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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Netflix Inc. pages available for free this week:
- Income Statement
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- There is a general upward trend in NOPAT over the five-year period, starting at approximately $3.69 billion in 2020 and reaching $8.60 billion in 2024. The figure increased significantly from 2020 to 2021, then declined in 2022, followed by a slight recovery in 2023, and a strong increase again in 2024. This indicates improving operational profitability with some fluctuations during the middle years.
- Cost of Capital
- The cost of capital shows a gradual increase from 16.44% in 2020 to 16.97% in 2024. This upward trend, albeit moderate, suggests a rising expense related to the company’s financing sources or risk profile.
- Invested Capital
- Invested capital has consistently increased each year, starting at approximately $29.76 billion in 2020 and rising to $40.71 billion in 2024. The growth is steady, indicating ongoing investments or asset accumulation by the company.
- Economic Profit
- Economic profit exhibits notable volatility across the period. It is negative in 2020 (-$1.20 billion), positive in 2021 ($494 million), then negative again in 2022 (-$1.16 billion) and 2023 (-$873 million), before turning positive in 2024 ($1.69 billion). The fluctuation in economic profit reflects changing returns relative to the cost of capital, with the company struggling to consistently generate value over and above its capital cost until a notable improvement in 2024.
- Overall Analysis
- The company’s operational performance improved in terms of net operating profit, especially in the latest year. However, the rising cost of capital and the steady increase in invested capital create challenges in consistently achieving positive economic profit. Despite these challenges, the positive economic profit in 2021 and 2024 indicates that at times the company has managed to create value beyond its capital costs. The volatility in economic profit emphasizes a need for careful capital allocation and efficiency improvements to sustain value creation over time.
Net Operating Profit after Taxes (NOPAT)
Netflix Inc., NOPAT calculation
US$ 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. | ||||||
| Trade Desk 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 analysis of the company's annual financial data reveals fluctuating trends in key profitability metrics over the five-year period examined.
- Economic Profit
- The economic profit demonstrates considerable volatility, starting with a significant negative value in the initial year, indicating economic loss. This shifts to a positive figure in the subsequent year, reflecting an improvement in value creation. However, the profit reverts to negative figures in the following two years, although the magnitude of loss decreases in the fourth year compared to the first and third years. The final year shows a substantial positive rebound, reaching the highest level within the period. This pattern suggests unstable profitability with periods of both economic loss and gain.
- Invested Capital
- The invested capital exhibits a steady upward trend throughout the entire timeframe. The increase is consistent and notable, indicating ongoing investments and possibly expanding assets. This growth in invested capital signals the company's commitment to scaling or enhancing its operational base.
- Economic Spread Ratio
- The economic spread ratio parallels the economic profit trend, beginning with a negative spread that implies the company’s return on invested capital was less than its cost of capital. The ratio improves and becomes positive in the second year, indicating a period when returns exceeded costs. However, it declines into negative territory for the following two years, suggesting again suboptimal returns relative to capital costs. In the final year, the ratio rises markedly to its highest positive level in the period, reflecting a strong economic spread and efficient capital utilization during that year.
Overall, despite consistent growth in invested capital, the company’s economic profit and spread ratio experienced significant fluctuations. The recent positive trends in both economic profit and spread ratio may imply an improving ability to generate returns above the cost of capital, though past volatility indicates underlying challenges in maintaining consistent economic value creation.
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. | ||||||
| Trade Desk 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.
- Revenue Trends
- Revenues demonstrated a consistent upward trajectory over the five-year period. Starting from approximately $25.2 billion at the end of 2020, revenues increased steadily each year, reaching nearly $39.1 billion by the end of 2024. This represents a significant growth rate, highlighting successful expansion or increased market penetration.
- Economic Profit Analysis
- The economic profit displayed considerable volatility during the period. It recorded a substantial loss in 2020, followed by a positive turnaround in 2021. However, losses reemerged in 2022 and 2023, with values remaining negative but less severe in 2023 compared to 2020 and 2022. By 2024, economic profit improved markedly, showing a sizable positive gain. This fluctuation indicates challenges in sustaining profitability despite revenue growth, but the positive figure in 2024 suggests improvements in cost management or operational efficiency.
- Economic Profit Margin Insights
- The economic profit margin mirrored the trends observed in economic profit figures. It began with a negative margin of approximately -4.76% in 2020, turned positive in 2021 at around 1.66%, and reverted to negative levels in 2022 and 2023, albeit with a declining loss margin (-3.65% and -2.57%, respectively). By 2024, the margin increased substantially to 4.33%, signaling enhanced profitability relative to revenue size. This pattern reflects underlying fluctuations in profitability efficiency, with an indication of strategic improvements by the final year.
- Overall Observations
- Throughout the five-year span, there was strong revenue growth paired with unstable economic profit outcomes. The firm encountered profitability pressures in multiple years, yet successfully reversed these trends to attain positive economic profit and margin outcomes by 2024. The overall picture points to a company experiencing growth phases, facing profitability challenges, but ultimately managing to enhance economic performance by the end of the latest period.