sustained expansion of the capital base utilized to generate returns.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative throughout the period, reflecting the gap between the return on invested capital and the cost of capital. The ratio improved from -12.34% in 2017 to -7.67% in 2019 before experiencing a drastic decline to -52.85% in 2020. By 2021, the ratio recovered significantly to -4.71%, suggesting a substantial reduction in the spread deficit and a movement toward economic break-even.
Overall, the data indicates a period of high volatility centered around 2020, followed by a strong recovery in 2021. Although the economic spread ratio is trending toward positive territory, the persistent negative economic profit underscores a continuing challenge in achieving value creation relative to the cost of invested capital.
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Economic Profit Margin
Expedia Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (824) | (8,332) | (1,239) | (1,676) | (1,733) | |
| Revenue | 8,598) | 5,199) | 12,067) | 11,223) | 10,060) | |
| Add: Increase (decrease) in deferred merchant bookings and deferred revenue | 2,575) | (2,721) | 1,309) | 1,146) | 645) | |
| Adjusted revenue | 11,173) | 2,478) | 13,376) | 12,369) | 10,705) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.38% | -336.23% | -9.27% | -13.55% | -16.19% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Amazon.com Inc. | -0.84% | — | — | — | — | |
| Home Depot Inc. | 4.60% | — | — | — | — | |
| Lowe’s Cos. Inc. | 2.91% | — | — | — | — | |
| TJX Cos. Inc. | -8.77% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -824 ÷ 11,173 = -7.38%
3 Click competitor name to see calculations.
The analysis of economic profit and margins from 2017 to 2021 reveals a consistent inability to generate value above the cost of capital, though the magnitude of this deficit fluctuated significantly due to external market shocks and subsequent recovery.
- Economic Profit Trend
- Between 2017 and 2019, economic profit showed a steady trend of improvement, narrowing from a loss of 1,733 million US$ to 1,239 million US$. This positive trajectory was sharply reversed in 2020, where economic profit plummeted to a deficit of 8,332 million US$. By 2021, a substantial recovery occurred, with the loss reducing to 824 million US$, the lowest absolute deficit within the analyzed five-year period.
- Adjusted Revenue Volatility
- Revenue growth was consistent from 2017 through 2019, peaking at 13,376 million US$. The year 2020 marked a severe contraction, with revenue falling to 2,478 million US$, a decline of approximately 81% from the previous year. This collapse in revenue was the primary driver of the expanded economic losses during that period. Revenue rebounded strongly in 2021 to 11,173 million US$, returning to levels near the 2017 baseline.
- Economic Profit Margin Performance
- The economic profit margin remained negative throughout the entire period, indicating that the business did not achieve an economic surplus. From 2017 to 2019, the margin improved from -16.19% to -9.27%. The extreme volatility of 2020 resulted in an outlier margin of -336.23%, reflecting a state where the cost of capital and operating losses vastly outweighed the diminished revenue stream. In 2021, the margin improved to -7.38%, representing the most efficient utilization of capital relative to revenue in the given timeframe.
The data indicates a high sensitivity to revenue fluctuations, where the narrow gap between adjusted revenue and the cost of capital makes the economic profit margin highly volatile during periods of market instability. However, the 2021 results suggest a trajectory toward breaking even on an economic basis.
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