Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Facebook Inc. (NASDAQ:FB)

Economic Value Added (EVA)

Advanced level

Economic Profit

Facebook Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 18,086  21,981  15,406  9,712  2,932 
Cost of capital2 12.93% 12.73% 13.01% 13.05% 13.09%
Invested capital3 65,749  60,354  41,602  38,727  31,660 
 
Economic profit4 9,584  14,300  9,993  4,658  (1,212)

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 18,08612.93% × 65,749 = 9,584

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Facebook Inc.’s economic profit increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Facebook Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income 18,485  22,112  15,934  10,217  3,688 
Deferred income tax expense (benefit)1 (40) 295  (374) (457) (812)
Increase (decrease) in allowances2 (23) 40  95  26  29 
Increase (decrease) in deferred revenue3 117  49  34  (10)
Increase (decrease) in equity equivalents4 54  384  (273) (397) (793)
Interest expense 20  10  23 
Interest expense, operating lease liability5 330  —  —  —  86 
Adjusted interest expense 350  10  109 
Tax benefit of interest expense6 (74) (2) (2) (4) (38)
Adjusted interest expense, after taxes7 277  71 
Interest income (924) (661) (398) (176) (52)
Investment income, before taxes (924) (661) (398) (176) (52)
Tax expense (benefit) of investment income8 194  139  139  62  18 
Investment income, after taxes9 (730) (522) (259) (114) (34)
Net operating profit after taxes (NOPAT) 18,086  21,981  15,406  9,712  2,932 

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances.

3 Addition of increase (decrease) in deferred revenue.

4 Addition of increase (decrease) in equity equivalents to net income.

5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 10,324 × 3.20% = 330

6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 350 × 21.00% = 74

7 Addition of after taxes interest expense to net income.

8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 924 × 21.00% = 194

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Facebook Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Cash Operating Taxes

Facebook Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Provision for income taxes 6,327  3,249  4,660  2,301  2,506 
Less: Deferred income tax expense (benefit) (40) 295  (374) (457) (812)
Add: Tax savings from interest expense 74  38 
Less: Tax imposed on investment income 194  139  139  62  18 
Cash operating taxes 6,247  2,817  4,897  2,700  3,338 

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Facebook Inc.’s cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Invested Capital

Facebook Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Finance lease liabilities, current 55  —  —  — 
Finance lease liabilities, non-current 418  —  —  —  107 
Operating lease liability1 10,324  14,651  4,644  1,964  1,077 
Total reported debt & leases 10,797  14,651  4,644  1,964  1,191 
Stockholders’ equity 101,054  84,127  74,347  59,194  44,218 
Net deferred tax (assets) liabilities2 (1,156) (1,207) (1,249) (854) (151)
Allowances3 206  229  189  94  68 
Deferred revenue4 234  117  68  62  28 
Equity equivalents5 (716) (861) (992) (698) (55)
Accumulated other comprehensive (income) loss, net of tax6 489  760  227  703  455 
Adjusted stockholders’ equity 100,827  84,026  73,582  59,199  44,618 
Construction in progress7 (10,099) (7,228) (2,992) (1,890) (622)
Marketable securities8 (35,776) (31,095) (33,632) (20,546) (13,527)
Invested capital 65,749  60,354  41,602  38,727  31,660 

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

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 revenue.

5 Addition of equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 Subtraction of marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Facebook Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Facebook Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 597,255  597,255  ÷ 608,052  = 0.98 0.98 × 13.12% = 12.89%
Finance lease liabilities3 473  473  ÷ 608,052  = 0.00 0.00 × 3.10% × (1 – 21.00%) = 0.00%
Operating lease liability4 10,324  10,324  ÷ 608,052  = 0.02 0.02 × 3.20% × (1 – 21.00%) = 0.04%
Total: 608,052  1.00 12.93%

Based on: 10-K (filing date: 2020-01-30).

1 US$ in millions

2 Equity. See details »

3 Finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 475,732  475,732  ÷ 490,383  = 0.97 0.97 × 13.12% = 12.73%
Finance lease liabilities3 —  —  ÷ 490,383  = 0.00 0.00 × 0.00% × (1 – 21.00%) = 0.00%
Operating lease liability4 14,651  14,651  ÷ 490,383  = 0.03 0.03 × 0.00% × (1 – 21.00%) = 0.00%
Total: 490,383  1.00 12.73%

Based on: 10-K (filing date: 2019-01-31).

1 US$ in millions

2 Equity. See details »

3 Finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 560,927  560,927  ÷ 565,571  = 0.99 0.99 × 13.12% = 13.01%
Finance lease liabilities3 —  —  ÷ 565,571  = 0.00 0.00 × 0.00% × (1 – 35.00%) = 0.00%
Operating lease liability4 4,644  4,644  ÷ 565,571  = 0.01 0.01 × 0.00% × (1 – 35.00%) = 0.00%
Total: 565,571  1.00 13.01%

Based on: 10-K (filing date: 2018-02-01).

1 US$ in millions

2 Equity. See details »

3 Finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 378,530  378,530  ÷ 380,494  = 0.99 0.99 × 13.12% = 13.05%
Finance lease liabilities3 —  —  ÷ 380,494  = 0.00 0.00 × 0.00% × (1 – 35.00%) = 0.00%
Operating lease liability4 1,964  1,964  ÷ 380,494  = 0.01 0.01 × 0.00% × (1 – 35.00%) = 0.00%
Total: 380,494  1.00 13.05%

Based on: 10-K (filing date: 2017-02-03).

1 US$ in millions

2 Equity. See details »

3 Finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 310,558  310,558  ÷ 311,748  = 1.00 1.00 × 13.12% = 13.07%
Finance lease liabilities3 114  114  ÷ 311,748  = 0.00 0.00 × 7.96% × (1 – 35.00%) = 0.00%
Operating lease liability4 1,077  1,077  ÷ 311,748  = 0.00 0.00 × 7.96% × (1 – 35.00%) = 0.02%
Total: 311,748  1.00 13.09%

Based on: 10-K (filing date: 2016-01-28).

1 US$ in millions

2 Equity. See details »

3 Finance lease liabilities. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Facebook Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 9,584  14,300  9,993  4,658  (1,212)
Invested capital2 65,749  60,354  41,602  38,727  31,660 
Performance Ratio
Economic spread ratio3 14.58% 23.69% 24.02% 12.03% -3.83%
Benchmarks
Economic Spread Ratio, Competitors4
Adobe Inc. 5.61% 3.24% 7.91% 7.06% -2.16%
Alphabet Inc. 20.02% 21.58% 6.97% 14.22% 9.61%
Autodesk Inc. -20.09% -32.05% -29.81% -11.25% -10.59%
International Business Machines Corp. -3.29% -3.64% -6.42% -2.38% 1.42%
Intuit Inc. 21.66% 19.34% 23.96% 22.19% 15.51%
Microsoft Corp. 30.23% 9.62% 24.73% 41.87% 18.15%
Oracle Corp. 5.79% -3.25% 3.64% 6.37% 5.02%
salesforce.com inc. -5.72% -5.14% -6.57% -5.15% -7.71%
ServiceNow Inc. 3.38% -0.61% -0.06% -26.97% -14.93%

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 9,584 ÷ 65,749 = 14.58%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Facebook Inc.’s economic spread ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Facebook Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 9,584  14,300  9,993  4,658  (1,212)
 
Revenue 70,697  55,838  40,653  27,638  17,928 
Add: Increase (decrease) in deferred revenue 117  49  34  (10)
Adjusted revenue 70,814  55,887  40,659  27,672  17,918 
Performance Ratio
Economic profit margin2 13.53% 25.59% 24.58% 16.83% -6.76%
Benchmarks
Economic Profit Margin, Competitors3
Adobe Inc. 8.44% 5.31% 10.32% 9.16% -3.30%
Alphabet Inc. 12.42% 13.67% 4.12% 11.34% 9.15%
Autodesk Inc. -32.76% -46.66% -44.46% -14.19% -12.69%
International Business Machines Corp. -5.61% -5.11% -8.73% -3.17% 1.76%
Intuit Inc. 14.42% 12.85% 13.31% 12.54% 9.83%
Microsoft Corp. 20.35% 6.34% 18.90% 21.58% 7.98%
Oracle Corp. 10.55% -5.86% 7.47% 11.05% 8.88%
salesforce.com inc. -11.20% -8.12% -11.52% -7.39% -11.89%
ServiceNow Inc. 2.48% -0.52% -0.05% -20.26% -13.15%

Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 9,584 ÷ 70,814 = 13.53%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Facebook Inc.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.