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
Lumentum Holdings Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -206,411 – 14.80% × 3,043,200 = -656,830
An analysis of the financial performance between June 2020 and June 2025 reveals a significant deterioration in economic value creation. While the organization experienced a brief period of positive economic profit in 2021, the subsequent years are characterized by escalating losses and a consistent failure to generate returns exceeding the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trend is observed in operating profitability. NOPAT peaked in July 2021 at 446,535 thousand US$, followed by a sharp decline in 2022 and a transition into negative territory starting in July 2023. The losses deepened significantly in June 2024 to -409,039 thousand US$, with a partial moderation to -206,411 thousand US$ by June 2025. This indicates a sustained struggle to maintain positive operating income.
- Invested Capital and Cost of Capital
- Invested capital exhibited a consistent upward trajectory, growing from 1,599,300 thousand US$ in 2020 to a peak of 3,056,300 thousand US$ in 2024, before stabilizing at 3,043,200 thousand US$ in 2025. Concurrently, the cost of capital remained relatively high, fluctuating between 12.51% and 15.85%. The expansion of the capital base during a period of declining profitability increased the financial burden required to achieve a positive economic return.
- Economic Profit Trends
- The economic profit demonstrates a severe downward trend, reflecting substantial value destruction for shareholders. After a single year of value creation in 2021 (138,578 thousand US$), economic profit turned negative and deteriorated rapidly. The deficit peaked in June 2024 at -816,463 thousand US$. The combination of a growing capital base and plummeting NOPAT resulted in a widening gap between actual operating returns and the required return on invested capital.
The overall financial trajectory indicates that the increase in invested capital has not yielded corresponding operational gains. Instead, the rise in capital investment coincided with a collapse in NOPAT, leading to systemic economic losses that peaked in 2024 and remained deeply negative through 2025.
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Net Operating Profit after Taxes (NOPAT)
Lumentum Holdings Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for uncollectible accounts receivable.
3 Addition of increase (decrease) in deferred revenue and customer deposits.
4 Addition of increase (decrease) in product warranty reserve.
5 Addition of increase (decrease) in restructuring and related accrual.
6 Addition of increase (decrease) in equity equivalents to net income (loss).
7 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 35,000 × 3.80% = 1,330
8 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 23,530 × 21.00% = 4,941
9 Addition of after taxes interest expense to net income (loss).
Net operating profit after taxes (NOPAT) exhibited considerable fluctuation over the observed period. Initial values demonstrated growth, followed by a significant decline and subsequent negative values. This analysis details the observed trends in NOPAT and its relationship to net income (loss).
- Overall Trend
- NOPAT began at US$182.539 thousand in June 2020 and increased substantially to US$446.535 thousand by July 2021. A subsequent decrease was observed in July 2022, with NOPAT reported at US$237.780 thousand. The period from July 2022 to June 2025 witnessed a marked downturn, culminating in a negative NOPAT of US$206.411 thousand in June 2025.
- Growth Phase (2020-2021)
- The period between June 2020 and July 2021 showed a strong positive trend in NOPAT. This represents a significant increase of approximately 144.3% over the two-year period, indicating improved operational efficiency or increased revenue generation during this time. This growth outpaced the increase in net income during the same period.
- Decline and Negative Values (2022-2025)
- Following the peak in July 2021, NOPAT experienced a decline, becoming negative in July 2023 and remaining so through June 2025. The negative NOPAT values suggest that the company’s operating profits, after accounting for taxes, were insufficient to cover the cost of capital employed. The magnitude of the negative NOPAT increased substantially from US$138.034 thousand in July 2023 to US$206.411 thousand in June 2025.
- Relationship to Net Income (Loss)
- While NOPAT and net income both experienced fluctuations, the trend in net income was more volatile. Net income was positive through July 2022, but turned negative in July 2023 and reached a substantial loss in June 2024. The divergence between NOPAT and net income suggests that non-operating items, such as interest expense or gains/losses on asset sales, significantly impacted the overall net income figure, particularly in the later years. The negative NOPAT values consistently preceded or coincided with the negative net income, indicating operational performance is a key driver of overall profitability.
The observed trends in NOPAT warrant further investigation to determine the underlying causes of the decline and negative values. Factors such as increased operating costs, decreased revenue, or changes in the tax rate could be contributing to this performance.
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Cash Operating Taxes
Lumentum Holdings Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
The income tax provision and cash operating taxes exhibit distinct patterns over the observed period. Cash operating taxes generally decreased from 2020 to 2023, then experienced a significant decline in 2024, followed by a modest increase in the projected value for 2025. The income tax provision shows more volatility, with a substantial increase in 2021, followed by decreases in 2022 and 2023, and a dramatic increase in 2024 before projecting a substantial benefit in 2025.
- Cash Operating Taxes Trend
- Cash operating taxes increased notably from US$39.755 million in 2020 to US$83.144 million in 2021. This was followed by a decrease to US$77.620 million in 2022 and a further reduction to US$76.959 million in 2023, indicating a leveling off after the initial increase. A significant decrease to US$50.313 million is projected for 2024, with a slight recovery to US$53.841 million anticipated in 2025. This suggests potential changes in the company’s effective tax rate or taxable income.
- Income Tax Provision Trend
- The income tax provision demonstrates considerable fluctuation. It rose from US$38.800 million in 2020 to US$65.800 million in 2021. Subsequent years saw decreases, falling to US$36.200 million in 2022 and US$29.200 million in 2023. A substantial increase to US$140.800 million is projected for 2024, followed by a significant tax benefit of US$198.000 million in 2025. This large benefit in 2025 could be attributable to various factors, including the utilization of net operating loss carryforwards or changes in tax legislation.
- Relationship Between Provision and Cash Taxes
- The cash operating taxes generally track the income tax provision, but with differences in magnitude. In 2020 and 2021, the cash taxes were slightly higher than the provision. From 2022 through 2023, the difference narrowed. The projected values for 2024 and 2025 show a more pronounced divergence, with the income tax provision significantly exceeding cash taxes in 2024 and becoming a benefit in 2025, while cash taxes remain positive. This discrepancy suggests timing differences between reported income tax expense and actual cash payments, or the impact of deferred tax assets and liabilities.
The projected values for 2024 and 2025 warrant further investigation to understand the underlying drivers of these changes, particularly the substantial income tax benefit anticipated in 2025. These fluctuations could have a material impact on the company’s economic value added.
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Invested Capital
Lumentum Holdings Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
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 and customer deposits.
5 Addition of product warranty reserve.
6 Addition of restructuring and related accrual.
7 Addition of equity equivalents to stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of short-term investments.
The invested capital of the company demonstrates a generally increasing trend over the observed period, although with some fluctuations. Total reported debt & leases and stockholders’ equity are the components used to derive invested capital, and both exhibit changes that contribute to this overall pattern.
- Invested Capital Trend
- Invested capital increased from US$1,599.3 million in June 2020 to US$1,964.1 million in July 2021, representing a growth of approximately 22.8%. A further increase was observed in July 2022, reaching US$2,500.7 million. The upward trend continued into July 2023, with invested capital reaching US$2,902.9 million. However, a slight decrease occurred in June 2024 to US$3,056.3 million, followed by a minor reduction again in June 2025 to US$3,043.2 million. Despite these recent minor declines, the overall trend remains positive when considering the period from 2020 to 2025.
- Debt & Leases
- Total reported debt & leases increased consistently from US$1,189.3 million in June 2020 to US$2,873.7 million in July 2023, indicating a significant reliance on debt financing during this period. A decrease was then noted in June 2024 to US$2,559.6 million, and a slight increase to US$2,608.2 million in June 2025. This suggests a potential shift in financing strategy or debt repayment efforts in the later years.
- Stockholders’ Equity
- Stockholders’ equity initially increased from US$1,749.2 million in June 2020 to US$1,972.8 million in July 2021. However, it then experienced a decline, falling to US$1,875.0 million in July 2022 and continuing downward to US$1,355.8 million in July 2023. This downward trend persisted into June 2024, reaching US$957.3 million, before a partial recovery to US$1,134.7 million in June 2025. The decrease in stockholders’ equity may be attributable to factors such as share repurchases, dividend payments, or net losses.
The interplay between debt and equity significantly influences the invested capital. While debt increased substantially through 2023, the concurrent decline in stockholders’ equity from 2022 onwards partially offset this increase. The stabilization of invested capital in the most recent periods suggests a balancing act between these two components of the company’s capital structure.
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Cost of Capital
Lumentum Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,245,404) | 8,245,404) | ÷ | 11,396,404) | = | 0.72 | 0.72 | × | 19.03% | = | 13.77% | ||
| Debt3 | 3,116,000) | 3,116,000) | ÷ | 11,396,404) | = | 0.27 | 0.27 | × | 4.74% × (1 – 21.00%) | = | 1.02% | ||
| Operating lease liability4 | 35,000) | 35,000) | ÷ | 11,396,404) | = | 0.00 | 0.00 | × | 3.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 11,396,404) | 1.00 | 14.80% | ||||||||||
Based on: 10-K (reporting date: 2025-06-28).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 3,834,520) | 3,834,520) | ÷ | 6,108,220) | = | 0.63 | 0.63 | × | 19.03% | = | 11.95% | ||
| Debt3 | 2,217,300) | 2,217,300) | ÷ | 6,108,220) | = | 0.36 | 0.36 | × | 4.74% × (1 – 21.00%) | = | 1.36% | ||
| Operating lease liability4 | 56,400) | 56,400) | ÷ | 6,108,220) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 6,108,220) | 1.00 | 13.33% | ||||||||||
Based on: 10-K (reporting date: 2024-06-29).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 3,547,106) | 3,547,106) | ÷ | 6,190,606) | = | 0.57 | 0.57 | × | 19.03% | = | 10.90% | ||
| Debt3 | 2,581,400) | 2,581,400) | ÷ | 6,190,606) | = | 0.42 | 0.42 | × | 4.81% × (1 – 21.00%) | = | 1.58% | ||
| Operating lease liability4 | 62,100) | 62,100) | ÷ | 6,190,606) | = | 0.01 | 0.01 | × | 3.10% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 6,190,606) | 1.00 | 12.51% | ||||||||||
Based on: 10-K (reporting date: 2023-07-01).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,203,910) | 6,203,910) | ÷ | 8,678,810) | = | 0.71 | 0.71 | × | 19.03% | = | 13.60% | ||
| Debt3 | 2,414,900) | 2,414,900) | ÷ | 8,678,810) | = | 0.28 | 0.28 | × | 5.68% × (1 – 21.00%) | = | 1.25% | ||
| Operating lease liability4 | 60,000) | 60,000) | ÷ | 8,678,810) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 8,678,810) | 1.00 | 14.87% | ||||||||||
Based on: 10-K (reporting date: 2022-07-02).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,298,728) | 6,298,728) | ÷ | 8,173,528) | = | 0.77 | 0.77 | × | 19.03% | = | 14.66% | ||
| Debt3 | 1,815,400) | 1,815,400) | ÷ | 8,173,528) | = | 0.22 | 0.22 | × | 5.67% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 59,400) | 59,400) | ÷ | 8,173,528) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 8,173,528) | 1.00 | 15.68% | ||||||||||
Based on: 10-K (reporting date: 2021-07-03).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,316,800) | 6,316,800) | ÷ | 8,076,000) | = | 0.78 | 0.78 | × | 19.03% | = | 14.88% | ||
| Debt3 | 1,690,800) | 1,690,800) | ÷ | 8,076,000) | = | 0.21 | 0.21 | × | 5.67% × (1 – 21.00%) | = | 0.94% | ||
| Operating lease liability4 | 68,400) | 68,400) | ÷ | 8,076,000) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 8,076,000) | 1.00 | 15.85% | ||||||||||
Based on: 10-K (reporting date: 2020-06-27).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Lumentum Holdings Inc., economic spread ratio calculation, comparison to benchmarks
| Jun 28, 2025 | Jun 29, 2024 | Jul 1, 2023 | Jul 2, 2022 | Jul 3, 2021 | Jun 27, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (656,830) | (816,463) | (501,258) | (134,015) | 138,578) | (70,873) | |
| Invested capital2 | 3,043,200) | 3,056,300) | 2,902,900) | 2,500,700) | 1,964,100) | 1,599,300) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -21.58% | -26.71% | -17.27% | -5.36% | 7.06% | -4.43% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Apple Inc. | 106.95% | 164.25% | 137.44% | 198.95% | 195.32% | 143.29% | |
| Arista Networks Inc. | 53.57% | 34.98% | 20.37% | 15.90% | 30.95% | — | |
| Cisco Systems Inc. | -3.67% | -0.66% | 6.34% | 6.26% | 5.50% | 9.81% | |
| Dell Technologies Inc. | -9.75% | -8.39% | -0.72% | 3.15% | -1.38% | — | |
| Super Micro Computer Inc. | -8.13% | -6.08% | 4.00% | -4.88% | -12.86% | -15.81% | |
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -656,830 ÷ 3,043,200 = -21.58%
4 Click competitor name to see calculations.
The financial data indicates a significant period of economic value destruction, characterized by deeply negative economic profit and a declining economic spread ratio over the majority of the observed timeframe. While there was a brief period of value creation in 2021, the subsequent years demonstrate a widening gap between the returns generated and the cost of the capital employed.
- Economic Profit Trends
- Economic profit remained negative for five of the six years analyzed. After a peak of 138.58 million US$ in 2021, the metric entered a steep decline, reaching a trough of -816.46 million US$ in 2024. Although a modest recovery is noted in 2025, with losses narrowing to -656.83 million US$, the overall trajectory reflects a substantial failure to generate returns above the cost of capital.
- Invested Capital Growth
- A consistent upward trend in invested capital is observed from 2020 through 2024, rising from 1.60 billion US$ to 3.06 billion US$. This growth represents nearly a 91% increase in the capital base over four years. The capital level stabilized in 2025 at 3.04 billion US$, suggesting a transition from aggressive capital expansion to a period of consolidation.
- Economic Spread Ratio Analysis
- The economic spread ratio serves as a critical indicator of value creation efficiency, showing extreme volatility. The ratio moved from -4.43% in 2020 to a positive 7.06% in 2021, before collapsing to -26.71% by 2024. This deterioration indicates that as the invested capital base grew, the ability to generate a return exceeding the cost of capital diminished sharply. The slight improvement to -21.58% in 2025 suggests a marginal reduction in the rate of value erosion, though the ratio remains deeply negative.
The divergence between the expanding invested capital and the plummeting economic profit suggests that the investments made between 2021 and 2024 did not yield the expected economic returns. The correlation between the increase in capital and the widening negative spread indicates a decrease in capital efficiency, where additional investment exacerbated the economic loss rather than alleviating it.
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Economic Profit Margin
Lumentum Holdings Inc., economic profit margin calculation, comparison to benchmarks
| Jun 28, 2025 | Jun 29, 2024 | Jul 1, 2023 | Jul 2, 2022 | Jul 3, 2021 | Jun 27, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (656,830) | (816,463) | (501,258) | (134,015) | 138,578) | (70,873) | |
| Net revenue | 1,645,000) | 1,359,200) | 1,767,000) | 1,712,600) | 1,742,800) | 1,678,600) | |
| Add: Increase (decrease) in deferred revenue and customer deposits | 100) | (1,500) | 2,100) | (600) | (1,300) | (1,000) | |
| Adjusted net revenue | 1,645,100) | 1,357,700) | 1,769,100) | 1,712,000) | 1,741,500) | 1,677,600) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -39.93% | -60.14% | -28.33% | -7.83% | 7.96% | -4.22% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Apple Inc. | 22.80% | 20.99% | 21.62% | 23.51% | 22.69% | 18.78% | |
| Arista Networks Inc. | 33.11% | 24.77% | 15.38% | 10.95% | 18.13% | — | |
| Cisco Systems Inc. | -5.91% | -1.07% | 6.30% | 7.02% | 6.14% | 10.24% | |
| Dell Technologies Inc. | -5.27% | -5.15% | -0.40% | 1.65% | -1.18% | — | |
| Super Micro Computer Inc. | -4.19% | -3.09% | 1.36% | -2.07% | -4.64% | -5.87% | |
Based on: 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03), 10-K (reporting date: 2020-06-27).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenue
= 100 × -656,830 ÷ 1,645,100 = -39.93%
3 Click competitor name to see calculations.
An analysis of the economic value added metrics reveals a period of significant instability and a general deterioration in value creation from 2020 to 2025, characterized by a brief window of profitability followed by a severe decline.
- Economic Profit Trends
- Economic profit exhibited extreme volatility, transitioning from a negative value in 2020 to a peak positive of 138,578 thousand dollars in 2021. This positive trajectory was short-lived, as the subsequent years saw a sustained and accelerating decline, reaching a trough of negative 816,463 thousand dollars in 2024. A moderate recovery is observed in 2025, with losses narrowing to 656,830 thousand dollars.
- Adjusted Net Revenue Performance
- Revenue remained relatively stable between 2020 and 2023, fluctuating within the 1.67 to 1.77 billion dollar range. A sharp contraction occurred in 2024, where revenue fell to 1,357,700 thousand dollars, representing the lowest point in the analyzed period. By 2025, revenue rebounded to 1,645,100 thousand dollars, returning toward historical norms.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrors the trajectory of absolute economic profit. After achieving a positive margin of 7.96% in 2021, the margin entered a steep decline, crashing to negative 60.14% by 2024. This indicates a severe erosion of value relative to generated revenue. While the margin improved to negative 39.93% in 2025, it remains deeply negative, suggesting that the company continues to generate returns below its cost of capital.
The correlation between the sharp dip in revenue and the peak in economic losses during 2024 suggests a systemic operational shock. However, the fact that economic profit margins deteriorated more aggressively than revenue suggests that the loss of value is also driven by factors such as increased operating costs or a higher cost of capital, rather than purely by top-line revenue declines.
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