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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Express Scripts Holding Co., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹	3,274,103)	3,375,341)	2,290,431)	1,953,528)	1,817,712)
Cost of capital²	12.54%	12.48%	12.59%	13.72%	13.55%
Invested capital³	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)

Economic profit⁴	(1,368,196)	(1,081,751)	(2,421,274)	(3,345,376)	(3,778,304)

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 – 12.54% × 37,007,152 = -1,368,196

An analysis of the economic profit from 2013 to 2017 reveals a persistent inability to generate returns exceeding the cost of capital. However, a sustained improvement in the economic profit trajectory is evident through 2016, as the deficit narrowed significantly before experiencing a slight reversal in the final year of the period.

Net Operating Profit After Taxes (NOPAT): NOPAT exhibited a strong upward trend for the majority of the period, increasing from 1.82 billion US$ in 2013 to a peak of 3.38 billion US$ in 2016. This represents a substantial growth in operational profitability. A minor decline occurred in 2017, with NOPAT settling at 3.27 billion US$.
Invested Capital and Cost of Capital: Invested capital followed a downward trajectory from 2013 to 2016, decreasing from 41.29 billion US$ to 35.71 billion US$, suggesting a reduction in the capital base required to support operations. The cost of capital remained relatively stable, fluctuating within a narrow range between 12.48% and 13.72%, with a general trend toward lower rates following 2014.
Economic Profit Trends: Economic profit remained negative throughout the entire five-year period, indicating that the company did not achieve its required rate of return on invested capital. Despite the negative values, the economic loss decreased steadily from 3.78 billion US$ in 2013 to 1.08 billion US$ in 2016. This improvement was driven by the simultaneous increase in NOPAT and the decrease in invested capital. The trend reversed in 2017, as economic profit declined back to negative 1.37 billion US$, coinciding with a slight increase in invested capital and a decrease in NOPAT.

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Express Scripts Holding Co., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net income attributable to Express Scripts	4,517,400)	3,404,400)	2,476,400)	2,007,600)	1,844,600)
Deferred income tax expense (benefit)¹	(1,678,900)	(497,400)	(462,100)	(430,500)	(573,700)
Increase (decrease) in allowance for doubtful accounts²	20,300)	(12,300)	(77,800)	(37,100)	69,700)
Increase (decrease) in equity equivalents³	(1,658,600)	(509,700)	(539,900)	(467,600)	(504,000)
Interest expense and other	607,900)	694,800)	500,300)	582,900)	596,100)
Interest expense, operating lease liability⁴	9,028)	8,956)	8,671)	11,144)	12,226)
Adjusted interest expense and other	616,928)	703,756)	508,971)	594,044)	608,326)
Tax benefit of interest expense and other⁵	(215,925)	(246,314)	(178,140)	(207,915)	(212,914)
Adjusted interest expense and other, after taxes⁶	401,003)	457,441)	330,831)	386,128)	395,412)
(Income) loss from discontinued operations, net of tax⁷	—)	—)	—)	—)	53,600)
Net income (loss) attributable to noncontrolling interest	14,300)	23,200)	23,100)	27,400)	28,100)
Net operating profit after taxes (NOPAT)	3,274,103)	3,375,341)	2,290,431)	1,953,528)	1,817,712)

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.

Net Income Attributable to Express Scripts: The net income attributable to the company showed a consistent upward trend throughout the five-year period. Starting from approximately 1.84 billion US dollars in 2013, the net income increased annually, reaching about 4.52 billion US dollars by the end of 2017. This represents a more than doubling of net income over the duration analyzed, indicating strong profitability growth.
Net Operating Profit After Taxes (NOPAT): The NOPAT figures likewise showed an overall increasing trend, rising from roughly 1.82 billion US dollars in 2013 to over 3.27 billion US dollars in 2017. The growth is generally steady, with an especially notable increase between 2015 and 2016. However, unlike net income, NOPAT slightly declined in 2017 compared to the previous year, decreasing from approximately 3.38 billion to 3.27 billion US dollars.
Comparative Insights: Both net income and NOPAT demonstrate sustained profitability improvements over the analyzed timeframe, highlighting effective operational and financial management. The disparity in 2017, where net income continued rising but NOPAT decreased, may suggest changes in operating efficiency, tax impact, or other factors affecting post-tax operating profits.

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Express Scripts Holding Co., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Provision for income taxes	397,300)	999,500)	1,364,300)	1,031,200)	1,104,000)
Less: Deferred income tax expense (benefit)	(1,678,900)	(497,400)	(462,100)	(430,500)	(573,700)
Add: Tax savings from interest expense and other	215,925)	246,314)	178,140)	207,915)	212,914)
Cash operating taxes	2,292,125)	1,743,214)	2,004,540)	1,669,615)	1,890,614)

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).

Provision for Income Taxes: The provision for income taxes exhibits fluctuation over the five-year period. It begins at 1,104,000 thousand US dollars at the end of 2013, then decreases slightly in 2014 to 1,031,200 thousand US dollars. A notable increase occurs in 2015, with the provision reaching 1,364,300 thousand US dollars, followed by a decline in 2016 to 999,500 thousand US dollars. By the end of 2017, there is a significant drop to 397,300 thousand US dollars, marking the lowest figure in the observed timeframe.
Cash Operating Taxes: Cash operating taxes demonstrate more variability with an overall upward trajectory throughout the period. Starting at 1,890,614 thousand US dollars in 2013, the amount decreases to 1,669,615 thousand US dollars in 2014. Subsequently, a sharp increase is observed in 2015, reaching 2,004,540 thousand US dollars. In 2016, cash operating taxes decline again to 1,743,214 thousand US dollars before climbing significantly to 2,292,125 thousand US dollars by the end of 2017, the highest level recorded in the five years.
Comparative Observations: Overall, the provision for income taxes and cash operating taxes do not follow the same trend patterns. While the provision for income taxes peaks in 2015 before steadily declining to its lowest point in 2017, cash operating taxes show a general increasing trend despite year-to-year fluctuations. The divergence between these two tax-related metrics may suggest differences in tax accounting policies, timing differences, or changes in cash flow management relating to tax obligations.

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Express Scripts Holding Co., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Short-term debt and current maturities of long-term debt	1,032,900)	722,300)	1,646,400)	2,555,300)	1,584,000)
Long-term debt, excluding current maturities	14,981,500)	14,846,000)	13,946,300)	11,012,700)	12,363,000)
Operating lease liability¹	236,952)	240,743)	266,786)	294,809)	321,730)
Total reported debt & leases	16,251,352)	15,809,043)	15,859,486)	13,862,809)	14,268,730)
Total Express Scripts stockholders’ equity	18,119,600)	16,236,000)	17,372,800)	20,054,200)	21,837,400)
Net deferred tax (assets) liabilities²	2,532,300)	3,572,200)	4,069,800)	4,532,400)	4,985,200)
Allowance for doubtful accounts³	95,300)	75,000)	87,300)	165,100)	202,200)
Equity equivalents⁴	2,627,600)	3,647,200)	4,157,100)	4,697,500)	5,187,400)
Accumulated other comprehensive (income) loss, net of tax⁵	2,900)	12,300)	14,000)	(2,100)	(11,700)
Non-controlling interest	5,700)	7,800)	7,700)	9,800)	7,400)
Adjusted total Express Scripts stockholders’ equity	20,755,800)	19,903,300)	21,551,600)	24,759,400)	27,020,500)
Invested capital	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)

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.

Total Reported Debt & Leases: The total reported debt and leases show a fluctuating trend over the five-year period. The value decreased slightly from approximately 14.27 billion USD at the end of 2013 to about 13.86 billion USD in 2014. However, from 2014 onward, the debt increased steadily, reaching around 16.25 billion USD by the end of 2017. This reflects a rising leverage position in the latter years.
Total Express Scripts Stockholders’ Equity: Stockholders’ equity demonstrates a declining trend from 2013 through 2016, dropping from roughly 21.84 billion USD in 2013 to about 16.24 billion USD in 2016. This decline represents a significant reduction in equity over this period. Notably, in 2017, there is a reversal of this downward trend with equity increasing to about 18.12 billion USD, suggesting a partial recovery or accumulation of retained earnings or capital injection during that year.
Invested Capital: Invested capital also declined consistently from 2013 to 2016, moving from approximately 41.29 billion USD to around 35.71 billion USD. In 2017, a modest increase to about 37.01 billion USD is observed. This trend indicates a contraction in the total capital employed by the company initially, followed by a slight expansion towards the end of the period.

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Express Scripts Holding Co., cost of capital calculations

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,380,248)	44,380,248)	÷	60,978,400)	=	0.73	0.73	×	16.31%	=	11.87%
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					12.54%

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 »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,176,284)	42,176,284)	÷	58,225,826)	=	0.72	0.72	×	16.31%	=	11.81%
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					12.48%

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 »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,861,358)	45,861,358)	÷	62,116,744)	=	0.74	0.74	×	16.31%	=	12.04%
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					12.59%

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 »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	63,036,595)	63,036,595)	÷	77,531,603)	=	0.81	0.81	×	16.31%	=	13.26%
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					13.72%

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 »

Dec 31, 2013

	Capital (fair value)¹	Weights					Cost of capital
Equity²	59,847,588)	59,847,588)	÷	74,732,117)	=	0.80	0.80	×	16.31%	=	13.06%
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					13.55%

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 »

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	(1,368,196)	(1,081,751)	(2,421,274)	(3,345,376)	(3,778,304)
Invested capital²	37,007,152)	35,712,343)	37,411,086)	38,622,209)	41,289,230)
Performance Ratio
Economic spread ratio³	-3.70%	-3.03%	-6.47%	-8.66%	-9.15%
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 × -1,368,196 ÷ 37,007,152 = -3.70%

⁴ Click competitor name to see calculations.

The analysis of economic value added metrics reveals a period of sustained negative economic profit, although the magnitude of these losses diminished significantly over the first four years of the observed period before experiencing a slight reversal in the final year.

Economic Profit Trends: Economic profit remained negative throughout the five-year duration, indicating that the company did not generate returns above its cost of capital. A consistent recovery trend was observed from 2013, when losses were 3.78 billion US dollars, improving steadily to a peak of -1.08 billion US dollars by 2016. This improvement trend was interrupted in 2017, as economic profit widened to -1.37 billion US dollars.
Invested Capital Dynamics: Invested capital exhibited a general downward trend from 2013 through 2016, decreasing from 41.29 billion US dollars to 35.71 billion US dollars. This contraction suggests a reduction in the capital base utilized to generate returns. In 2017, this trend reversed, with invested capital increasing to 37.01 billion US dollars.
Economic Spread Ratio Performance: The economic spread ratio remained negative for the entirety of the period, confirming that the cost of capital consistently exceeded the return on invested capital. The ratio showed marked improvement from -9.15% in 2013 to -3.03% in 2016, mirroring the trajectory of the economic profit. However, in alignment with the 2017 increase in invested capital and decrease in economic profit, the spread ratio deteriorated to -3.70%.

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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	(1,368,196)	(1,081,751)	(2,421,274)	(3,345,376)	(3,778,304)
Revenues	100,064,600)	100,287,500)	101,751,800)	100,887,100)	104,098,800)
Performance Ratio
Economic profit margin²	-1.37%	-1.08%	-2.38%	-3.32%	-3.63%
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 × -1,368,196 ÷ 100,064,600 = -1.37%

³ Click competitor name to see calculations.

Between 2013 and 2017, the entity consistently reported negative economic profit, indicating that returns did not exceed the cost of capital employed. Despite the persistent deficit, a general trend of recovery was observed from 2013 through 2016, characterized by a significant narrowing of losses before a slight deterioration in 2017.

Economic Profit Trajectory: Economic losses decreased steadily from US$ 3,778,304 thousand in 2013 to a period low of US$ 1,081,751 thousand in 2016. This trend reflects a substantial improvement in value creation efficiency over four years. However, this progress was partially offset in 2017, as the economic profit deficit widened again to US$ 1,368,196 thousand.
Revenue Performance: Revenues remained relatively stagnant over the analyzed period, fluctuating within a narrow range between approximately US$ 100 billion and US$ 104 billion. The absence of significant top-line growth indicates that the improvements in economic profit observed until 2016 were likely driven by operational cost reductions or optimized capital management rather than revenue expansion.
Economic Profit Margin Analysis: The economic profit margin mirrored the trend of the absolute economic profit, improving from -3.63% in 2013 to -1.08% in 2016. This upward trajectory suggests a closing gap between the actual return on invested capital and the required rate of return. The shift to -1.37% in 2017 aligns with the increase in economic losses, marking a decline in the entity's ability to approach a positive economic value added state.

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Express Scripts Holding Co. (NASDAQ:ESRX)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin