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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- Statement of Comprehensive Income
- Balance Sheet: Assets
- Cash Flow Statement
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Net Profit Margin since 2009
- Return on Equity (ROE) since 2009
- Return on Assets (ROA) since 2009
- Total Asset Turnover since 2009
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Economic Profit
Fortinet Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a consistent upward trajectory over the analyzed period. Starting at approximately $554 million in 2018, it increased steadily each year to reach approximately $1.82 billion by the end of 2022. This demonstrates a strong and continuous growth in operational profitability.
- Cost of Capital
- The cost of capital remained relatively stable across the years, fluctuating marginally between 16.28% and 16.31% from 2018 to 2020, with a slight decrease to 16.04% in 2021 and remaining constant in 2022. This stability suggests a consistent perception of risk and financing costs over the period.
- Invested Capital
- Invested capital saw a notable increase, from approximately $1.89 billion in 2018 to $4.28 billion by the end of 2022. The growth was gradual at first but accelerated significantly between 2020 and 2022, indicating increased investments in assets or resources that support the company's operations.
- Economic Profit
- Economic profit showed a robust upward trend, increasing from approximately $247 million in 2018 to about $1.14 billion in 2022. The growth in economic profit outpaced the increase in invested capital, reflecting enhanced efficiency in generating returns above the cost of capital during the period.
Net Operating Profit after Taxes (NOPAT)
Fortinet Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Fortinet, Inc..
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Fortinet, Inc..
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net Income Attributable to Fortinet, Inc.
- The net income attributable to the company exhibited a positive growth trend over the five-year period. Starting at 332,200 thousand US dollars in 2018, the figure slightly decreased to 326,500 thousand in 2019. However, from 2019 onwards, a significant upward trajectory is evident, with net income rising to 488,500 thousand in 2020, 606,800 thousand in 2021, and reaching 857,300 thousand in 2022. This progression indicates strong profitability improvement, particularly after 2019.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a consistent and robust increase during the same timeframe. From 554,165 thousand US dollars in 2018, it climbed steadily each year: 773,545 thousand in 2019, 966,259 thousand in 2020, 1,371,124 thousand in 2021, and culminating at 1,822,720 thousand in 2022. The rate of growth accelerated notably after 2020, reflecting enhanced operating efficiency and/or expansion of core business operations.
- Overall Trends and Insights
- Both net income and NOPAT depict a healthy and improving financial performance over the five-year span. The initial slight dip in net income in 2019 contrasts with a continuous increase in NOPAT, suggesting operational resilience despite minor fluctuations in net profitability that year. The marked growth in both metrics post-2019 underscores successful strategic execution, greater operational leverage, or favorable market conditions contributing to substantially higher earnings and operating profits by 2022.
Cash Operating Taxes
Fortinet Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
- Provision for (benefit from) income taxes
- The provision for income taxes displayed considerable volatility over the five-year period. Initially, there was a significant income tax benefit of -81,300 thousand US dollars in 2018, indicating a tax gain rather than an expense. This shifted dramatically in 2019, turning into a tax expense of 52,700 thousand US dollars, which then remained relatively stable through 2020 at 53,200 thousand US dollars. In the subsequent years, the provision showed a decreasing trend in magnitude to 14,100 thousand US dollars in 2021, followed by an increase to 30,800 thousand US dollars in 2022. Overall, the data suggests a transition from a tax benefit to consistent tax expenses, with some fluctuations in the expense levels in recent years.
- Cash Operating Taxes
- Cash operating taxes showed a pronounced upward trend throughout the period examined. Beginning at 20,735 thousand US dollars in 2018, the amount decreased to 13,846 thousand US dollars in 2019, representing a short-term decline. However, from 2019 onwards, cash operating taxes rose sharply every year, reaching 56,940 thousand US dollars in 2020, 108,979 thousand US dollars in 2021, and peaking at 257,229 thousand US dollars in 2022. This consistent increase may indicate growing taxable income, changes in tax strategy, or increased profitability subject to cash tax payments.
Invested Capital
Fortinet Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
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 total Fortinet, Inc. stockholders’ equity (deficit).
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
8 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases remained relatively stable from 2018 to 2020, fluctuating between 46,100 and 53,100 thousand US dollars. However, there was a significant increase in 2021, with the value rising sharply to 1,055,200 thousand US dollars. This upward trend continued into 2022, with a slight further increase to 1,086,100 thousand US dollars, indicating a large increase in debt and lease obligations in the most recent two years.
- Total Stockholders’ Equity (Deficit)
- Stockholders’ equity exhibited a rising trend from 2018 through 2019, increasing from 1,010,200 thousand US dollars to 1,321,900 thousand US dollars. In 2020, equity declined sharply to 856,000 thousand US dollars and continued to decrease in 2021 to 781,700 thousand US dollars. The trend culminated in 2022 with a negative equity position of -281,600 thousand US dollars, reflecting a shift from equity surplus to deficit over the five-year period.
- Invested Capital
- Invested capital increased steadily over the observed period. It rose from 1,886,300 thousand US dollars in 2018 to 2,227,800 thousand US dollars in 2019 and remained close to that level in 2020 at 2,218,800 thousand US dollars. A notable increase occurred in 2021 when invested capital surged to 3,286,100 thousand US dollars, followed by continued growth in 2022 reaching 4,282,000 thousand US dollars. This indicates an expanding capital base, particularly pronounced in the most recent two years.
Cost of Capital
Fortinet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Fortinet Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a consistent upward trend over the reviewed five-year period. Starting at approximately 247 million US dollars in 2018, it increased significantly each year, reaching about 1.14 billion US dollars by the end of 2022. This represents a substantial increase, indicating improved value creation beyond the cost of capital.
- Invested Capital
- Invested capital rose steadily from around 1.89 billion US dollars in 2018 to about 4.28 billion US dollars in 2022. There was a notable acceleration in growth between 2020 and 2022, where capital investment increased by over 1 billion US dollars annually. This suggests increased asset deployment to support business activities.
- Economic Spread Ratio
- The economic spread ratio showed an overall positive trajectory, rising from 13.1% in 2018 to a peak of 27.24% in 2020. Although there was a slight decrease to 25.68% in 2021, it rebounded to 26.52% by 2022. This ratio indicates effective returns on invested capital exceeding the cost of capital, with a peak period around 2020 followed by a minor stabilization at a high level.
- Summary Insights
- Over the five-year period, the company demonstrated robust growth in economic profit and invested capital, accompanied by strong and relatively stable economic spread ratios well above 13%. The data suggests improved operational efficiency and value generation, with intensified capital investment supporting expanding economic profits. The economic spread ratio's peak in 2020 followed by a moderate stabilization might reflect strategic capital allocation maintaining high returns despite increasing invested capital.
Economic Profit Margin
Fortinet Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the analyzed period exhibits a consistent and marked improvement in the company's economic profitability and revenue generation. Key metrics demonstrate a positive trajectory, indicating effective utilization of capital and operational efficiency enhancement.
- Economic Profit
- The economic profit has shown a significant upward trend, increasing from $247,062 thousand in 2018 to $1,135,686 thousand in 2022. This progression illustrates a nearly fivefold growth over five years, suggesting enhanced value creation for shareholders and improved profitability beyond the cost of capital.
- Adjusted Revenue
- Adjusted revenue has also grown substantially, from $2,151,700 thousand in 2018 to $5,604,800 thousand in 2022. This steady increase reflects successful revenue expansion efforts, possibly driven by market growth, product demand, or strategic initiatives that boosted sales performance.
- Economic Profit Margin
- The economic profit margin has improved from 11.48% in 2018 to 20.26% in 2022. This margin growth indicates that economic profit has increased at a faster rate than revenue, implying improved profitability efficiency and cost management over the period. The margin plateauing slightly in the final year suggests stabilization of returns relative to revenue.
Overall, the data indicates robust financial health with expanding revenue bases and increasing profitability margins, reflecting effective operational and strategic management leading to enhanced economic profit and value generation.