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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Economic Profit
Paramount Global, economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial data reveals a varied performance in key profitability and capital efficiency metrics over the five-year period analyzed.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT indicates an overall upward trend from 2018 until 2021, increasing from $2,342 million to a peak of $5,241 million in 2021. However, there is a significant decline in 2022, with NOPAT dropping sharply to $1,431 million. This suggests that while operational profitability improved substantially through 2021, the year 2022 experienced marked operational challenges or reduced profitability.
- Cost of Capital
- The cost of capital fluctuated between 10.88% and 14.05% during the period. It started relatively high at 14.05% in 2018, decreased to its lowest point at 10.88% in 2019, then rose again to about 13.83% in 2020 before stabilizing around 12% in the last two years. The variability suggests some changes in the risk profile or market conditions impacting the required returns on investment.
- Invested Capital
- Invested capital more than doubled from $15,419 million in 2018 to a peak of $45,938 million in 2021, indicating substantial capital investments or acquisition activities. In 2022, invested capital slightly decreased to $44,287 million, potentially reflecting divestitures, asset sales, or capital optimization efforts.
- Economic Profit
- Economic profit shows a concerning trend, turning negative in 2019 and remaining so thereafter. Starting from a modest positive $176 million in 2018, it deteriorates to -$462 million in 2019, worsens to -$1,954 million in 2020, and though it slightly improves in 2021 to -$278 million, it again declines sharply to -$3,891 million in 2022. This persistent negative economic profit indicates that the return generated on invested capital has been insufficient to cover the cost of capital, signaling value destruction despite positive operational earnings until 2021.
In summary, while operational profitability improved and invested capital grew substantially through 2021, the company faced a steep profitability decline in 2022 coupled with ongoing challenges in generating economic profit. The patterns suggest pressures on both operational efficiency and capital return, which warrant an in-depth review of cost structures, investment returns, and strategic initiatives to restore value creation.
Net Operating Profit after Taxes (NOPAT)
Paramount Global, NOPAT calculation
US$ in millions
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 credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in restructuring liability.
5 Addition of increase (decrease) in equity equivalents to net earnings attributable to Paramount.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net earnings attributable to Paramount.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
- Net Earnings Attributable to Paramount
- The net earnings displayed fluctuations over the observed period. Starting at 1,960 million US$ in 2018, the earnings increased significantly to 3,308 million US$ in 2019. In 2020, there was a decline to 2,422 million US$, followed by a marked recovery in 2021 reaching 4,543 million US$. However, by the end of 2022, net earnings experienced a sharp decrease to 1,104 million US$.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT trend showed consistent growth from 2018 through 2021. Beginning at 2,342 million US$ in 2018, it rose steadily to 3,590 million US$ in 2019 and 3,726 million US$ in 2020, before peaking at 5,241 million US$ in 2021. In 2022, NOPAT declined significantly to 1,431 million US$.
- Overall Financial Performance Trend
- Both net earnings and NOPAT illustrate overall growth periods until 2021, suggesting improved operational efficiency and profitability. The substantial decrease in both indicators in 2022 could reflect adverse conditions impacting profitability, warranting further investigation into underlying causes during this period.
Cash Operating Taxes
Paramount Global, cash operating taxes calculation
US$ in millions
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).
- Provision (benefit) for income taxes
- The provision for income taxes exhibited significant volatility over the observed period. In 2018, the provision was a positive amount of 273 million USD, which then notably shifted to a benefit (negative provision) of 9 million USD in 2019. This reversal indicates that the company likely recorded a tax credit or adjustment during that year. Subsequently, in 2020, the provision sharply increased to 535 million USD, followed by a further increase to 646 million USD in 2021. However, in 2022, the provision decreased substantially to 227 million USD, yet remained positive. These fluctuations suggest variations in taxable income, tax strategies, or changes in tax regulations impacting the company’s effective tax expense year over year.
- Cash operating taxes
- Cash operating taxes showed a rising trend from 2018 to 2019, increasing markedly from 322 million USD to 967 million USD, which reflects a substantial increase in cash taxes paid or payable. In 2020, this figure declined significantly to 633 million USD and then rose again to 766 million USD in 2021. The amount decreased once more in 2022 to 519 million USD. Despite the fluctuations, cash operating taxes remained considerably higher than the 2018 level throughout the remaining years, indicating sustained elevated tax payments on an operational cash basis despite some volatility.
- Overall Tax Trends
- The disparity between the provision for income taxes and cash operating taxes suggests possible timing differences, tax deferrals, or differences between book and taxable income recognition. The volatility in the provision for income taxes compared to the somewhat elevated but fluctuating cash operating taxes indicates complex tax positions and possibly varying tax credits or adjustments over the years. The data reflects an environment of changing tax expenses and cash outflows related to taxes, which should be monitored further for underlying causes such as changes in profitability, tax law, or tax planning initiatives.
Invested Capital
Paramount Global, invested capital calculation (financing approach)
US$ in millions
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 deferred revenues.
5 Addition of restructuring liability.
6 Addition of equity equivalents to total Paramount stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
The financial data reveals significant shifts in the company's capital structure and financial position over the five-year period ending December 31, 2022.
- Total Reported Debt & Leases
- The total reported debt and leases initially increased sharply from $11,083 million in 2018 to a peak of $21,622 million in 2020. After this peak, a downward trend is evident, as the figure declined to $19,632 million in 2021 and further to $17,566 million in 2022. This suggests a partial deleveraging strategy following a period of increasing debt levels.
- Total Paramount Stockholders’ Equity
- Stockholders' equity exhibited a marked rise throughout the timeframe. It grew substantially from $2,804 million in 2018 to $13,207 million in 2019, followed by a steady increase each year, reaching $23,036 million by 2022. This consistent equity growth indicates strengthening capitalization and possibly improved retained earnings or equity infusions over the period.
- Invested Capital
- Invested capital expanded dramatically from $15,419 million in 2018 to $41,069 million in 2020, continuing upward to a peak of $45,938 million in 2021 before slightly decreasing to $44,287 million in 2022. The general upward trend reflects substantial investment in assets or operational scaling, with a minor contraction in the final year.
In summary, the company significantly increased its equity base and invested capital over the five years, alongside an initial expansion and subsequent reduction in debt levels. The reduction in debt combined with rising equity suggests improved financial stability and potentially enhanced capacity for future investment or debt management.
Cost of Capital
Paramount Global, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.75% Series A Mandatory Convertible Preferred Stock | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.75% Series A Mandatory Convertible Preferred Stock | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.75% Series A Mandatory Convertible Preferred Stock | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.75% Series A Mandatory Convertible Preferred Stock | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.75% Series A Mandatory Convertible Preferred Stock | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Paramount Global, 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The analysis of the financial metrics over the five-year period reveals significant fluctuations and concerning trends in economic profit, invested capital, and economic spread ratio.
- Economic Profit
- The economic profit demonstrates a declining trajectory overall. It starts positively at 176 million US dollars in the earliest period, then experiences a negative swing to -462 million in the following year. This downward trend intensifies, with economic profit falling further into negative territory, reaching its lowest point at -3,891 million in the most recent period. The data suggests persistent challenges in generating returns above cost of capital during this timeframe.
- Invested Capital
- Invested capital shows an increasing trend initially, rising sharply from 15,419 million US dollars to a peak of 45,938 million in the fourth year. However, there is a slight reduction in the final period to 44,287 million. The expansion in invested capital may indicate increased asset or resource allocation, though the subsequent decline could signal divestitures or impairments.
- Economic Spread Ratio
- The economic spread ratio reflects the profitability relative to capital invested and mirrors the fluctuations found in economic profit. Starting at a positive 1.14%, it deteriorates into negative figures from the second period onwards, worsening to -8.79% in the final year. This consistent negative spread indicates that the returns generated by the capital invested were increasingly below the cost of capital, highlighting inefficiencies in capital utilization.
Overall, the data indicate growing invested capital accompanied by declining economic profit and negative economic spread ratios. This pattern suggests that despite deploying more resources, the company has struggled to earn sufficient returns above its capital costs, pointing to operational or market challenges that may require strategic or structural adjustments.
Economic Profit Margin
Paramount Global, 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- The company experienced an overall increasing trend in adjusted revenues from 2018 to 2022. Revenues rose sharply from approximately 14.5 billion US dollars in 2018 to close to 28 billion US dollars in 2019, then dipped slightly in 2020 to around 25.5 billion US dollars, followed by a recovery and further increases reaching over 30 billion US dollars by 2022. This indicates a general growth trajectory with a noticeable decline during the 2020 period, possibly reflecting external economic or market challenges during that year.
- Economic Profit
- The economic profit displayed a negative trend over the analyzed period. Starting with a positive economic profit of 176 million US dollars in 2018, it plunged into negative territory in 2019 with a loss of 462 million US dollars. The losses deepened significantly in 2020 to nearly 2 billion US dollars, followed by a partial recovery in 2021 with a smaller loss of 278 million US dollars. However, in 2022, economic profit deteriorated substantially again, recording the largest loss of 3.9 billion US dollars during these years. This pattern suggests increasing difficulties in generating value above the cost of capital, despite revenue growth.
- Economic Profit Margin
- The economic profit margin mirrored the trends observed in economic profit, starting with a positive margin of 1.21% in 2018. The margin became negative in subsequent years, reflecting losses relative to adjusted revenues. It worsened considerably to -1.65% in 2019 and further to -7.66% in 2020. Although there was a slight improvement in 2021 with a margin of -0.97%, the margin deteriorated again in 2022 to -12.96%, the lowest point in the period. This highlights declining efficiency in converting revenue into economic profit, underscoring challenges in cost management or capital efficiency.
- Overall Insights
- Despite consistent growth in adjusted revenues through the years, the company faced escalating economic losses and deteriorating profitability margins, especially pronounced in 2020 and 2022. The disconnect between revenue growth and economic profit suggests underlying issues that could include increased operational costs, higher capital charges, or impairments affecting earnings quality. The temporary improvement in economic profit margin in 2021 did not sustain, signalling volatility and ongoing financial pressure. Continuous monitoring and strategic adjustments may be required to enhance value creation and return metrics.