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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- Income Statement
- Analysis of Profitability Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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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 financial data reveals several noteworthy trends over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibited a strong upward trend from 2020 through 2021, increasing significantly from approximately 3.7 billion to over 6 billion US dollars. This peak in 2021 was followed by a decline in 2022, dropping to nearly 5 billion, before recovering moderately in 2023. The data for 2024 shows a substantial increase, reaching its highest level in the observed period at approximately 8.6 billion US dollars, indicating a robust rebound and growth in operational profitability.
- Cost of Capital
-
The cost of capital gradually increased over the five years, starting at 16.23% in 2020 and reaching 16.75% by 2024. This gradual rise suggests a modest increase in the required return by investors or overall funding costs, which could reflect changes in market conditions or company risk profile.
- Invested Capital
-
Invested capital consistently increased each year, growing from around 29.8 billion US dollars in 2020 to over 40.7 billion by 2024. This steady increase indicates ongoing investment in the company’s operations or assets, potentially supporting growth initiatives or capital expenditures.
- Economic Profit
-
The company experienced fluctuations in economic profit throughout the period. It was negative in 2020 at approximately -1.14 billion US dollars, then turned positive in 2021 with a gain of about 565 million. However, economic profit reversed to negative in 2022 and 2023, though the magnitude of loss declined in 2023 compared to 2022. Notably, 2024 showed a strong positive economic profit of around 1.78 billion, suggesting a return to value creation above the cost of capital.
Overall, the data indicates a volatile pattern in profitability and value creation, with a peak in operating profit in 2021 followed by a decline and recovery. The increasing cost of capital and the steady rise in invested capital reflect growing capital requirements and cost pressures that the company faces. The recovery in both NOPAT and economic profit in the latest year analyzed suggests improved operational efficiency and enhanced value generation after previous challenges.
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 analysis of the financial data over the five-year period reveals notable fluctuations in economic profit and economic spread ratio, alongside a consistent increase in invested capital.
- Economic Profit
- The economic profit demonstrates significant volatility. In 2020, the company incurred a substantial loss of approximately -1,135,760 thousand US dollars. This shifted to a positive economic profit in 2021, reaching 564,985 thousand US dollars. However, the following two years, 2022 and 2023, again reflected negative economic profits of -1,076,827 thousand and -792,154 thousand US dollars respectively. In 2024, the economic profit turned positive again, reaching the highest value in the period at 1,779,373 thousand US dollars. This pattern indicates unstable profitability with marked recoveries and setbacks.
- Invested Capital
- Invested capital has shown a consistent upward trend, increasing steadily from 29,762,011 thousand US dollars in 2020 to 40,712,328 thousand US dollars in 2024. This represents an approximate increase of 37% over the five years, suggesting ongoing investments and asset growth.
- Economic Spread Ratio
- The economic spread ratio mirrors the fluctuations seen in economic profit. It started negatively at -3.82% in 2020, turned positive at 1.62% in 2021, then dropped back to negative levels at -2.85% and -2.09% in 2022 and 2023 respectively. In 2024, it climbed to a high positive rate of 4.37%. The spread ratio indicates the return on invested capital relative to the cost, confirming periods of value destruction and value creation.
In summary, while invested capital has continually grown, the company’s economic profit and economic spread ratio have experienced considerable variability, with two cycles of negative and positive performance. The return to strong positive economic profit and spread in 2024 may signal improved efficiency or profitability following earlier declines.
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.
- Adjusted Revenues
- The adjusted revenues demonstrate a consistent upward trend over the five-year period. Beginning at approximately $25.2 billion in 2020, revenues increased steadily each year to reach close to $39.1 billion by the end of 2024. This represents strong growth in the company's revenue base, with the compound annual growth rate indicating a robust expansion of the business operations.
- Economic Profit
- The economic profit figures exhibit significant volatility throughout the observed timeframe. The company recorded a substantial economic loss of about $1.14 billion in 2020, followed by a sharp turnaround to a positive economic profit of approximately $565 million in 2021. However, this was not sustained, as losses reemerged in 2022 and 2023, amounting to roughly $1.08 billion and $792 million respectively. In 2024, economic profit improved markedly to a positive $1.78 billion, indicating a strong recovery and improved profitability in that fiscal year.
- Economic Profit Margin
- The economic profit margin aligns with the economic profit trend, showing notable fluctuations across the years. Starting with a negative margin of -4.51% in 2020, the margin turned positive at 1.9% in 2021. This positive margin was not sustained as it reverted to negative percentages in 2022 (-3.4%) and 2023 (-2.34%). The margin subsequently rose significantly to 4.55% in 2024, signaling improved efficiency and profitability relative to revenues in the latest period.
- Overall Analysis
- The data reflects a company experiencing fluctuating economic profitability despite steady revenue growth. The periods of negative economic profit and margin in 2020, 2022, and 2023 suggest challenges in cost management, investments, or competitive pressures impacting net value creation. Conversely, the positive swings in 2021 and particularly in 2024 indicate effective operational and financial improvements leading to enhanced economic returns. The marked increase in economic profit and margins in 2024 is a positive signal for future financial health provided these improvements are sustainable.