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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

O’Reilly Automotive Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	2,362,405)	1,953,719)	1,589,868)	1,512,921)	1,241,849)
Cost of capital²	12.28%	11.76%	11.73%	12.00%	11.43%
Invested capital³	5,766,861)	6,200,132)	6,076,741)	5,606,204)	5,440,691)

Economic profit⁴	1,654,132)	1,224,708)	876,879)	840,440)	619,795)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,362,405 – 12.28% × 5,766,861 = 1,654,132

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	O’Reilly Automotive Inc. economic profit increased from 2019 to 2020 and from 2020 to 2021.

O’Reilly Automotive Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income	2,164,685)	1,752,302)	1,391,042)	1,324,487)	1,133,804)
Deferred income tax expense (benefit)¹	20,383)	12,381)	21,158)	20,160)	(4,760)
Increase (decrease) in allowance for doubtful accounts²	(800)	(1,747)	1,179)	521)	677)
Increase (decrease) in deferred revenue liability³	(1,100)	400)	(200)	(400)	(100)
Increase (decrease) in product warranty liabilities⁴	11,313)	4,817)	8,849)	7,822)	7,775)
Increase (decrease) in equity equivalents⁵	29,796)	15,851)	30,986)	28,103)	3,592)
Interest expense	144,768)	161,126)	139,975)	122,129)	91,349)
Interest expense, operating lease liability⁶	75,465)	81,659)	80,826)	81,643)	75,294)
Adjusted interest expense	220,233)	242,785)	220,801)	203,772)	166,643)
Tax benefit of interest expense⁷	(46,249)	(50,985)	(46,368)	(42,792)	(58,325)
Adjusted interest expense, after taxes⁸	173,984)	191,800)	174,433)	160,980)	108,318)
(Gain) loss on marketable securities	(5,700)	(5,400)	(5,800)	1,700)	(3,600)
Interest income	(1,971)	(2,491)	(2,545)	(2,521)	(2,347)
Investment income, before taxes	(7,671)	(7,891)	(8,345)	(821)	(5,947)
Tax expense (benefit) of investment income⁹	1,611)	1,657)	1,752)	172)	2,081)
Investment income, after taxes¹⁰	(6,060)	(6,234)	(6,593)	(649)	(3,866)
Net operating profit after taxes (NOPAT)	2,362,405)	1,953,719)	1,589,868)	1,512,921)	1,241,849)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenue liability.

⁴ Addition of increase (decrease) in product warranty liabilities.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,039,589 × 3.70% = 75,465

⁷ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 220,233 × 21.00% = 46,249

⁸ Addition of after taxes interest expense to net income.

⁹ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 7,671 × 21.00% = 1,611

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	O’Reilly Automotive Inc. NOPAT increased from 2019 to 2020 and from 2020 to 2021.

O’Reilly Automotive Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income tax expense	617,229)	514,103)	399,287)	369,600)	504,000)
Less: Deferred income tax expense (benefit)	20,383)	12,381)	21,158)	20,160)	(4,760)
Add: Tax savings from interest expense	46,249)	50,985)	46,368)	42,792)	58,325)
Less: Tax imposed on investment income	1,611)	1,657)	1,752)	172)	2,081)
Cash operating taxes	641,484)	551,050)	422,745)	392,060)	565,004)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	O’Reilly Automotive Inc. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

O’Reilly Automotive Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Long-term debt	3,826,978)	4,123,217)	3,890,527)	3,417,122)	2,978,390)
Operating lease liability¹	2,039,589)	2,041,469)	1,971,358)	1,976,830)	1,945,593)
Total reported debt & leases	5,866,567)	6,164,686)	5,861,885)	5,393,952)	4,923,983)
Shareholders’ equity (deficit)	(66,423)	140,258)	397,340)	353,667)	653,046)
Net deferred tax (assets) liabilities²	175,212)	155,899)	133,280)	105,566)	85,406)
Allowance for doubtful accounts³	11,870)	12,670)	14,417)	13,238)	12,717)
Deferred revenue liability⁴	3,400)	4,500)	4,100)	4,300)	4,700)
Product warranty liabilities⁵	77,199)	65,886)	61,069)	52,220)	44,398)
Equity equivalents⁶	267,681)	238,955)	212,866)	175,324)	147,221)
Accumulated other comprehensive (income) loss, net of tax⁷	6,799)	2,155)	(4,890)	—)	—)
Adjusted shareholders’ equity (deficit)	208,057)	381,368)	605,316)	528,991)	800,267)
Construction in progress⁸	(255,307)	(305,511)	(358,259)	(291,246)	(257,853)
Marketable securities⁹	(52,456)	(40,411)	(32,201)	(25,493)	(25,706)
Invested capital	5,766,861)	6,200,132)	6,076,741)	5,606,204)	5,440,691)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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 liability.

⁵ Addition of product warranty liabilities.

⁶ Addition of equity equivalents to shareholders’ equity (deficit).

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	O’Reilly Automotive Inc. invested capital increased from 2019 to 2020 but then decreased significantly from 2020 to 2021.

O’Reilly Automotive Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	43,239,980)	43,239,980)	÷	49,415,198)	=	0.88	0.88	×	13.62%	=	11.92%
Long-term debt³	4,135,629)	4,135,629)	÷	49,415,198)	=	0.08	0.08	×	3.62% × (1 – 21.00%)	=	0.24%
Operating lease liability⁴	2,039,589)	2,039,589)	÷	49,415,198)	=	0.04	0.04	×	3.70% × (1 – 21.00%)	=	0.12%
Total:	49,415,198)					1.00					12.28%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,405,549)	31,405,549)	÷	38,094,613)	=	0.82	0.82	×	13.62%	=	11.23%
Long-term debt³	4,647,595)	4,647,595)	÷	38,094,613)	=	0.12	0.12	×	3.70% × (1 – 21.00%)	=	0.36%
Operating lease liability⁴	2,041,469)	2,041,469)	÷	38,094,613)	=	0.05	0.05	×	4.00% × (1 – 21.00%)	=	0.17%
Total:	38,094,613)					1.00					11.76%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	27,616,051)	27,616,051)	÷	33,730,334)	=	0.82	0.82	×	13.62%	=	11.15%
Long-term debt³	4,142,925)	4,142,925)	÷	33,730,334)	=	0.12	0.12	×	4.01% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	1,971,358)	1,971,358)	÷	33,730,334)	=	0.06	0.06	×	4.10% × (1 – 21.00%)	=	0.19%
Total:	33,730,334)					1.00					11.73%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,839,089)	28,839,089)	÷	34,218,965)	=	0.84	0.84	×	13.62%	=	11.48%
Long-term debt³	3,403,046)	3,403,046)	÷	34,218,965)	=	0.10	0.10	×	4.13% × (1 – 21.00%)	=	0.32%
Operating lease liability⁴	1,976,830)	1,976,830)	÷	34,218,965)	=	0.06	0.06	×	4.13% × (1 – 21.00%)	=	0.19%
Total:	34,218,965)					1.00					12.00%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,431,597)	20,431,597)	÷	25,451,357)	=	0.80	0.80	×	13.62%	=	10.94%
Long-term debt³	3,074,167)	3,074,167)	÷	25,451,357)	=	0.12	0.12	×	3.87% × (1 – 35.00%)	=	0.30%
Operating lease liability⁴	1,945,593)	1,945,593)	÷	25,451,357)	=	0.08	0.08	×	3.87% × (1 – 35.00%)	=	0.19%
Total:	25,451,357)					1.00					11.43%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

O’Reilly Automotive Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	1,654,132)	1,224,708)	876,879)	840,440)	619,795)
Invested capital²	5,766,861)	6,200,132)	6,076,741)	5,606,204)	5,440,691)
Performance Ratio
Economic spread ratio³	28.68%	19.75%	14.43%	14.99%	11.39%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	4.73%	2.09%	-1.25%	—	—
Home Depot Inc.	16.43%	23.52%	23.95%	—	—
Lowe’s Cos. Inc.	12.36%	8.43%	-1.05%	—	—
TJX Cos. Inc.	-9.44%	8.27%	7.54%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,654,132 ÷ 5,766,861 = 28.68%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	O’Reilly Automotive Inc. economic spread ratio improved from 2019 to 2020 and from 2020 to 2021.

O’Reilly Automotive Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	1,654,132)	1,224,708)	876,879)	840,440)	619,795)

Sales	13,327,563)	11,604,493)	10,149,985)	9,536,428)	8,977,726)
Add: Increase (decrease) in deferred revenue liability	(1,100)	400)	(200)	(400)	(100)
Adjusted sales	13,326,463)	11,604,893)	10,149,785)	9,536,028)	8,977,626)
Performance Ratio
Economic profit margin²	12.41%	10.55%	8.64%	8.81%	6.90%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	2.03%	0.81%	-0.57%	—	—
Home Depot Inc.	6.18%	7.80%	7.57%	—	—
Lowe’s Cos. Inc.	3.91%	3.12%	-0.36%	—	—
TJX Cos. Inc.	-6.57%	3.71%	3.37%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted sales
= 100 × 1,654,132 ÷ 13,326,463 = 12.41%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	O’Reilly Automotive Inc. economic profit margin improved from 2019 to 2020 and from 2020 to 2021.

O’Reilly Automotive Inc. (NASDAQ:ORLY)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin