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
Marriott International Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,577 – 16.68% × 13,992 = -756
The financial performance between 2015 and 2019 is characterized by a fundamental shift in capital structure and a subsequent struggle to maintain positive economic value added. While operating profitability showed growth for a significant portion of the period, the substantial expansion of the capital base created a capital charge that consistently exceeded net operating profits after 2015.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trend was observed from 2016 to 2018, with NOPAT increasing from 1,039 million US$ to a peak of 2,260 million US$. However, this growth was reversed in 2019, as NOPAT declined to 1,577 million US$, indicating a reduction in operating efficiency or market headwinds during the final year of the period.
- Invested Capital and Capital Charge
- A massive increase in invested capital occurred between 2015 and 2016, rising from 758 million US$ to 16,537 million US$. This capital base remained elevated, fluctuating between 13,992 million US$ and 14,627 million US$ through 2019. With the cost of capital remaining relatively stable—averaging approximately 17%—the resulting capital charge significantly outweighed the operating gains.
- Economic Profit Trajectory
- Economic profit transitioned from a positive 971 million US$ in 2015 to a substantial deficit of -1,740 million US$ in 2016, directly correlating with the surge in invested capital. Although a recovery trend was observed through 2018, where the deficit narrowed to -276 million US$ due to rising NOPAT, the trend reversed in 2019. The economic profit fell again to -756 million US$, driven primarily by the decline in NOPAT despite a slight reduction in both invested capital and the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Marriott International Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in accounts receivable reserve.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,012 × 4.80% = 49
6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 443 × 21.00% = 93
7 Addition of after taxes interest expense to net income.
8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 26 × 21.00% = 5
9 Elimination of after taxes investment income.
The financial data reflects the company's net income and net operating profit after taxes (NOPAT) over the five-year period from 2015 to 2019.
- Net Income
- Net income displayed fluctuations during the analyzed period. It began at 859 million US dollars in 2015, experienced a slight decrease to 780 million in 2016, then increased significantly to 1,372 million in 2017. The upward trend continued with a peak at 1,907 million in 2018 before declining to 1,273 million in 2019. This pattern suggests variability in profitability, with a notable peak in 2018 followed by a reduction in the subsequent year.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures followed a somewhat similar pattern, starting at 1,097 million US dollars in 2015 and slightly decreasing to 1,039 million in 2016. In 2017, NOPAT increased sharply to 1,463 million and continued its upward trajectory to reach the highest value of 2,260 million in 2018. However, in 2019, NOPAT saw a decrease to 1,577 million. The larger magnitude of changes in NOPAT compared to net income indicates that operating profitability experienced more pronounced fluctuations, with a strong peak in 2018.
Overall, the data reveals a pattern of growth in both net income and NOPAT leading up to 2018, followed by a decline in 2019. The significant increase in 2018 suggests a particularly strong operational and financial performance that year, which was not sustained in 2019. This trend may prompt further examination of underlying factors affecting profitability, including operating efficiency, market conditions, or extraordinary items impacting net income.
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Cash Operating Taxes
Marriott International Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
- Provision for Income Taxes
- The provision for income taxes exhibits significant fluctuation over the five-year period. It started at 396 million USD in 2015, increased slightly to 404 million USD in 2016, then surged sharply to 1,464 million USD in 2017. Following this peak, it decreased substantially to 438 million USD in 2018 and further to 326 million USD in 2019. This volatility suggests irregularities potentially related to changes in taxable income, tax strategies, or one-time tax events within the observed period.
- Cash Operating Taxes
- Cash operating taxes show an upward trend from 315 million USD in 2015 to a peak of 1,691 million USD in 2017. After this peak, cash taxes declined considerably to 626 million USD in 2018 and then decreased slightly to 577 million USD in 2019. The large increase in 2017 followed by a sharp reduction indicates a potential timing difference between accrued tax provisions and actual cash taxes paid, or a resolution of prior period tax liabilities.
- Overall Insights
- Both provision for income taxes and cash operating taxes demonstrate pronounced variability, especially in 2017, where both metrics reached their highest values within the period. The 2017 spike may reflect extraordinary tax circumstances, such as adjustments for deferred tax liabilities, changes in tax legislation, or significant shifts in pre-tax income figures. The subsequent decreases in 2018 and 2019 suggest normalization or rectification following the exceptional activity in 2017.
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Invested Capital
Marriott International Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 shareholders’ equity (deficit).
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- Total Reported Debt & Leases
-
The total reported debt and leases shows a consistent upward trend throughout the period from 2015 to 2019. The amount more than doubled from approximately $4.9 billion in 2015 to roughly $12 billion in 2019. This indicates a significant increase in the company’s leverage and financial obligations over these years.
- Shareholders’ Equity (Deficit)
-
Shareholders’ equity exhibits notable volatility over the period. It started with a deficit of about $3.6 billion in 2015, turned positive to reach a peak of approximately $5.4 billion in 2016, and then gradually declined in subsequent years to a much smaller positive value of around $0.7 billion by the end of 2019. The sharp swing from deficit to surplus and the subsequent erosion suggests fluctuations in net assets, possibly driven by operational performance, capital changes, or valuation adjustments.
- Invested Capital
-
Invested capital experienced substantial growth from 2015 to 2016, jumping from $758 million to over $16.5 billion, reflecting a major change in asset base or capital structure. After this significant increase, the invested capital decreases slightly over the following years, stabilizing near $14 billion by 2019. This pattern indicates a period of considerable investment or acquisition activity followed by a phase of relative stabilization or modest divestment.
- Overall Insights
-
The data suggests an overall increase in leverage with rising debt levels and fluctuating equity, which may point to increased financial risk or strategic financing decisions. The large increase in invested capital followed by a moderate decline could reflect business expansion efforts followed by optimization or consolidation. The reduction in shareholders’ equity after peaking might warrant further investigation into profitability, asset impairments, or dividend policies affecting retained earnings.
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Cost of Capital
Marriott International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 38,789) | 38,789) | ÷ | 51,023) | = | 0.76 | 0.76 | × | 21.07% | = | 16.02% | ||
| Long-term debt, including current portion3 | 11,222) | 11,222) | ÷ | 51,023) | = | 0.22 | 0.22 | × | 3.34% × (1 – 21.00%) | = | 0.58% | ||
| Operating lease liability4 | 1,012) | 1,012) | ÷ | 51,023) | = | 0.02 | 0.02 | × | 4.80% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 51,023) | 1.00 | 16.68% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,272) | 42,272) | ÷ | 53,109) | = | 0.80 | 0.80 | × | 21.07% | = | 16.77% | ||
| Long-term debt, including current portion3 | 9,217) | 9,217) | ÷ | 53,109) | = | 0.17 | 0.17 | × | 3.51% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 1,621) | 1,621) | ÷ | 53,109) | = | 0.03 | 0.03 | × | 3.51% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 53,109) | 1.00 | 17.34% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 50,502) | 50,502) | ÷ | 60,540) | = | 0.83 | 0.83 | × | 21.07% | = | 17.58% | ||
| Long-term debt, including current portion3 | 8,219) | 8,219) | ÷ | 60,540) | = | 0.14 | 0.14 | × | 3.24% × (1 – 35.00%) | = | 0.29% | ||
| Operating lease liability4 | 1,819) | 1,819) | ÷ | 60,540) | = | 0.03 | 0.03 | × | 3.24% × (1 – 35.00%) | = | 0.06% | ||
| Total: | 60,540) | 1.00 | 17.93% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,750) | 33,750) | ÷ | 43,613) | = | 0.77 | 0.77 | × | 21.07% | = | 16.31% | ||
| Long-term debt, including current portion3 | 8,455) | 8,455) | ÷ | 43,613) | = | 0.19 | 0.19 | × | 3.40% × (1 – 35.00%) | = | 0.43% | ||
| Operating lease liability4 | 1,408) | 1,408) | ÷ | 43,613) | = | 0.03 | 0.03 | × | 3.40% × (1 – 35.00%) | = | 0.07% | ||
| Total: | 43,613) | 1.00 | 16.81% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,461) | 16,461) | ÷ | 21,433) | = | 0.77 | 0.77 | × | 21.07% | = | 16.18% | ||
| Long-term debt, including current portion3 | 4,166) | 4,166) | ÷ | 21,433) | = | 0.19 | 0.19 | × | 3.36% × (1 – 35.00%) | = | 0.42% | ||
| Operating lease liability4 | 806) | 806) | ÷ | 21,433) | = | 0.04 | 0.04 | × | 3.36% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 21,433) | 1.00 | 16.69% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Marriott International Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (756) | (276) | (1,088) | (1,740) | 971) | |
| Invested capital2 | 13,992) | 14,627) | 14,229) | 16,537) | 758) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.40% | -1.89% | -7.65% | -10.52% | 128.11% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -756 ÷ 13,992 = -5.40%
4 Click competitor name to see calculations.
The financial trajectory from 2015 to 2019 indicates a significant shift from value creation to consistent value destruction. A stark contrast exists between the initial 2015 performance and the subsequent four-year period, which was characterized by negative economic profit and a depressed economic spread ratio.
- Economic Profit Trends
- A positive economic profit of 971 million USD was recorded in 2015, but this figure plummeted to -1,740 million USD in 2016. While a recovery trend was observed through 2018, where losses narrowed to -276 million USD, the trend reversed in 2019, with economic profit declining again to -756 million USD.
- Invested Capital Fluctuations
- Invested capital experienced a massive escalation between 2015 and 2016, rising from 758 million USD to 16,537 million USD. Following this surge, the capital base remained relatively stable, fluctuating between approximately 14 billion USD and 16.5 billion USD through 2019.
- Economic Spread Ratio Performance
- The economic spread ratio shifted from a highly positive 128.11% in 2015 to negative territory starting in 2016. The ratio reached its lowest point in 2016 at -10.52% and showed marginal improvement toward -1.89% by 2018, before deteriorating to -5.40% in 2019. This pattern demonstrates that the return on invested capital remained below the cost of capital for the majority of the analyzed period.
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Economic Profit Margin
Marriott International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (756) | (276) | (1,088) | (1,740) | 971) | |
| Revenues | 20,972) | 20,758) | 22,894) | 17,072) | 14,486) | |
| Add: Increase (decrease) in deferred revenue | 129) | 146) | —) | —) | —) | |
| Adjusted revenues | 21,101) | 20,904) | 22,894) | 17,072) | 14,486) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -3.58% | -1.32% | -4.75% | -10.19% | 6.70% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | — | — | — | — | — | |
| Booking Holdings Inc. | — | — | — | — | — | |
| Chipotle Mexican Grill Inc. | — | — | — | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | — | — | — | — | — | |
| Starbucks Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -756 ÷ 21,101 = -3.58%
3 Click competitor name to see calculations.
The financial performance from 2015 to 2019 indicates a significant shift from value creation to value destruction. While the period began with positive economic profit, the subsequent four years were characterized by negative economic profit, suggesting that the returns generated were insufficient to cover the company's cost of capital.
- Economic Profit Trends
- A sharp reversal occurred between 2015 and 2016, as economic profit plummeted from a positive 971 million US$ to a deficit of 1,740 million US$. Although a recovery trend was observed between 2016 and 2018, with the deficit narrowing to 276 million US$, this progress was offset in 2019 when economic profit declined again to 756 million US$.
- Revenue Growth and Capital Efficiency
- Adjusted revenues demonstrated a general upward trajectory, rising from 14,486 million US$ in 2015 to a peak of 22,894 million US$ in 2017. However, this expansion in scale did not correlate with a return to positive economic profit. The fact that revenues remained elevated above 20,000 million US$ from 2017 through 2019 while economic profit remained negative suggests that the cost of capital associated with the expanded operations outweighed the incremental operating gains.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. After a healthy margin of 6.70% in 2015, the margin collapsed to -10.19% in 2016. A steady improvement was noted through 2018, where the margin reached -1.32%, nearly reaching a break-even point. The subsequent decline to -3.58% in 2019 indicates a degradation in capital efficiency toward the end of the observed period.
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