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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Fiserv Inc. pages available for free this week:
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Economic Profit
Fiserv Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
Analysis of the economic profit metrics reveals a significant divergence between operational growth and capital efficiency over the five-year period from 2017 to 2021.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trend is observed in NOPAT, which grew from US$ 1,176 million in 2017 to US$ 1,797 million in 2021. This indicates a steady expansion in the company's capacity to generate operating earnings after tax.
- Cost of Capital
- The cost of capital remained relatively stable with a general downward trajectory, decreasing from 13.39% in 2017 to 11.87% in 2021. This suggests a slight reduction in the required rate of return on invested capital over the period.
- Invested Capital
- A substantial structural shift occurred in 2019, where invested capital surged from US$ 9,909 million in 2018 to US$ 62,514 million. This capital base remained elevated through 2021, concluding at US$ 59,700 million.
- Economic Profit
- Economic profit transitioned from near-breakeven levels in 2017 (-US$ 56 million) and 2018 (-US$ 7 million) to a deep deficit starting in 2019. The economic profit dropped to -US$ 6,125 million in 2019, directly correlating with the spike in invested capital. Despite a gradual improvement to -US$ 5,289 million by 2021, the company has continued to experience economic value destruction.
The data indicates that while operational profitability has improved consistently, the magnitude of the capital expansion in 2019 has created a capital charge that far exceeds the NOPAT. Consequently, the increase in operating profit has been insufficient to offset the cost of the expanded capital base, resulting in persistent negative economic profit.
Net Operating Profit after Taxes (NOPAT)
Fiserv 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 doubtful accounts.
3 Addition of increase (decrease) in contract liabilities.
4 Addition of increase (decrease) in employee termination costs reserve.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Fiserv, Inc..
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to Fiserv, Inc..
9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The analysis of the annual financial data reveals mixed trends in profitability measures over the five-year period ending December 31, 2021.
- Net Income Attributable to Fiserv, Inc.
- The net income shows some volatility throughout the years. From 2017 to 2018, it decreased slightly from 1246 million USD to 1187 million USD. A more significant decline occurred between 2018 and 2019, dropping to 893 million USD. However, this was followed by a modest recovery in 2020 to 958 million USD and a substantial increase in 2021 to 1334 million USD, surpassing the initial 2017 level. This pattern indicates a dip in profitability midway through the period, followed by a strong rebound in recent years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT displayed a consistent upward trajectory over the entire five-year span. It increased from 1176 million USD in 2017 to 1322 million USD in 2018, with further growth to 1565 million USD in 2019. This positive trend persisted in 2020 at 1728 million USD and reached 1797 million USD by the end of 2021. The steady rise in NOPAT suggests improving operational efficiency and profitability after taxes despite fluctuations in net income.
Overall, while net income faced a decline mid-period before a recovery, NOPAT steadily improved year-over-year, indicating strengthening core operating performance. The divergence between net income and NOPAT trends could be attributed to factors such as non-operating items, tax effects, or one-time charges influencing net income figures differently than operating profit metrics.
Cash Operating Taxes
Fiserv 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).
The financial data reveals varying trends in tax-related expenses over the five-year period ending in 2021.
- Income Tax Provision
- The income tax provision exhibits fluctuations without a clear linear trend. Starting at 158 million USD in 2017, it more than doubled to 378 million USD in 2018. This was followed by a significant reduction to 198 million USD in 2019 and stability around 196 million USD in 2020. In 2021, there was a notable increase to 363 million USD, approaching the 2018 level. This pattern suggests variability in taxable income, tax rates, or tax planning outcomes over the years.
- Cash Operating Taxes
- The cash operating taxes show a different pattern characterized by an initial decrease from 471 million USD in 2017 to 288 million USD in 2018 and a further decline to 255 million USD in 2019. In 2020, the figure rose slightly to 278 million USD, followed by a sharp increase to 775 million USD in 2021, which represents a nearly threefold jump compared to the previous year. This sharp rise in 2021 might reflect changes in operational profitability, tax timing differences, or alterations in cash tax policy or payments.
Overall, while income tax provision levels remained relatively volatile with peaks in 2018 and 2021, cash operating taxes demonstrated a steady decline until 2019, a minor uptick in 2020, and a significant surge in 2021. The disparity between the trends in provision and cash taxes in recent years may indicate differences in accrued versus actual cash tax payments, suggesting the influence of tax deferrals, credits, or adjustments impacting cash flow differently from the provision expense.
Invested Capital
Fiserv 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 contract liabilities.
5 Addition of employee termination costs reserve.
6 Addition of equity equivalents to total Fiserv, Inc. shareholders’ equity.
7 Removal of accumulated other comprehensive income.
The financial data reveals several significant trends in the company’s capital structure and financial positioning over the five-year period.
- Total reported debt & leases
- The reported debt and leases displayed an increasing trend from 2017 through 2019, rising sharply from $5,266 million in 2017 to $22,642 million in 2019. This substantial increase indicates a significant leveraging or financing activity during that period. In 2020 and 2021, the reported debt & leases figures stabilized somewhat, with slight decreases and then a modest increase ending at $21,974 million in 2021, suggesting a relatively stable level of debt in the most recent years considered.
- Total shareholders’ equity
- Shareholders’ equity experienced a decline from $2,731 million in 2017 to $2,293 million in 2018, followed by a dramatic increase to $32,979 million in 2019. This surge aligns with the observed rise in debt, which may reflect an equity issuance, revaluation, or comprehensive income increase that boosted equity considerably. Subsequently, shareholders’ equity declined slightly but remained high at $32,330 million in 2020 and then decreased further to $30,952 million in 2021. Despite these decreases, equity levels remain substantially higher than the initial 2017-2018 amounts.
- Invested capital
- Invested capital followed a trend similar to that of total debt and shareholders’ equity. Beginning at $9,201 million in 2017 and increasing modestly to $9,909 million in 2018, it then surged to $62,514 million by the end of 2019. This jump reflects the substantial changes in both debt and equity levels noted previously. Despite the surge, invested capital slightly decreased in 2020 and 2021, ending at $59,700 million in 2021, suggesting moderate adjustments or repayments affecting the overall invested capital base during these last two years.
In summary, the data illustrates a period of significant capital restructuring or acquisition activity around 2019, characterized by sharp increases in both debt and equity components. Following this peak, the company maintained relatively stable but high financial leverage and equity levels, with minor declines in invested capital and equity in recent years. This pattern may indicate strategic investments or financing followed by a phase of consolidation or optimization of the capital structure.
Cost of Capital
Fiserv Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
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: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Fiserv 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant capital expansion accompanied by a substantial decline in economic profitability beginning in 2019. While the organization maintained a near-neutral economic position during 2017 and 2018, a sharp divergence occurred in subsequent years, characterized by a marked increase in invested capital and a corresponding surge in economic losses.
- Economic Profit
- Economic profit remained relatively stable and near break-even during 2017 and 2018, with losses of 56 million USD and 7 million USD, respectively. However, a drastic decline occurred in 2019, where losses expanded to 6,125 million USD. From 2020 through 2021, a gradual recovery trend is observed, with losses narrowing to 5,721 million USD and 5,289 million USD, although the figures remain significantly below historical levels.
- Invested Capital
- A substantial increase in invested capital is evident in 2019, rising from 9,909 million USD in 2018 to 62,514 million USD. This represents a significant expansion of the capital base. Following this peak, invested capital entered a period of slight contraction, declining to 60,165 million USD in 2020 and further to 59,700 million USD by the end of 2021.
- Economic Spread Ratio
- The economic spread ratio mirrors the volatility observed in profit and capital. The ratio was nearly flat in 2017 (-0.61%) and 2018 (-0.07%), indicating that the return on invested capital was closely aligned with the cost of capital. In 2019, the ratio dropped sharply to -9.80%, reflecting a severe misalignment between the cost of the expanded capital base and the generated returns. A marginal improvement is noted in 2020 (-9.51%) and 2021 (-8.86%), suggesting a slow trend toward recovery in the spread between returns and capital costs.
Economic Profit Margin
Fiserv 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 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in contract liabilities | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 reveals a significant transformation in scale and economic profitability. The period is marked by a sharp divergence between revenue growth and economic value creation, particularly starting in 2019, followed by a gradual trend toward margin recovery.
- Economic Profit Trends
- Economic profit remained relatively stable and near break-even during 2017 and 2018, with losses of 56 million and 7 million respectively. A substantial deterioration occurred in 2019, where economic profit dropped to negative 6,125 million. From 2019 to 2021, a consistent upward trajectory is observed as the losses narrowed to 5,721 million in 2020 and 5,289 million by the end of 2021.
- Adjusted Revenue Expansion
- Adjusted revenue experienced a dramatic increase over the analyzed period. Following a period of stability between 2017 and 2018, revenue nearly doubled in 2019 to 10,365 million. This growth momentum continued through 2021, reaching 16,303 million, representing a significant expansion of the company's operational scale.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility seen in absolute economic profit. The margin was marginally negative in 2017 and 2018, reaching a peak deficit of negative 59.09% in 2019. Subsequent years show a steady improvement in the margin, rising to negative 38.30% in 2020 and negative 32.44% in 2021. This indicates that while the company continues to generate negative economic value, the rate of loss relative to revenue is declining as the expanded revenue base begins to offset the capital charges or operational losses.