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.
Economic Profit
Fiserv Inc., economic profit 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 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
= 1,797 – 11.88% × 59,700 = -5,296
The financial performance from 2017 to 2021 is characterized by a consistent increase in operational profitability contrasted by a substantial expansion of the capital base, resulting in sustained negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A steady upward trajectory is observed in NOPAT, which grew from 1,176 million US dollars in 2017 to 1,797 million US dollars in 2021. This represents a consistent improvement in the core operational earning capacity of the business over the five-year period.
- Invested Capital and Capital Structure
- Invested capital remained relatively stable between 2017 and 2018, but experienced a significant surge in 2019, increasing from 9,909 million US dollars to 62,514 million US dollars. Following this peak, the capital base saw a gradual contraction, ending at 59,700 million US dollars in 2021.
- Cost of Capital
- The cost of capital exhibited a general downward trend, moving from 13.40% in 2017 to 11.88% in 2021. This reduction suggests a decrease in the weighted average cost of financing or a shift in the risk profile of the company's capital sources.
- Economic Profit Analysis
- Economic profit remained negative throughout the entire period, indicating that the company did not generate returns in excess of its cost of capital. While there was a slight improvement from 2017 to 2018, the massive expansion of invested capital in 2019 led to a sharp decline in economic profit, which reached a low of -6,133 million US dollars. From 2019 to 2021, economic profit showed a gradual recovery, improving to -5,296 million US dollars, driven by the combination of rising NOPAT, a declining cost of capital, and a slight reduction in the total invested capital base.
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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
= 737 × 2.70% = 20
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 716 × 21.00% = 150
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
= 3 × 21.00% = 1
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
An examination of the financial performance from 2017 to 2021 reveals a divergence between operational profitability and bottom-line net income. While core operating performance demonstrated consistent growth, net income experienced significant volatility during the mid-period.
- Net Operating Profit After Taxes (NOPAT)
- A sustained upward trajectory is observed in NOPAT, which increased from 1,176 million US dollars in 2017 to 1,797 million US dollars in 2021. This represents a continuous growth pattern, with the most significant year-over-year increase occurring between 2018 and 2019. The steady rise in NOPAT indicates a strengthening of core operational efficiency and an improved ability to generate profit from primary business activities.
- Net Income Attributable to Fiserv, Inc.
- Net income exhibited a non-linear trend characterized by a contraction followed by a recovery. From 1,246 million US dollars in 2017, the figure declined to a low of 893 million US dollars in 2019. A recovery phase followed, with net income rising to 958 million US dollars in 2020 and reaching a five-year peak of 1,334 million US dollars by December 31, 2021.
- Operational versus Net Profitability Divergence
- A notable gap emerged between NOPAT and net income, particularly between 2019 and 2020. During this period, NOPAT continued to expand while net income remained relatively depressed. This divergence suggests that while the fundamental operating business was growing, net results were likely impacted by non-operating factors, such as interest expenses, tax adjustments, or one-time charges. The alignment between operational profit and net income improved significantly by 2021 as net income recovered more sharply.
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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).
Analysis of tax expenditures from 2017 to 2021 reveals a volatile relationship between accrual-based tax provisions and actual cash operating tax outflows. While the income tax provision fluctuated throughout the period, cash operating taxes exhibited a distinct U-shaped trend, characterized by an initial decline followed by a substantial surge in the final year of the period.
- Cash Operating Tax Trends
- Cash operating taxes decreased from 471 million in 2017 to a low of 255 million in 2019. This downward trajectory reversed slightly in 2020 before experiencing a sharp increase to 775 million in 2021, representing a nearly 179% increase over the 2020 value.
- Accrual versus Cash Divergence
- A consistent discrepancy is observed between the income tax provision and cash operating taxes. In 2017 and 2021, cash tax payments significantly exceeded the reported tax provision. Specifically, in 2021, cash operating taxes of 775 million were more than double the income tax provision of 363 million, indicating that the actual cash burden on the organization was substantially higher than the accounting expense recognized during that period.
- Implications for Economic Value Added (EVA)
- Because EVA calculations utilize cash operating taxes to determine the true tax impact on operating profit, the high volatility in cash outflows introduces variability into the Net Operating Profit After Tax (NOPAT). The significant spike in cash taxes in 2021 likely resulted in a reduction of NOPAT, thereby exerting downward pressure on the company's economic value added for that fiscal year compared to the relative stability seen between 2018 and 2020.
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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 analysis of invested capital reveals a significant shift in the capital structure occurring in 2019, characterized by a substantial and simultaneous expansion of both debt and equity components. Following this inflection point, the capital base remained relatively stable with a slight downward trajectory through 2021.
- Debt and Lease Obligations
- Total reported debt and leases experienced a sharp increase in 2019, rising from 6,337 million USD in 2018 to 22,642 million USD. This represents a more than threefold increase in liabilities within a single fiscal year. Subsequent periods showed minimal volatility, with a slight decrease in 2020 followed by a modest increase to 21,974 million USD by December 31, 2021.
- Shareholders' Equity
- Shareholders' equity exhibited a parallel growth pattern, jumping from 2,293 million USD in 2018 to 32,979 million USD in 2019. This surge indicates a massive expansion of the equity base. From 2019 to 2021, equity levels entered a period of gradual decline, ending at 30,952 million USD.
- Total Invested Capital
- Invested capital surged from 9,909 million USD in 2018 to a peak of 62,514 million USD in 2019. This expansion reflects a fundamental change in the scale of the company's balance sheet. Between 2019 and 2021, total invested capital underwent a moderate contraction, settling at 59,700 million USD by the end of the reported period.
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Cost of Capital
Fiserv Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 62,324) | 62,324) | ÷ | 85,657) | = | 0.73 | 0.73 | × | 15.45% | = | 11.24% | ||
| Debt3 | 22,596) | 22,596) | ÷ | 85,657) | = | 0.26 | 0.26 | × | 2.97% × (1 – 21.00%) | = | 0.62% | ||
| Operating lease liability4 | 737) | 737) | ÷ | 85,657) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 85,657) | 1.00 | 11.88% | ||||||||||
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 | 77,236) | 77,236) | ÷ | 101,076) | = | 0.76 | 0.76 | × | 15.45% | = | 11.81% | ||
| Debt3 | 23,244) | 23,244) | ÷ | 101,076) | = | 0.23 | 0.23 | × | 3.14% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 596) | 596) | ÷ | 101,076) | = | 0.01 | 0.01 | × | 2.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 101,076) | 1.00 | 12.39% | ||||||||||
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 | 73,709) | 73,709) | ÷ | 97,436) | = | 0.76 | 0.76 | × | 15.45% | = | 11.69% | ||
| Debt3 | 22,984) | 22,984) | ÷ | 97,436) | = | 0.24 | 0.24 | × | 3.25% × (1 – 21.00%) | = | 0.61% | ||
| Operating lease liability4 | 743) | 743) | ÷ | 97,436) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 97,436) | 1.00 | 12.31% | ||||||||||
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 | 33,187) | 33,187) | ÷ | 39,574) | = | 0.84 | 0.84 | × | 15.45% | = | 12.96% | ||
| Debt3 | 6,009) | 6,009) | ÷ | 39,574) | = | 0.15 | 0.15 | × | 3.69% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 378) | 378) | ÷ | 39,574) | = | 0.01 | 0.01 | × | 3.69% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 39,574) | 1.00 | 13.43% | ||||||||||
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 | 29,363) | 29,363) | ÷ | 34,738) | = | 0.85 | 0.85 | × | 15.45% | = | 13.06% | ||
| Debt3 | 5,009) | 5,009) | ÷ | 34,738) | = | 0.14 | 0.14 | × | 3.36% × (1 – 35.00%) | = | 0.31% | ||
| Operating lease liability4 | 366) | 366) | ÷ | 34,738) | = | 0.01 | 0.01 | × | 3.36% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 34,738) | 1.00 | 13.40% | ||||||||||
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 | (5,296) | (5,728) | (6,133) | (8) | (57) | |
| Invested capital2 | 59,700) | 60,165) | 62,514) | 9,909) | 9,201) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -8.87% | -9.52% | -9.81% | -0.09% | -0.62% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 6.61% | — | — | — | — | |
| Adobe Inc. | 8.87% | 1.15% | — | — | — | |
| AppLovin Corp. | -30.02% | — | — | — | — | |
| Cadence Design Systems Inc. | 6.80% | — | — | — | — | |
| Datadog Inc. | -3.98% | — | — | — | — | |
| International Business Machines Corp. | -6.16% | — | — | — | — | |
| Intuit Inc. | 0.10% | — | — | — | — | |
| Microsoft Corp. | 27.55% | — | — | — | — | |
| Oracle Corp. | 0.54% | — | — | — | — | |
| Palantir Technologies Inc. | -40.19% | — | — | — | — | |
| Palo Alto Networks Inc. | -5.19% | — | — | — | — | |
| Salesforce Inc. | -12.46% | — | — | — | — | |
| ServiceNow Inc. | 1.95% | — | — | — | — | |
| Synopsys Inc. | -6.90% | -6.70% | — | — | — | |
| Workday Inc. | -19.34% | — | — | — | — | |
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 × -5,296 ÷ 59,700 = -8.87%
4 Click competitor name to see calculations.
The financial trajectory from 2017 to 2021 is characterized by a significant expansion of the capital base and a subsequent period of negative economic value creation. A pivotal shift occurred in 2019, where a substantial increase in invested capital coincided with a sharp decline in economic profit, leading to a persistent negative economic spread ratio.
- Invested Capital Trends
- Invested capital remained relatively stable between 2017 and 2018, growing marginally from 9,201 million to 9,909 million US$. However, 2019 marked a drastic escalation, with invested capital surging to 62,514 million US$. This represents a more than six-fold increase in the capital base within a single year. Following this peak, the capital base saw a slight, gradual contraction, ending at 59,700 million US$ by December 31, 2021.
- Economic Profit Analysis
- Economic profit was marginally negative in 2017 and 2018, showing an initial improvement from -57 million to -8 million US$. This trend reversed sharply in 2019, when economic profit plummeted to -6,133 million US$. While the deficit narrowed slightly in 2020 and 2021 to -5,728 million and -5,296 million US$ respectively, the company has remained unable to generate returns exceeding its cost of capital since the 2019 expansion.
- Economic Spread Ratio Performance
- The economic spread ratio reflects the inefficiency of the invested capital relative to the cost of capital. Between 2017 and 2018, the ratio was near breakeven, moving from -0.62% to -0.09%. The 2019 capital expansion resulted in a severe deterioration of this ratio to -9.81%. Although a slow recovery is observable through 2021, with the ratio improving to -8.87%, the spread remains deeply negative, indicating that the return on invested capital continues to fall significantly short of the required threshold.
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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 | (5,296) | (5,728) | (6,133) | (8) | (57) | |
| Revenue | 16,226) | 14,852) | 10,187) | 5,823) | 5,696) | |
| Add: Increase (decrease) in contract liabilities | 77) | 86) | 178) | (161) | 69) | |
| Adjusted revenue | 16,303) | 14,938) | 10,365) | 5,662) | 5,765) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -32.48% | -38.35% | -59.17% | -0.15% | -0.99% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | 3.39% | — | — | — | — | |
| Adobe Inc. | 11.05% | 1.65% | — | — | — | |
| AppLovin Corp. | -60.11% | — | — | — | — | |
| Cadence Design Systems Inc. | 6.90% | — | — | — | — | |
| Datadog Inc. | -3.16% | — | — | — | — | |
| International Business Machines Corp. | -11.71% | — | — | — | — | |
| Intuit Inc. | 0.13% | — | — | — | — | |
| Microsoft Corp. | 22.86% | — | — | — | — | |
| Oracle Corp. | 1.07% | — | — | — | — | |
| Palantir Technologies Inc. | -66.20% | — | — | — | — | |
| Palo Alto Networks Inc. | -6.98% | — | — | — | — | |
| Salesforce Inc. | -28.58% | — | — | — | — | |
| ServiceNow Inc. | 1.68% | — | — | — | — | |
| Synopsys Inc. | -10.97% | -11.50% | — | — | — | |
| Workday Inc. | -25.24% | — | — | — | — | |
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 × -5,296 ÷ 16,303 = -32.48%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 reveals a period of significant structural change, characterized by a substantial expansion in revenue coupled with a period of severe economic value erosion followed by a gradual recovery trend.
- Adjusted Revenue Trends
- A period of relative stability existed between 2017 and 2018, with revenue hovering around 5.7 billion US$. Starting in 2019, a sharp upward trajectory is observed, with revenue increasing to 10.37 billion US$ in 2019 and continuing to climb to 16.3 billion US$ by 2021. This indicates a rapid scaling of operations or significant inorganic growth during this window.
- Economic Profit Trajectory
- Economic profit remained near break-even in 2017 and 2018, with losses of 57 million US$ and 8 million US$, respectively. However, a precipitous decline occurred in 2019, where economic profit dropped to negative 6.13 billion US$. While this figure began to improve in 2020 and 2021, reaching negative 5.3 billion US$, the organization continued to fail to generate returns above its cost of capital throughout the analyzed period.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility seen in absolute economic profit. After remaining marginally negative in 2017 (-0.99%) and 2018 (-0.15%), the margin collapsed to -59.17% in 2019. Since that trough, a consistent recovery pattern has emerged, with the margin improving to -38.35% in 2020 and -32.48% in 2021. The narrowing of this margin suggests that while the company is still destroying economic value, the efficiency of capital utilization relative to revenue growth is improving.
In summary, the period is marked by a stark divergence between revenue growth and economic value creation. The massive increase in adjusted revenue from 2019 onwards coincided with a surge in the cost of capital or a significant increase in invested capital that exceeded the generated returns. Despite the persistent negative economic profit, the steady improvement in the economic profit margin since 2019 indicates a gradual trend toward stabilizing the value-creation process.
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