Stock Analysis on Net

Palo Alto Networks Inc. (NASDAQ:PANW)

$24.99

Economic Value Added (EVA)

Microsoft Excel

Paying user area

The data is hidden behind: . Unhide it.

This is a one-time payment. There is no automatic renewal.


We accept:

Visa Mastercard American Express Maestro Discover JCB PayPal Google Pay
Visa Secure Mastercard Identity Check American Express SafeKey

Economic Profit

Palo Alto Networks Inc., economic profit calculation

US$ in thousands

Microsoft Excel
12 months ended: Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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 data reflects the financial performance of Palo Alto Networks Inc. over a six-year period, focusing on key metrics such as Net Operating Profit After Taxes (NOPAT), Cost of Capital, Invested Capital, and Economic Profit.

Net Operating Profit After Taxes (NOPAT)
There is a clear upward trend in NOPAT over the years 2019 to 2023, increasing from approximately $536 million to around $2.61 billion. This indicates a substantial improvement in the company’s operational profitability. However, there is a slight decrease observed in 2024 where NOPAT declined to approximately $2.50 billion, suggesting a marginal reduction in operating profit after taxes compared to the previous year.
Cost of Capital
The cost of capital has displayed some variability, starting at 14.79% in 2019, dipping slightly below 14.5% in 2020 and 2022, and then rising steadily to 15.5% by 2024. This upward trend in cost of capital towards the later years may indicate an increased perceived risk or changes in financing costs for the company.
Invested Capital
Invested capital shows a strong growth trajectory over the period. It almost triples from about $3.88 billion in 2019 to over $10.84 billion in 2024. This significant increase suggests substantial investments in assets or working capital, which could relate to expansion activities or increased operational scale.
Economic Profit
Economic profit, which measures net operating profit adjusted for the cost of capital, starts negative and improves dramatically over time. Initial years 2019 through 2021 reflect losses, with the largest negative economic profit recorded in 2020 (around -$289 million). From 2022 onwards, economic profit turns positive, peaking at approximately $1.24 billion in 2023 before slightly decreasing to around $821 million in 2024. This shift from negative to positive economic profit indicates that returns have begun to exceed the cost of capital, reflecting enhanced value creation for shareholders.

In summary, the company has experienced significant growth in both operating profitability and invested capital over the period analyzed. While cost of capital has marginally increased, the strong gains in NOPAT and the reversal of economic profit from negative to positive highlight improved efficiency in capital use and expanding economic value generation. The slight declines in NOPAT and economic profit in 2024 warrant attention but do not negate the overall positive trend observed in recent years.


Net Operating Profit after Taxes (NOPAT)

Palo Alto Networks Inc., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Net income (loss)
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for credit losses2
Increase (decrease) in deferred revenue3
Increase (decrease) in equity equivalents4
Interest expense
Interest expense, operating lease liability5
Adjusted interest expense
Tax benefit of interest expense6
Adjusted interest expense, after taxes7
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income8
Investment income, after taxes9
Net operating profit after taxes (NOPAT)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for credit losses.

3 Addition of increase (decrease) in deferred revenue.

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

5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

7 Addition of after taxes interest expense to net income (loss).

8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

9 Elimination of after taxes investment income.


Net Income (Loss)
The net income showed a significant fluctuation during the analyzed period. Initially, there was a considerable loss of $81.9 million in 2019, which worsened substantially to a loss of $267 million in 2020, and further to nearly $499 million in 2021. However, starting in 2022, the trend reversed with a notable recovery where the loss decreased back to $267 million. Subsequently, the company turned profitable with net income rising sharply to $439.7 million in 2023 and then increasing substantially to approximately $2.58 billion in 2024. This turnaround suggests effective changes in operations or strategy leading to improved profitability.
Net Operating Profit After Taxes (NOPAT)
NOPAT exhibited steady growth throughout the entire period. Starting at $536.4 million in 2019, it increased consistently each year, reaching $696.4 million in 2020, then $845.1 million in 2021. A marked acceleration happened in 2022 when NOPAT doubled to approximately $1.72 billion, followed by continued growth to $2.61 billion in 2023. There was a slight decrease in 2024 to about $2.5 billion, yet the figure remains significantly higher than in the initial years. The growth in NOPAT indicates enhanced core operational efficiency and profitability, despite minor recent decline.

Cash Operating Taxes

Palo Alto Networks Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Provision for (benefit from) income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).


Provision for (benefit from) income taxes
The provision for income taxes shows considerable volatility across the years. From 2019 to 2020, it increased significantly from 7,300 to 35,200 thousand US dollars, followed by a slight decrease to 33,900 thousand US dollars in 2021. A notable increase occurred again in 2022 and 2023, reaching 59,800 and 126,600 thousand US dollars, respectively. The year 2024 exhibits a substantial negative value of -1,589,300 thousand US dollars, indicating a significant tax benefit in that period. This reversal may warrant further investigation to understand the underlying causes, such as tax credits, loss carrybacks, or other accounting adjustments.
Cash operating taxes
Cash operating taxes demonstrate a steady upward trend over the six-year period. Starting at 32,566 thousand US dollars in 2019, cash tax payments rose consistently each year, reaching 57,464 in 2020, 81,834 in 2021, with a slight dip to 68,221 in 2022, then increasing again to 76,038 in 2023. The 2024 figure spikes sharply to 384,452 thousand US dollars, representing a dramatic increase compared to previous years. This substantial rise in cash taxes in 2024 contrasts with the large tax benefit recorded in the provision for income taxes, highlighting potential differences between accounting provisions and actual cash tax payments.

Invested Capital

Palo Alto Networks Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Current portion of convertible senior notes, net
Convertible senior notes, net, excluding current portion
Operating lease liability1
Total reported debt & leases
Stockholders’ equity
Net deferred tax (assets) liabilities2
Allowance for credit losses3
Deferred revenue4
Equity equivalents5
Accumulated other comprehensive (income) loss, net of tax6
Adjusted stockholders’ equity
Available-for-sale investments7
Invested capital

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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.

5 Addition of equity equivalents to stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of available-for-sale investments.


Total reported debt & leases
The total reported debt and leases showed an increasing trend from July 31, 2019, reaching a peak in July 31, 2022, with a value of 4,015,200 thousand US dollars. After this peak, a significant decline occurred over the subsequent two years, dropping to 2,330,900 thousand US dollars in 2023 and further down to 1,410,300 thousand US dollars in 2024. This pattern indicates a strategy of leveraging more debt until 2022, followed by notable deleveraging or repayment actions thereafter.
Stockholders’ equity
Stockholders’ equity decreased sharply from 1,586,300 thousand US dollars in 2019 to a low point of 210,000 thousand US dollars in 2022. This was followed by a robust recovery, with equity rising significantly to 1,748,400 thousand US dollars in 2023 and further increasing to 5,169,700 thousand US dollars in 2024. The equity trend reflects a period of diminished net asset value, potentially due to operational losses or share repurchases, followed by strong capital retention or additional equity infusions in the later years.
Invested capital
Invested capital exhibited consistent growth throughout the entire period. Starting at 3,879,623 thousand US dollars in 2019, it nearly doubled by 2020 and continued to rise annually, reaching 10,841,500 thousand US dollars in 2024. This steady increase suggests ongoing investments in the company's operations and assets, supporting growth initiatives despite fluctuations in debt and equity.

Cost of Capital

Palo Alto Networks Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2024-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Convertible Senior Notes3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-07-31).

1 US$ in thousands

2 Equity. See details »

3 Convertible Senior Notes. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Palo Alto Networks Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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.


Economic Profit
The economic profit shows a marked improvement over the observed periods. Initially, the values were negative, indicating losses, with a significant decline from -37,337 thousand USD in 2019 to a low of -289,111 thousand USD in 2020. Following this, there was a partial recovery in 2021 and a notable turnaround to positive figures starting in 2022, reaching a peak of 1,243,887 thousand USD in 2023 before a reduction to 821,306 thousand USD in 2024. This transition from negative to positive economic profit suggests enhanced value creation within the company over the years.
Invested Capital
The invested capital consistently increased each year, starting at 3,879,623 thousand USD in 2019 and rising steadily to 10,841,500 thousand USD by 2024. This upward trend indicates ongoing investments or accumulation of capital assets, which may signal expansion or increased operational scale. The growth in invested capital is relatively continuous, with no years showing a decline, representing a persistent commitment to capital deployment.
Economic Spread Ratio
The economic spread ratio initially exhibited negative values, reflecting a period where returns on invested capital were below the cost of capital. The negative spread deepened from -0.96% in 2019 to -4.11% in 2020 and slightly improved to -3.15% in 2021. A shift occurred in 2022 with a positive spread of 5.54%, which further increased sharply to 13.62% in 2023 before decreasing to 7.58% in 2024. The positive spread in the later years demonstrates improved profitability relative to cost of capital, suggesting effective capital utilization and potentially increased competitive advantage.

Economic Profit Margin

Palo Alto Networks Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1
 
Revenue
Add: Increase (decrease) in deferred revenue
Adjusted revenue
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Accenture PLC
Adobe Inc.
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × ÷ =

3 Click competitor name to see calculations.


The financial data exhibits notable trends over the six-year period. Adjusted revenue shows a consistent upward trajectory, increasing from approximately $3.51 billion in 2019 to over $10.21 billion by 2024. This steady growth suggests an expanding market presence or enhanced operational capacity.

Economic profit, however, reveals a different pattern. Initially negative for the first three years, declining from -$37.3 million in 2019 to a low of -$289.1 million in 2020 before improving slightly to -$231.7 million in 2021, it then reverses significantly. Starting in 2022, economic profit turns positive, reaching a peak of approximately $1.24 billion in 2023 before declining to $821.3 million in 2024. This turnaround reflects changes in cost management, operational efficiency, or revenue quality, resulting in improved profitability despite the recent dip.

The economic profit margin aligns with these observations. Negative margins in the initial years (-1.06% in 2019 to -6.68% in 2020, then improving to -4.24% in 2021) indicate unprofitable operations relative to invested capital. From 2022 onwards, the margin becomes positive, peaking at 13.53% in 2023 and slightly decreasing to 8.04% in 2024. The positive margin years correspond to the period of positive economic profit, indicating better value creation for shareholders during these years.

Overall, the data reflects a company experiencing robust revenue growth alongside a transition from economic loss to economic gain. The peak economic profit and margin in 2023 suggest an optimal period of financial performance, with a moderate decrease in 2024 hinting at potential challenges or investments affecting profitability. The sustained revenue growth, however, underlines ongoing expansion.