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.
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Express Scripts Holding Co. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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Economic Profit
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 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a generally increasing trend over the five-year period. It rose from approximately 1.82 billion in 2013 to over 3.37 billion in 2016, indicating substantial growth in operating profitability. However, there is a slight decline in 2017, with NOPAT falling to about 3.27 billion, suggesting a minor contraction in profitability during that year.
- Cost of Capital
- The cost of capital remains relatively stable throughout the period, fluctuating narrowly between 10.84% and 11.88%. It reached its peak in 2014 at 11.88% and steadily decreased through 2016 before a slight increase in 2017. This stability implies that the company's required return rate did not experience significant volatility.
- Invested Capital
- Invested capital demonstrates a downward trend from 41.29 billion in 2013 to a low of approximately 35.71 billion in 2016, indicating a reduction in the capital base employed in operations. However, there is a small reversal in this trend in 2017, with invested capital increasing to roughly 37.01 billion. This fluctuation suggests a period of capital optimization followed by a modest reinvestment.
- Economic Profit
- Economic profit remains negative throughout the observed period, indicating that the company consistently failed to generate returns above its cost of capital. Although economic losses decreased substantially from -3.03 billion in 2013 to approximately -495 million in 2016, suggesting an improvement in value creation, there is a subsequent increase in economic losses in 2017 to about -757 million. This indicates a partial erosion of the gains made in previous years.
- Overall Analysis
- The financial data indicates that while operating profitability grew significantly until 2016, economic profitability remains below the cost of capital, highlighting ongoing challenges in value creation. The reduction in invested capital may reflect efficiency measures, which contributed to narrowing economic losses. Nevertheless, the slight decline in NOPAT coupled with increased economic losses in 2017 signals a potential need to reassess operational and capital deployment strategies to enhance sustainable financial performance.
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
= × =
5 2017 Calculation
Tax benefit of interest expense and other = Adjusted interest expense and other × Statutory income tax rate
= × 35.00% =
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.
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).
- 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.
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.
- 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.
Cost of Capital
Express Scripts Holding Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| 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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit shows a consistent improvement over the analyzed period, moving from a substantial negative value of approximately -3.03 billion US dollars in 2013 to -0.76 billion US dollars in 2017. Although the economic profit remains negative throughout the entire period, the trend indicates a reduction in losses and a movement towards economic profitability.
- Invested Capital
- Invested capital demonstrates a decreasing trend from 41.29 billion US dollars at the end of 2013 to 35.71 billion US dollars in 2016, followed by a slight increase to 37.01 billion US dollars in 2017. This pattern suggests a general reduction in invested capital, with a small reversal observed in the final year.
- Economic Spread Ratio
- The economic spread ratio, expressed as a percentage, moves upward from -7.33% in 2013 to -2.05% in 2017, signifying an improvement in return relative to the cost of capital. Despite remaining negative throughout, the ratio's narrowing gap indicates enhanced operational efficiency or cost management that positively influences the economic spread.
- Overall Analysis
- Over the five-year period, there is a noticeable trend toward improved financial performance as reflected by reduced economic losses and a narrowing negative economic spread ratio. The decline in invested capital may reflect strategic capital management or divestitures. Together, these trends suggest efforts to enhance profitability and capital efficiency, though the persistent negative economic profit highlights ongoing challenges in achieving positive economic returns.
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 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| 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 × ÷ =
3 Click competitor name to see calculations.
- Revenue Trends
- Revenues demonstrated relative stability over the five-year period, fluctuating minimally between approximately 100 billion and 104 billion US dollars. The highest revenue was recorded in 2013 at around 104.1 billion, followed by a slight decline and then maintenance near the 100 billion mark through to 2017.
- Economic Profit Trends
- Economic profit showed a clear improving trend, moving from a significant negative value of approximately -3.03 billion US dollars in 2013 to a considerably reduced loss of about -0.76 billion US dollars in 2017. Despite remaining negative throughout, the downward trend in losses indicates progress towards better profitability.
- Economic Profit Margin Trends
- The economic profit margin correspondingly improved from -2.91% in 2013 to -0.76% in 2017, reflecting a reduction in the gap between economic profit and revenues. This margin consistently increased towards zero, indicating a gradual enhancement in the efficiency and profitability of operations relative to total revenues.
- Summary Insights
- Over the observed period, the company experienced steady revenue levels without significant growth. Concurrently, the company’s economic profitability improved markedly, as reflected by both the absolute economic profit figures and the profit margin percentages. Though still negative by the end of 2017, the trends suggest ongoing efforts to reduce losses and enhance profit generation relative to revenues.