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: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Economic Profit
Netflix Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of the financial data reveals several notable trends and patterns over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- There is a general upward trend in NOPAT from 2020 to 2024. Starting at approximately 3.69 billion USD in 2020, NOPAT nearly doubled to about 6.08 billion USD in 2021, followed by a decline to 4.99 billion USD in 2022. Subsequently, NOPAT increased again to around 5.44 billion USD in 2023 and experienced a significant rise to approximately 8.60 billion USD by the end of 2024.
- Cost of Capital
- The cost of capital shows a gradual increase over the period, starting at 16.18% in 2020 and rising steadily each year to reach 16.71% in 2024. This increase suggests a marginally higher expected return or risk associated with the company’s invested capital during this timeframe.
- Invested Capital
- Invested capital demonstrates a consistent upward trajectory across the five years. Beginning at approximately 29.76 billion USD in 2020, the figure rose to around 41.71 billion USD by the end of 2024. The largest increases occurred between 2020 and 2022, with a more moderate rise thereafter.
- Economic Profit
- Economic profit fluctuated significantly during the period. It started negatively at about -1.12 billion USD in 2020, turned positive to roughly 580 million USD in 2021, and declined sharply back to negative territory in 2022 (-1.06 billion USD) and 2023 (-0.78 billion USD). By 2024, the company achieved a significant positive economic profit of Approximately 1.80 billion USD, indicating improved value creation over the cost of capital.
In summary, the company’s NOPAT and invested capital have generally increased, reflecting growth and greater investment. The cost of capital has risen slightly, indicating a modest increase in the required return for investors. Economic profit volatility suggests fluctuating efficiency in generating returns above the cost of capital, with the most recent year showing strong improvement and positive value generation.
Net Operating Profit after Taxes (NOPAT)
Netflix Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
- Net Income
- The net income displayed a significant overall growth trend over the analyzed period. Starting at approximately 2.76 billion US dollars in 2020, it nearly doubled by 2021 reaching around 5.12 billion. A slight decline occurred in 2022 to about 4.49 billion, followed by a recovery in 2023 to roughly 5.41 billion. The most notable increase was observed in 2024, with net income rising sharply to approximately 8.71 billion, representing substantial profitability expansion toward the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited a strong upward trend, beginning at roughly 3.69 billion US dollars in 2020. It increased markedly to about 6.08 billion in 2021 before experiencing a decrease in 2022 to around 4.99 billion. The figure rebounded slightly in 2023, reaching approximately 5.44 billion, and then surged considerably in 2024 to approximately 8.60 billion. This pattern reflects similar movements to net income, indicating consistent operational profitability progression, with a particularly strong performance in the final year.
- Summary of Trends
- Both net income and NOPAT show parallel trends with peaks in 2021, followed by declines in 2022 and subsequent recoveries. The data reflects a strong recovery and growth phase culminating in significant financial improvement in 2024. The increases in 2024 imply enhanced efficiency in core operations and improved bottom-line results. Minor fluctuations in the middle years suggest potential operational or market challenges that were ultimately overcome.
Cash Operating Taxes
Netflix Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data reveals a consistent upward trend in both the provision for income taxes and cash operating taxes over the five-year period from 2020 to 2024.
- Provision for Income Taxes
- This figure increased steadily each year, starting at 437,954 thousand US dollars in 2020 and rising to 1,254,026 thousand US dollars in 2024. The growth suggests a rising taxable income base or changes in tax liabilities, with the most significant increase occurring between 2023 and 2024.
- Cash Operating Taxes
- Cash operating taxes also exhibited a persistent increase year over year, moving from 545,709 thousand US dollars in 2020 to 1,952,319 thousand US dollars in 2024. The increase was particularly sharp in the later years, indicating higher cash outflows related to taxation, which may impact liquidity considerations.
The concurrent rises in both provision for income taxes and cash operating taxes indicate growing tax obligations generally aligned with operational or profitability expansion. The substantial increases in the 2023 to 2024 period could warrant further analysis regarding tax planning, cash flow management, and potential impacts on net income and operational financing.
Invested Capital
Netflix Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of capital work-in-progress.
7 Subtraction of short-term investments.
The financial data reveals several noteworthy trends related to the capital structure and equity position over the five-year period analyzed.
- Total reported debt & leases
- This liability category shows a general decline from 2020 to 2022, decreasing from approximately 18.51 billion USD to 16.93 billion USD. Following this reduction, the figure remains relatively stable in 2023 before experiencing an increase in 2024, reaching nearly 18.00 billion USD. The initial reduction could indicate active debt management or repayment, while the subsequent rise suggests renewed borrowing or lease obligations arising during the latest year.
- Stockholders’ equity
- Stockholders’ equity demonstrates a consistent and substantial increase throughout the period. Starting from approximately 11.07 billion USD in 2020, the equity nearly doubles by the end of 2022, reaching over 20.78 billion USD. It remains stable in 2023 and then attains a new peak in 2024, exceeding 24.74 billion USD. This upward trend indicates strong retained earnings growth, equity issuances, or other comprehensive income components that strengthen the company's net asset position.
- Invested capital
- Invested capital, representing the total capital deployed in business operations, follows an upward trajectory across all five periods. Beginning at roughly 29.76 billion USD in 2020, it increases steadily to over 40.71 billion USD by 2024. The growth in invested capital aligns with the rise in equity, supported by generally stable debt levels, implying ongoing investment in operational assets or acquisitions expanding the company's capital base.
- Summary
- Overall, the company exhibits a strengthening financial position characterized by rising equity and invested capital. While debt levels declined initially, a slight increase in the most recent year suggests a potential strategic shift or operational financing need. The equity surge significantly outpaces debt growth, indicative of robust internal capital generation or equity financing, thus potentially improving solvency and financial flexibility over time.
Cost of Capital
Netflix Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (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 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (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 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (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 Senior Notes. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Netflix Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals significant fluctuations in the economic profit over the analyzed five-year period. Initially, economic profit is substantially negative at approximately -1.12 billion US dollars for the year ending in 2020. This is followed by a turnaround to a positive economic profit of about 580 million US dollars in 2021. However, the subsequent years show another decline, with economic profit reverting to negative territory in 2022 and 2023, before surging to a markedly positive level of roughly 1.8 billion US dollars in 2024.
Invested capital exhibits a consistent upward trajectory throughout the period. It increases steadily from around 29.76 billion US dollars at the end of 2020 to 40.71 billion US dollars by the end of 2024, reflecting ongoing capital investment or asset accumulation over these years.
The economic spread ratio mirrors the volatility of economic profit with corresponding trends. It starts at a negative rate of -3.77% in 2020, improves to a positive 1.67% in 2021, and then declines again to negative values of -2.81% and -2.04% in 2022 and 2023, respectively. By 2024, the ratio shows a significant positive increase to 4.42%, indicating improved returns over the cost of capital.
Overall, the data indicates periods of both economic underperformance and recovery. The notable positive economic profit and economic spread ratio in 2024 suggest strengthened financial performance and value creation after earlier years of economic losses. The steady increase in invested capital suggests ongoing growth initiatives and expansion despite the volatility in economic profitability indicators.
Economic Profit Margin
Netflix Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data indicates fluctuations in economic profit over the analyzed periods, with a notable recovery in the latest year. Adjusted revenues show a consistent upward trajectory, reflecting growth over the five years.
- Economic Profit
- There is significant volatility in economic profit, with negative values in 2020, 2022, and 2023, and positive values in 2021 and 2024. The magnitude of negative economic profit was highest in 2020 (-1,122,632 thousand US$) and decreased in 2023 (-775,152 thousand US$), followed by a substantial positive swing in 2024 (1,798,087 thousand US$). This suggests challenges in profitability during most years, but a notable improvement in the final year.
- Adjusted Revenues
- The adjusted revenues have increased steadily each year from 25,189,303 thousand US$ in 2020 to 39,078,810 thousand US$ in 2024. This represents continuous revenue expansion with a compound growth trend evident over the five-year span, indicating successful top-line growth strategies.
- Economic Profit Margin
- The economic profit margin follows a pattern similar to economic profit, moving from negative (-4.46% in 2020) to positive (1.95% in 2021), then back to negative levels in 2022 (-3.35%) and 2023 (-2.29%), and finally reaching a positive margin of 4.6% in 2024. The margin recovery in 2024 aligns with the increase in economic profit, highlighting improved profitability relative to revenues.
Overall, while revenue growth has been consistent and robust, profitability as measured by economic profit and its margin has been volatile, with significant losses in certain years offset by strong gains in others. The final year shows marked improvement in profitability, suggesting potential operational or strategic enhancements contributing to better economic returns.