Economic Value Added (EVA)
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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
Express Scripts Holding Co., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,274,103 – 12.63% × 37,007,152 = -1,399,220
Between 2013 and 2017, a consistent trend of negative economic profit is observed, although the magnitude of these losses diminished significantly until 2016 before experiencing a slight reversal in the final year.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory in NOPAT is evident from 2013 to 2016, with values increasing from 1,817,712 thousand to 3,375,341 thousand. This growth indicates a period of improving operational profitability. However, a slight decline occurred in 2017, with NOPAT retreating to 3,274,103 thousand.
- Invested Capital and Cost of Capital
- Invested capital demonstrated a steady decline from 41,289,230 thousand in 2013 to a low of 35,712,343 thousand in 2016, suggesting an optimization of the capital base. In 2017, this trend reversed as invested capital increased to 37,007,152 thousand. The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 12.56% and 13.81%.
- Economic Profit Trajectory
- Economic profit remained negative throughout the analyzed period, signaling that the returns generated from operations were insufficient to cover the cost of invested capital. The economic loss narrowed from 3,816,391 thousand in 2013 to 1,111,548 thousand in 2016, driven by the dual effect of rising NOPAT and a reducing capital base. In 2017, the economic profit widened to a loss of 1,399,220 thousand, resulting from the simultaneous decrease in NOPAT and the increase in invested capital.
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Net Operating Profit after Taxes (NOPAT)
Express Scripts Holding Co., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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 attributable to Express Scripts.
4 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 236,952 × 3.81% = 9,028
5 2017 Calculation
Tax benefit of interest expense and other = Adjusted interest expense and other × Statutory income tax rate
= 616,928 × 35.00% = 215,925
6 Addition of after taxes interest expense to net income attributable to Express Scripts.
7 Elimination of discontinued operations.
Between 2013 and 2017, there was a general upward trajectory in both net income and net operating profit after taxes (NOPAT), although a notable divergence occurred in the final year of the period.
- Net Income Growth Trends
- Net income attributable to Express Scripts exhibited consistent and accelerating growth over the five-year period. Starting at 1.84 billion US$ in 2013, the figure rose steadily to 4.52 billion US$ by 2017. The most significant increases occurred between 2015 and 2017, indicating a strong expansion in overall bottom-line profitability.
- NOPAT Performance and Volatility
- NOPAT followed a positive growth trend from 2013 through 2016, rising from 1.82 billion US$ to a peak of 3.38 billion US$. However, this momentum reversed in 2017, when NOPAT decreased to 3.27 billion US$. This represents a deviation from the growth pattern observed in the previous four years.
- Comparative Analysis of Operational vs. Total Profitability
- A critical divergence is observed in 2017. While net income continued to climb significantly, NOPAT declined. Because NOPAT focuses specifically on core operational performance by excluding non-operating financial items, this gap suggests that the 2017 increase in net income was driven by non-operating factors rather than improvements in core business operations. The alignment between the two metrics from 2013 to 2016 indicates that operational gains were the primary drivers of profitability during the earlier part of the period.
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Cash Operating Taxes
Express Scripts Holding Co., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
The analysis of tax expenditures from 2013 to 2017 reveals a persistent divergence between accounting tax provisions and actual cash operating taxes. While the provision for income taxes showed a general downward trajectory toward the end of the period, cash operating taxes remained volatile and reached their peak in the final year, creating a widening gap between reported tax expenses and actual cash outflows.
- Provision for Income Taxes Trend
- The provision for income taxes exhibited significant volatility, peaking at 1,364,300 thousand US$ in 2015. Following this peak, a sharp decline occurred, with the provision falling to 999,500 thousand US$ in 2016 and further dropping to a period low of 397,300 thousand US$ in 2017. This represents a substantial reduction in recognized tax expenses on the income statement over the final three years.
- Cash Operating Taxes Trend
- Cash operating taxes fluctuated throughout the period, beginning at 1,890,614 thousand US$ in 2013 and dipping to 1,669,615 thousand US$ in 2014. A recovery followed in 2015, with values reaching 2,004,540 thousand US$, before another dip in 2016. In 2017, cash operating taxes rose to their highest level in the analyzed period, totaling 2,292,125 thousand US$.
- Analysis of Tax Divergence
- A consistent pattern is observed where cash operating taxes exceed the provision for income taxes in every year analyzed. This disparity became most acute in 2017, where cash taxes were approximately 5.7 times higher than the tax provision. From an Economic Value Added (EVA) perspective, the reliance on cash operating taxes rather than accounting provisions indicates a higher actual tax burden on cash flow than what is reflected in the net income figures, which would negatively impact the calculation of after-tax operating profit.
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Invested Capital
Express Scripts Holding Co., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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 total Express Scripts stockholders’ equity.
5 Removal of accumulated other comprehensive income.
Between 2013 and 2017, invested capital exhibited a general downward trajectory for the first four years before experiencing a moderate recovery in the final period. The total invested capital peaked at 41,289,230 thousand US dollars in 2013 and reached its lowest point of 35,712,343 thousand US dollars in 2016, representing a cumulative contraction of approximately 13.4% over that interval. A reversal of this trend occurred in 2017, with invested capital increasing to 37,007,152 thousand US dollars.
- Invested Capital Dynamics
- The fluctuation in invested capital is characterized by a consistent year-over-year decline from 2013 through 2016. This suggests a period of capital reduction or optimization. The subsequent increase in 2017 indicates a shift toward renewed capital investment or a change in the financing structure.
- Stockholders' Equity Analysis
- Stockholders' equity served as the primary driver for the reduction in invested capital between 2013 and 2016. Equity declined steadily from 21,837,400 thousand US dollars to 16,236,000 thousand US dollars. This significant reduction in the equity base suggests potential activities such as aggressive share repurchases or dividend distributions that exceeded retained earnings. A recovery was noted in 2017, where equity rose to 18,119,600 thousand US dollars.
- Debt and Lease Obligations
- In contrast to the equity trend, total reported debt and leases remained relatively stable with a gradual upward bias. After a slight dip in 2014 to 13,862,809 thousand US dollars, debt increased steadily to 16,251,352 thousand US dollars by 2017. The growth in debt obligations during the periods when equity was declining suggests a shift in the capital structure toward a higher proportion of debt financing to sustain operations or fund capital requirements.
- Capital Structure Correlation
- The divergence between declining equity and rising debt from 2014 to 2017 indicates a strategic shift in how the company's assets were financed. While the total invested capital decreased until 2016, the increasing reliance on debt implies an increase in financial leverage during the mid-period of the analysis.
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Cost of Capital
Express Scripts Holding Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,380,248) | 44,380,248) | ÷ | 60,978,400) | = | 0.73 | 0.73 | × | 16.42% | = | 11.95% | ||
| Debt3 | 16,361,200) | 16,361,200) | ÷ | 60,978,400) | = | 0.27 | 0.27 | × | 3.81% × (1 – 35.00%) | = | 0.66% | ||
| Operating lease liability4 | 236,952) | 236,952) | ÷ | 60,978,400) | = | 0.00 | 0.00 | × | 3.81% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 60,978,400) | 1.00 | 12.63% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,176,284) | 42,176,284) | ÷ | 58,225,826) | = | 0.72 | 0.72 | × | 16.42% | = | 11.90% | ||
| Debt3 | 15,808,800) | 15,808,800) | ÷ | 58,225,826) | = | 0.27 | 0.27 | × | 3.72% × (1 – 35.00%) | = | 0.66% | ||
| Operating lease liability4 | 240,743) | 240,743) | ÷ | 58,225,826) | = | 0.00 | 0.00 | × | 3.72% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 58,225,826) | 1.00 | 12.56% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,861,358) | 45,861,358) | ÷ | 62,116,744) | = | 0.74 | 0.74 | × | 16.42% | = | 12.13% | ||
| Debt3 | 15,988,600) | 15,988,600) | ÷ | 62,116,744) | = | 0.26 | 0.26 | × | 3.25% × (1 – 35.00%) | = | 0.54% | ||
| Operating lease liability4 | 266,786) | 266,786) | ÷ | 62,116,744) | = | 0.00 | 0.00 | × | 3.25% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 62,116,744) | 1.00 | 12.68% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 63,036,595) | 63,036,595) | ÷ | 77,531,603) | = | 0.81 | 0.81 | × | 16.42% | = | 13.35% | ||
| Debt3 | 14,200,200) | 14,200,200) | ÷ | 77,531,603) | = | 0.18 | 0.18 | × | 3.78% × (1 – 35.00%) | = | 0.45% | ||
| Operating lease liability4 | 294,809) | 294,809) | ÷ | 77,531,603) | = | 0.00 | 0.00 | × | 3.78% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 77,531,603) | 1.00 | 13.81% | ||||||||||
Based on: 10-K (reporting date: 2014-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 59,847,588) | 59,847,588) | ÷ | 74,732,117) | = | 0.80 | 0.80 | × | 16.42% | = | 13.15% | ||
| Debt3 | 14,562,800) | 14,562,800) | ÷ | 74,732,117) | = | 0.19 | 0.19 | × | 3.80% × (1 – 35.00%) | = | 0.48% | ||
| Operating lease liability4 | 321,730) | 321,730) | ÷ | 74,732,117) | = | 0.00 | 0.00 | × | 3.80% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 74,732,117) | 1.00 | 13.65% | ||||||||||
Based on: 10-K (reporting date: 2013-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Express Scripts Holding Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (1,399,220) | (1,111,548) | (2,453,090) | (3,381,547) | (3,816,391) | |
| Invested capital2 | 37,007,152) | 35,712,343) | 37,411,086) | 38,622,209) | 41,289,230) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -3.78% | -3.11% | -6.56% | -8.76% | -9.24% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,399,220 ÷ 37,007,152 = -3.78%
4 Click competitor name to see calculations.
The analysis of economic value added metrics from 2013 to 2017 reveals a period of consistent negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital. However, a sustained trend of improvement was evident between 2013 and 2016, followed by a marginal reversal in 2017.
- Economic Profit Trends
- Economic profit demonstrated a steady recovery from 2013 to 2016, with the deficit narrowing from -3,816,391 thousand US dollars to -1,111,548 thousand US dollars. This trend indicates an improvement in the company's ability to generate value relative to its capital costs. This positive trajectory was interrupted in 2017, as economic profit declined to -1,399,220 thousand US dollars.
- Invested Capital Dynamics
- Invested capital followed a downward trajectory from 2013 to 2016, decreasing from 41,289,230 thousand US dollars to 35,712,343 thousand US dollars. This reduction suggests a phase of capital optimization or asset reduction. In 2017, a shift occurred as invested capital increased to 37,007,152 thousand US dollars, which correlates with the observed dip in economic profit for the same period.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the period, confirming that the return on invested capital stayed below the cost of capital. There was a significant narrowing of the negative spread from -9.24% in 2013 to -3.11% in 2016, reflecting improved capital efficiency. This improvement was slightly offset in 2017, with the ratio widening to -3.78%.
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Economic Profit Margin
Express Scripts Holding Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (1,399,220) | (1,111,548) | (2,453,090) | (3,381,547) | (3,816,391) | |
| Revenues | 100,064,600) | 100,287,500) | 101,751,800) | 100,887,100) | 104,098,800) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.40% | -1.11% | -2.41% | -3.35% | -3.67% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -1,399,220 ÷ 100,064,600 = -1.40%
3 Click competitor name to see calculations.
Between 2013 and 2017, the company consistently reported negative economic profit, indicating that returns were insufficient to cover the cost of capital. However, a general trend of improvement was observed for most of the period, as the magnitude of the economic loss decreased before experiencing a slight reversal in the final year.
- Economic Profit Trends
- Economic profit showed a consistent upward trajectory from 2013 to 2016, improving from -3,816,391 thousand USD to -1,111,548 thousand USD. This represents a significant reduction in the value deficit. This positive momentum shifted in 2017, when economic profit declined to -1,399,220 thousand USD.
- Revenue Stability
- Revenues remained relatively stagnant throughout the five-year period, fluctuating within a narrow range between approximately 100 billion USD and 104 billion USD. The lack of significant top-line growth suggests that the improvements in economic profit through 2016 were likely driven by operational efficiencies or capital structure optimizations rather than revenue expansion.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the trend of absolute economic profit, narrowing from -3.67% in 2013 to -1.11% in 2016. The subsequent decline to -1.40% in 2017 indicates a marginal erosion of the progress made in closing the gap between operating returns and the cost of capital.
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