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
Old Dominion Freight Line Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,440,126 – 18.08% × 4,117,551 = 695,869
Analysis of the financial performance from 2018 to 2022 reveals a significant transition from marginal value creation to substantial economic profit growth, driven primarily by an acceleration in operating profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a period of stagnation between 2018 and 2020, fluctuating within a narrow range between 625 million and 664 million. A pivot occurred in 2021, where NOPAT rose sharply to 1.07 billion, followed by a further increase to 1.44 billion in 2022. This indicates a rapid scaling of operational profitability in the latter two years of the period.
- Invested Capital and Cost of Capital
- Invested capital showed a consistent upward trend, increasing from 3.06 billion in 2018 to 4.12 billion by 2022. Parallel to this expansion, the cost of capital remained remarkably stable, maintaining a tight range between 18.00% and 18.08%. The consistency of the cost of capital suggests a stable risk profile and funding cost during the expansion of the asset base.
- Economic Profit Analysis
- Economic profit experienced significant volatility, falling from 114.1 million in 2018 to a near-break-even level of 2.1 million in 2019. After a slight recovery in 2020, the metric grew exponentially, reaching 368.9 million in 2021 and peaking at 695.9 million in 2022. This trajectory demonstrates that the returns generated on invested capital began to far exceed the required cost of capital starting in 2021.
The data indicates that while the capital base grew steadily, the growth in NOPAT far outpaced the growth in invested capital after 2020. Because the cost of capital remained constant, the resulting surge in economic profit confirms a substantial increase in the company's ability to create value above its minimum required return.
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Net Operating Profit after Taxes (NOPAT)
Old Dominion Freight Line Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for uncollectible accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 98,100 × 3.80% = 3,728
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 5,291 × 21.00% = 1,111
6 Addition of after taxes interest expense to net income.
7 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 4,884 × 21.00% = 1,026
8 Elimination of after taxes investment income.
An analysis of the financial performance between 2018 and 2022 reveals a significant upward trajectory in both net income and net operating profit after taxes (NOPAT). While the initial period showed moderate growth and some volatility, the latter two years experienced an accelerated expansion in profitability.
- Net Income Trends
- Net income demonstrated consistent year-over-year growth throughout the five-year period. Starting at 605,668 thousand US dollars in 2018, the figure rose marginally in 2019 and 2020 before experiencing a sharp increase in 2021 to 1,034,375 thousand US dollars. This growth culminated in 2022 with a peak of 1,377,159 thousand US dollars, representing a total increase of approximately 127% over the observed period.
- Net Operating Profit After Taxes (NOPAT) Trends
- The NOPAT exhibited a more volatile pattern in the early years, with a decrease from 664,318 thousand US dollars in 2018 to 625,596 thousand US dollars in 2019. A slight recovery followed in 2020, after which NOPAT mirrored the rapid acceleration seen in net income. By December 31, 2022, NOPAT reached 1,440,126 thousand US dollars, signaling a substantial strengthening of core operating efficiency.
- Comparative Analysis of NOPAT and Net Income
- Throughout the entire period, NOPAT remained consistently higher than net income. This gap indicates that operating profitability, independent of capital structure and financing costs, exceeded the final bottom-line earnings. The divergence was most pronounced in 2018 and 2022, suggesting that while operating performance grew aggressively, interest expenses or other non-operating items continued to impact the final net income figures.
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Cash Operating Taxes
Old Dominion Freight Line Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
A sustained upward trajectory is observed in both the provision for income taxes and cash operating taxes from 2018 through 2022. This concurrent increase indicates a scaling of taxable income and associated cash outflows over the analyzed period.
- Cash Operating Taxes Trend
- Cash operating taxes exhibited consistent year-over-year growth, rising from 152,350 thousand dollars in 2018 to 402,267 thousand dollars by 2022. This represents a significant increase in actual cash disbursements for tax purposes, reflecting higher operational tax obligations accompanying business growth.
- Provision for Income Taxes Trend
- The provision for income taxes remained relatively stable between 2018 and 2019 before entering a period of rapid acceleration. From a base of 209,845 thousand dollars in 2018, the provision increased to 464,190 thousand dollars by 2022, with the most pronounced growth occurring between 2020 and 2022.
- Comparative Analysis of Accruals and Cash Outflows
- While both metrics trended upward, the cash operating taxes grew at a more linear rate compared to the provision for income taxes. The sharp increase in the provision amount during 2021 and 2022 indicates that the accounting-based tax liability accelerated more rapidly than the actual cash taxes paid during those specific years.
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Invested Capital
Old Dominion Freight Line Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
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 equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of short-term investments.
Invested capital demonstrated a consistent upward trajectory over the five-year period, increasing from US$ 3,056,198 thousand in 2018 to US$ 4,117,551 thousand in 2022. This overall growth indicates a sustained expansion of the company's resource base to support operational activities.
- Invested Capital Trends
- The capital base grew by approximately 34.7% between 2018 and 2022. While growth was robust in 2019 and 2021, a marginal contraction was observed in 2020, where invested capital dipped slightly to US$ 3,423,416 thousand before resuming an accelerating upward trend.
- Shareholders' Equity Analysis
- Shareholders' equity acted as the primary component and driver of invested capital. Equity increased steadily from US$ 2,680,483 thousand in 2018 to a peak of US$ 3,679,807 thousand in 2021. A slight decline was noted in 2022, with equity settling at US$ 3,652,917 thousand, yet it remained the dominant funding source throughout the period.
- Debt and Lease Obligations
- Total reported debt and leases remained relatively low compared to equity, signifying a conservative leverage profile. A significant increase occurred in 2020, with debt rising to US$ 206,231 thousand from US$ 111,500 thousand in 2019. Following this increase, debt levels remained relatively stable, ending the period at US$ 198,063 thousand in 2022.
- Capital Structure Composition
- The composition of invested capital reveals a heavy reliance on internal funding or equity over borrowed capital. The stability of debt levels relative to the substantial growth in shareholders' equity suggests that the increase in invested capital was primarily financed through retained earnings or equity issuance rather than increased leverage.
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Cost of Capital
Old Dominion Freight Line Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,630,139) | 37,630,139) | ÷ | 37,820,839) | = | 0.99 | 0.99 | × | 18.15% | = | 18.06% | ||
| Long-term debt, including current maturities3 | 92,600) | 92,600) | ÷ | 37,820,839) | = | 0.00 | 0.00 | × | 3.62% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 98,100) | 98,100) | ÷ | 37,820,839) | = | 0.00 | 0.00 | × | 3.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 37,820,839) | 1.00 | 18.08% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 32,446,727) | 32,446,727) | ÷ | 32,654,027) | = | 0.99 | 0.99 | × | 18.15% | = | 18.04% | ||
| Long-term debt, including current maturities3 | 104,500) | 104,500) | ÷ | 32,654,027) | = | 0.00 | 0.00 | × | 3.62% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 102,800) | 102,800) | ÷ | 32,654,027) | = | 0.00 | 0.00 | × | 3.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 32,654,027) | 1.00 | 18.05% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,411,604) | 25,411,604) | ÷ | 25,623,304) | = | 0.99 | 0.99 | × | 18.15% | = | 18.00% | ||
| Long-term debt, including current maturities3 | 105,400) | 105,400) | ÷ | 25,623,304) | = | 0.00 | 0.00 | × | 3.62% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 106,300) | 106,300) | ÷ | 25,623,304) | = | 0.00 | 0.00 | × | 3.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 25,623,304) | 1.00 | 18.02% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,439,956) | 16,439,956) | ÷ | 16,552,556) | = | 0.99 | 0.99 | × | 18.15% | = | 18.03% | ||
| Long-term debt, including current maturities3 | 46,100) | 46,100) | ÷ | 16,552,556) | = | 0.00 | 0.00 | × | 4.79% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 66,500) | 66,500) | ÷ | 16,552,556) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 16,552,556) | 1.00 | 18.05% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,209,782) | 12,209,782) | ÷ | 12,337,535) | = | 0.99 | 0.99 | × | 18.15% | = | 17.96% | ||
| Long-term debt, including current maturities3 | 45,600) | 45,600) | ÷ | 12,337,535) | = | 0.00 | 0.00 | × | 4.79% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 82,153) | 82,153) | ÷ | 12,337,535) | = | 0.01 | 0.01 | × | 4.79% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 12,337,535) | 1.00 | 18.00% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Old Dominion Freight Line Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 695,869) | 368,941) | 18,590) | 2,125) | 114,104) | |
| Invested capital2 | 4,117,551) | 3,881,401) | 3,423,416) | 3,453,801) | 3,056,198) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 16.90% | 9.51% | 0.54% | 0.06% | 3.73% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.19% | -3.65% | — | — | — | |
| Uber Technologies Inc. | -73.67% | -22.83% | — | — | — | |
| Union Pacific Corp. | -1.44% | -2.31% | — | — | — | |
| United Airlines Holdings Inc. | -3.34% | -10.26% | — | — | — | |
| United Parcel Service Inc. | 11.71% | 17.54% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 695,869 ÷ 4,117,551 = 16.90%
4 Click competitor name to see calculations.
The analysis of economic value creation between 2018 and 2022 reveals a period of significant volatility followed by a substantial acceleration in profitability. While the capital base expanded steadily throughout the period, the ability to generate returns exceeding the cost of capital fluctuated dramatically, culminating in a peak of economic efficiency by the end of 2022.
- Economic Profit Trends
- Economic profit experienced a sharp contraction between 2018 and 2019, falling from 114,104 thousand US$ to 2,125 thousand US$. A marginal recovery occurred in 2020, followed by an exponential increase in 2021 and 2022, with the latter reaching 695,869 thousand US$. This trajectory indicates a rapid transition from near-zero economic value addition to a high-growth phase of value creation.
- Invested Capital Expansion
- Invested capital demonstrated a consistent upward trend, growing from 3,056,198 thousand US$ in 2018 to 4,117,551 thousand US$ in 2022. The growth remained relatively stable, with a minor contraction in 2020, suggesting a disciplined approach to capital deployment even during periods of low economic profit.
- Economic Spread Ratio Performance
- The economic spread ratio highlights a critical shift in operational efficiency. After starting at 3.73% in 2018, the ratio collapsed to near-zero levels in 2019 (0.06%) and 2020 (0.54%), indicating that the return on invested capital barely exceeded the cost of capital. However, a strong rebound occurred in 2021, with the ratio climbing to 9.51% and further accelerating to 16.90% by December 31, 2022. This trend confirms a significant widening of the spread between the company's actual returns and its cost of capital, signaling enhanced value generation for shareholders.
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Economic Profit Margin
Old Dominion Freight Line Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 695,869) | 368,941) | 18,590) | 2,125) | 114,104) | |
| Revenue from operations | 6,260,077) | 5,256,328) | 4,015,129) | 4,109,111) | 4,043,695) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 11.12% | 7.02% | 0.46% | 0.05% | 2.82% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -4.40% | -2.79% | — | — | — | |
| Uber Technologies Inc. | -37.76% | -21.03% | — | — | — | |
| Union Pacific Corp. | -3.47% | -6.17% | — | — | — | |
| United Airlines Holdings Inc. | -3.05% | -21.62% | — | — | — | |
| United Parcel Service Inc. | 5.23% | 8.01% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue from operations
= 100 × 695,869 ÷ 6,260,077 = 11.12%
3 Click competitor name to see calculations.
An analysis of economic value creation from 2018 to 2022 reveals a period of significant volatility followed by an aggressive expansion in profitability relative to the cost of capital. The company experienced a sharp contraction in economic profit during the middle of the period, which was subsequently reversed by substantial growth in both top-line revenue and value generation in the final two years.
- Economic Profit Trajectory
- Economic profit demonstrated a non-linear trend, starting at 114,104 thousand USD in 2018 before dropping precipitously to 2,125 thousand USD in 2019. A marginal recovery occurred in 2020, followed by an exponential increase in 2021 and 2022, with the latter reaching a peak of 695,869 thousand USD. This indicates a transition from a period of barely exceeding the cost of capital to a phase of high value creation.
- Revenue Growth and Correlation
- Revenue from operations remained relatively stagnant between 2018 and 2020, fluctuating around the 4 billion USD mark. However, a significant upward shift occurred starting in 2021, with revenue climbing to 5,256,328 thousand USD and further increasing to 6,260,077 thousand USD by 2022. The surge in economic profit disproportionately exceeded the growth in revenue, suggesting improved operational efficiency or a reduction in the capital charge relative to earnings.
- Economic Profit Margin Expansion
- The economic profit margin serves as a key indicator of value efficiency. After declining from 2.82% in 2018 to a near-zero level of 0.05% in 2019, the margin expanded rapidly to 7.02% in 2021 and further to 11.12% in 2022. This trend highlights a substantial improvement in the company's ability to generate returns above its required cost of capital per dollar of revenue.
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