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.
Paying user area
Try for free
Illumina Inc. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Illumina Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Illumina Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a general upward trend from 2016 to 2019, increasing from 453 million US dollars to a peak of 957 million US dollars. However, in 2020, it declined substantially to 593 million US dollars, representing a significant reduction from the previous year.
- Cost of Capital
- The cost of capital showed a gradual increase over the period from 2016 to 2020, rising from 14.54% to 15.12%. This indicates a continuously increasing required return on invested capital throughout the years under review.
- Invested Capital
- Invested capital steadily increased from 2016 to 2019, growing from 2,874 million to 4,997 million US dollars. In 2020, there was a slight decrease to 4,907 million US dollars, suggesting a minor reduction in the capital base after years of growth.
- Economic Profit
- Economic profit followed a pattern similar to NOPAT but with more volatility. From 2016 to 2017, economic profit increased sharply from 35 million to 212 million US dollars, then slightly decreased to 190 million in 2018 before rising again to 213 million in 2019. In 2020, economic profit turned negative, with a loss of 149 million US dollars, indicating that the company did not generate returns above its cost of capital in that year.
- Overall Trends and Insights
- The data reveals growth in operating profitability and capital investment from 2016 through 2019, accompanied by an increasing cost of capital. Despite higher invested capital and improved earnings up to 2019, the downturn in 2020 is significant, marked by reduced NOPAT and a negative economic profit. This change implies challenges in maintaining profitability relative to the company's cost of capital, possibly due to increased expenses, decreased revenues, or external factors impacting performance in 2020. The rising cost of capital throughout the period likely exerted upward pressure on required returns, increasing the difficulty of achieving positive economic profit.
Net Operating Profit after Taxes (NOPAT)
Illumina Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in reserve for product warranties.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Illumina stockholders.
5 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2020 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 Illumina stockholders.
8 2020 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 Illumina Stockholders
- The net income demonstrated an overall upward trend from 2016 to 2019, starting at 463 million US dollars in 2016 and reaching a peak of 1002 million US dollars in 2019. This represents a substantial growth over the four-year period. However, in 2020, there was a notable decline to 656 million US dollars, which indicates a reversal of the previous growth trend.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a similar pattern to net income, increasing consistently from 453 million US dollars in 2016 to 957 million US dollars in 2019. This increase reflects improving operational efficiency and profitability. However, in 2020, NOPAT decreased to 593 million US dollars, signaling a significant downturn in operating profitability in that year.
- Overall Observations
- Both net income and NOPAT showed strong positive growth through 2019, indicating solid financial performance and effective management of operational costs and taxes. The decline observed in 2020 suggests that external factors or internal challenges may have adversely affected profitability. The 2020 results warrant further investigation to identify specific causes and to assess the sustainability of future earnings.
Cash Operating Taxes
Illumina Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
The financial data reveals the trends in tax-related expenses over five fiscal years ending from 2016 to 2020. Both the provision for income taxes and cash operating taxes have exhibited fluctuations throughout this period.
- Provision for Income Taxes
- This item showed a significant increase from $133 million in 2016 to a peak of $365 million in 2017. Subsequently, it decreased sharply to $112 million in 2018 and remained relatively stable in 2019 with a slight increase to $128 million. In 2020, there was a notable rise again to $200 million.
- Cash Operating Taxes
- Cash operating taxes also followed a somewhat similar pattern, increasing from $140 million in 2016 to $344 million in 2017. After 2017, there was a decline to $133 million in 2018, followed by a further decrease to $114 million in 2019. In 2020, cash operating taxes dropped dramatically to $35 million, reaching the lowest level in the five-year span.
Overall, both tax provisions and cash operating taxes peaked sharply in 2017, followed by declines in subsequent years. However, while the provision for income taxes saw a rebound in 2020, cash operating taxes continued to decline substantially. This divergence in 2020 may indicate changes in tax payment timing, tax strategy, or the recognition of deferred tax liabilities.
Invested Capital
Illumina Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
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 reserve for product warranties.
5 Addition of equity equivalents to total Illumina stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of short-term investments.
The financial data indicates several notable trends in the company's capital structure and financing components over the five-year period ending December 31, 2020.
- Total reported debt & leases
- This metric exhibits moderate fluctuations, beginning at $1,795 million in 2016, rising to a peak of $2,599 million in 2018, before decreasing to approximately $1,881 million in 2019 and stabilizing around $1,906 million in 2020. The increase through 2018 suggests a period of increased borrowing or lease commitments, followed by a reduction implying possible debt repayment or lease adjustments.
- Total stockholders’ equity
- Equity shows a consistent, steady increase year-over-year, rising from $2,197 million in 2016 to $4,694 million in 2020. The equity nearly doubled over the period, reflecting retained earnings growth, possible capital raises, or accumulated comprehensive income, indicating strengthening financial stability and increased shareholder value.
- Invested capital
- Invested capital generally trends upward from $2,874 million in 2016 to a peak of $4,997 million in 2019, with a slight decrease to $4,907 million in 2020. This overall growth reflects increased funding employed in the business, either through equity or liabilities, aligning with growth or expansion strategies. The small decline in 2020 suggests a minor contraction or adjustment in the capital base.
Overall, the company demonstrates a strengthening equity base coupled with management of debt levels, maintaining total invested capital at elevated levels consistent with potential expansion or operational scaling. The reduction in debt after 2018, alongside rising equity, may suggest a strategic shift towards lower leverage, improving financial flexibility.
Cost of Capital
Illumina Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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: 2019-12-29).
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: 2018-12-30).
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 »
| 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 millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Illumina Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited an overall increasing trend from 2016 to 2019, rising from 35 million US dollars in 2016 to 213 million US dollars in 2019. However, a significant decline occurred in 2020, with economic profit dropping to a negative value of -149 million US dollars, indicating a deterioration in profitability and value creation for that year.
- Invested Capital
- Invested capital showed a consistent upward trajectory over the five-year period, increasing from 2,874 million US dollars in 2016 to 4,907 million US dollars in 2020. The steady growth in invested capital suggests ongoing investments and expansion efforts despite the fluctuation in economic profit.
- Economic Spread Ratio
- The economic spread ratio, which measures the value generated over the cost of capital, followed a pattern similar to economic profit. It improved markedly from 1.23% in 2016 to a peak of 5.89% in 2017, then gradually declined to 4.26% by 2019. In 2020, the ratio reversed sharply to a negative value of -3.05%, reflecting the loss in economic profit and indicating that the company's returns fell below its cost of capital in that year.
- Summary
- The data reveals strong growth in invested capital alongside improving economic profitability and spread until 2019, signifying effective capital utilization and value creation during this period. The sharp reversal in 2020, with economic profit turning negative and a negative economic spread ratio, highlights a significant challenge in maintaining returns above the cost of capital, suggesting either operational or market difficulties impacting financial performance despite sustained levels of capital investment.
Economic Profit Margin
Illumina Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenue
- Revenue demonstrated a consistent upward trend from 2016 to 2019, increasing each year from $2,398 million in 2016 to a peak of $3,543 million in 2019. However, in 2020, revenue decreased to $3,239 million, signaling a decline after four consecutive years of growth.
- Economic Profit
- Economic profit exhibited significant variability over the five-year period. Starting at $35 million in 2016, it rose sharply to $212 million in 2017, followed by a slight decline to $190 million in 2018. In 2019, economic profit increased again to $213 million. Notably, there was a considerable downturn in 2020, with economic profit turning negative to -$149 million, indicating a loss in economic profit for that year.
- Economic Profit Margin
- The economic profit margin followed a pattern similar to economic profit. It improved substantially from 1.47% in 2016 to a high of 7.69% in 2017. A moderate decrease occurred in 2018 to 5.71%, followed by a slight increase to 6% in 2019. In 2020, the margin fell sharply to -4.61%, reflecting the negative economic profit and marking a reversal from the positive margins observed in previous years.
- Overall Analysis
- The data reflect strong revenue growth up to 2019, which was positively correlated with improvements in both economic profit and economic profit margin during most of the period. However, 2020 marked a year of notable decline across all key indicators, with revenue decreasing and economic profit turning negative. This suggests operational or market challenges impacting profitability despite relatively high revenue levels. The negative margin in 2020 further underscores the diminished economic returns relative to revenues in that year.