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
Paramount Global, economic profit 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 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
= 1,431 – 13.79% × 44,287 = -4,675
An analysis of the economic value added reveals a persistent failure to generate positive economic profit from 2018 through 2022. The company consistently operated below its cost of capital, indicating that the returns generated from operations were insufficient to cover the opportunity cost of the invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general growth trend between 2018 and 2021, increasing from 2,342 million USD to a peak of 5,241 million USD. However, this trajectory reversed sharply in 2022, with profits falling to 1,431 million USD, reflecting a significant contraction in operational earning power.
- Invested Capital and Cost of Capital
- A substantial expansion in invested capital occurred between 2018 and 2019, where the base grew from 15,419 million USD to 37,244 million USD, eventually peaking at 45,938 million USD in 2021. The cost of capital remained volatile, fluctuating between 12.44% and 16.33%, which established a high financial hurdle for the company to achieve positive economic value given the expanded capital base.
- Economic Profit Outcomes
- Economic profit remained negative throughout the observed five-year period. The deficit deepened significantly following the capital expansion of 2019, reaching -2,853 million USD in 2020. While a partial recovery was noted in 2021 due to peak NOPAT, the company experienced its most severe loss of economic value in 2022, with economic profit dropping to -4,675 million USD. This trend underscores a critical misalignment between the scale of invested capital and the actual returns generated by operations.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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
= 1,720 × 3.60% = 62
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 993 × 21.00% = 209
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
= 108 × 21.00% = 23
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
An analysis of the financial performance from 2018 to 2022 reveals a period of general growth in operational profitability followed by a significant contraction in the final year.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT demonstrated a consistent upward trajectory from 2018 through 2021, increasing from 2,342 million to a peak of 5,241 million. This growth indicates a substantial expansion in operational efficiency and profit generation during this period. However, a sharp reversal occurred in 2022, with NOPAT falling to 1,431 million, a level lower than that recorded at the start of the analyzed period in 2018.
- Comparative Relationship Between Net Earnings and NOPAT
- Net earnings remained consistently below NOPAT throughout the entire five-year duration. A notable divergence is observed between 2019 and 2020, where NOPAT continued to rise from 3,590 million to 3,726 million, while net earnings declined from 3,308 million to 2,422 million. This suggests that while core operations remained profitable and growing, non-operating factors—such as interest expenses or other non-operational losses—negatively impacted the final net income.
- Profitability Volatility and Peak Performance
- The highest level of financial performance occurred in 2021, with both net earnings and NOPAT reaching their respective peaks of 4,543 million and 5,241 million. The subsequent decline in 2022 is severe, with NOPAT decreasing by approximately 72.7% and net earnings dropping by approximately 75.6% relative to the 2021 highs, indicating a period of significant volatility and a sharp reduction in the ability to generate economic value.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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).
An analysis of tax expenditures from 2018 to 2022 reveals a notable divergence between accrual-based tax provisions and actual cash outflows associated with operating taxes.
- Cash Operating Tax Trends
- Cash operating taxes exhibited significant volatility throughout the period, reaching a peak of 967 million US dollars in 2019. Following this spike, expenditures decreased to 633 million US dollars in 2020, increased to 766 million US dollars in 2021, and declined to 519 million US dollars by the end of 2022. This suggests an inconsistent cash requirement for tax obligations over the five-year horizon.
- Income Tax Provision Patterns
- The provision for income taxes displayed extreme fluctuations, including a recorded tax benefit of 9 million US dollars in 2019. Provisions subsequently rose sharply, peaking at 646 million US dollars in 2021, before dropping to 227 million US dollars in 2022. This pattern indicates a lack of stability in the reported tax expense relative to operating results.
- Comparative Analysis of Tax Metrics
- A significant discrepancy is observed particularly in 2019, where the company reported a tax benefit while simultaneously recording its highest cash tax payment of the period. For the majority of the analyzed timeframe, cash operating taxes consistently exceeded the provision for income taxes. This indicates that actual cash outflows for tax purposes were higher than the expenses recognized on the income statement, likely reflecting the impact of deferred tax assets, non-deductible expenses, or timing differences in tax jurisdictions.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 total invested capital exhibited a significant expansion between 2018 and 2021, followed by a slight contraction in 2022. The most substantial increase occurred between 2018 and 2019, where invested capital rose from 15,419 million US$ to 37,244 million US$, representing a growth of approximately 141%. This capital base peaked in 2021 at 45,938 million US$ before declining to 44,287 million US$ by the end of 2022.
- Debt and Lease Obligations
- A sharp increase in reported debt and leases is observed between 2018 and 2019, jumping from 11,083 million US$ to 20,920 million US$. Debt levels peaked in 2020 at 21,622 million US$ and subsequently entered a period of steady decline, falling to 17,566 million US$ by December 31, 2022. This suggests a strategic deleveraging process in the latter part of the analyzed period.
- Stockholders' Equity
- Stockholders' equity demonstrated consistent and aggressive growth throughout the five-year period. From a base of 2,804 million US$ in 2018, equity surged to 13,207 million US$ in 2019 and continued an upward trajectory to reach 23,036 million US$ by 2022. The growth in equity was the primary driver of the total invested capital increase from 2020 onward.
- Capital Structure Dynamics
- The composition of invested capital shifted markedly over the period. In 2018, debt constituted the vast majority of the invested capital. By 2022, the reliance on debt decreased while the proportion of equity increased significantly. This transition indicates a strengthening of the balance sheet and a reduction in financial leverage, as the growth in equity more than offset the reductions in total debt and leases between 2020 and 2022.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
Paramount Global, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,287) | 15,287) | ÷ | 31,220) | = | 0.49 | 0.49 | × | 24.02% | = | 11.76% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | 248) | 248) | ÷ | 31,220) | = | 0.01 | 0.01 | × | 5.75% | = | 0.05% | ||
| Debt3 | 13,965) | 13,965) | ÷ | 31,220) | = | 0.45 | 0.45 | × | 5.16% × (1 – 21.00%) | = | 1.82% | ||
| Operating lease liability4 | 1,720) | 1,720) | ÷ | 31,220) | = | 0.06 | 0.06 | × | 3.60% × (1 – 21.00%) | = | 0.16% | ||
| Total: | 31,220) | 1.00 | 13.79% | ||||||||||
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 | 23,343) | 23,343) | ÷ | 47,319) | = | 0.49 | 0.49 | × | 24.02% | = | 11.85% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | 502) | 502) | ÷ | 47,319) | = | 0.01 | 0.01 | × | 5.75% | = | 0.06% | ||
| Debt3 | 21,551) | 21,551) | ÷ | 47,319) | = | 0.46 | 0.46 | × | 4.94% × (1 – 21.00%) | = | 1.78% | ||
| Operating lease liability4 | 1,923) | 1,923) | ÷ | 47,319) | = | 0.04 | 0.04 | × | 3.40% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 47,319) | 1.00 | 13.80% | ||||||||||
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 | 40,646) | 40,646) | ÷ | 67,156) | = | 0.61 | 0.61 | × | 24.02% | = | 14.54% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 67,156) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 24,621) | 24,621) | ÷ | 67,156) | = | 0.37 | 0.37 | × | 4.80% × (1 – 21.00%) | = | 1.39% | ||
| Operating lease liability4 | 1,889) | 1,889) | ÷ | 67,156) | = | 0.03 | 0.03 | × | 4.00% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 67,156) | 1.00 | 16.02% | ||||||||||
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 | 17,976) | 17,976) | ÷ | 41,520) | = | 0.43 | 0.43 | × | 24.02% | = | 10.40% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 41,520) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 21,343) | 21,343) | ÷ | 41,520) | = | 0.51 | 0.51 | × | 4.61% × (1 – 21.00%) | = | 1.87% | ||
| Operating lease liability4 | 2,201) | 2,201) | ÷ | 41,520) | = | 0.05 | 0.05 | × | 4.10% × (1 – 21.00%) | = | 0.17% | ||
| Total: | 41,520) | 1.00 | 12.44% | ||||||||||
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 | 18,887) | 18,887) | ÷ | 30,016) | = | 0.63 | 0.63 | × | 24.02% | = | 15.12% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 30,016) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 10,197) | 10,197) | ÷ | 30,016) | = | 0.34 | 0.34 | × | 4.18% × (1 – 21.00%) | = | 1.12% | ||
| Operating lease liability4 | 931) | 931) | ÷ | 30,016) | = | 0.03 | 0.03 | × | 3.59% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 30,016) | 1.00 | 16.33% | ||||||||||
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 | (4,675) | (1,098) | (2,853) | (1,045) | (175) | |
| Invested capital2 | 44,287) | 45,938) | 41,069) | 37,244) | 15,419) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.56% | -2.39% | -6.95% | -2.80% | -1.13% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | 7.35% | 26.64% | — | — | — | |
| Comcast Corp. | -7.70% | -2.70% | — | — | — | |
| Meta Platforms Inc. | 0.43% | 22.71% | — | — | — | |
| Netflix Inc. | -10.70% | -6.10% | — | — | — | |
| Walt Disney Co. | -15.27% | -18.26% | -20.51% | — | — | |
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 × -4,675 ÷ 44,287 = -10.56%
4 Click competitor name to see calculations.
Analysis of economic value added reveals a consistent failure to generate positive economic profit over the five-year period from 2018 to 2022. The company has operated persistently below its cost of capital, resulting in a continuous erosion of economic value.
- Economic Profit Trends
- Economic profit remained negative throughout the observed period, exhibiting a general downward trajectory. While losses were relatively contained at -175 million USD in 2018, they escalated significantly to -4.675 billion USD by 2022. A temporary mitigation of losses occurred in 2021, where economic profit improved to -1.098 billion USD, before deteriorating to the period's lowest point in the following year.
- Invested Capital Dynamics
- A substantial expansion in invested capital is observed, growing from 15.419 billion USD in 2018 to a peak of 45.938 billion USD in 2021. The most significant increase occurred between 2018 and 2019, representing a sharp rise in the capital base. Capital levels remained elevated through 2022, closing at 44.287 billion USD.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative for all reported years, confirming that the return on invested capital failed to exceed the weighted average cost of capital. The ratio fluctuated from -1.13% in 2018 to a critical low of -10.56% in 2022. The widening negative spread, particularly the sharp decline in 2020 and the severe drop in 2022, indicates an increasing inefficiency in utilizing the expanding capital base to generate value.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 | (4,675) | (1,098) | (2,853) | (1,045) | (175) | |
| Revenues | 30,154) | 28,586) | 25,285) | 27,812) | 14,514) | |
| Add: Increase (decrease) in deferred revenues | (140) | 80) | 212) | 165) | (10) | |
| Adjusted revenues | 30,014) | 28,666) | 25,497) | 27,977) | 14,504) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -15.58% | -3.83% | -11.19% | -3.73% | -1.21% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | 5.25% | 17.67% | — | — | — | |
| Comcast Corp. | -13.59% | -5.32% | — | — | — | |
| Meta Platforms Inc. | 0.38% | 17.84% | — | — | — | |
| Netflix Inc. | -12.76% | -7.12% | — | — | — | |
| Walt Disney Co. | -31.42% | -46.53% | -55.17% | — | — | |
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 × -4,675 ÷ 30,014 = -15.58%
3 Click competitor name to see calculations.
The period between 2018 and 2022 is characterized by a consistent inability to generate positive economic value, as evidenced by negative economic profit across all reported years. While the scale of operations expanded significantly, the gap between the returns generated and the cost of capital widened, culminating in a substantial deficit by the end of 2022.
- Economic Profit Trends
- A persistent negative trajectory is observed in economic profit, moving from a deficit of 175 million USD in 2018 to a peak loss of 4,675 million USD in 2022. Although a partial recovery occurred in 2021, where the deficit narrowed to 1,098 million USD, the subsequent decline in 2022 represents the most significant erosion of economic value in the analyzed timeframe.
- Revenue Growth and Scale
- Adjusted revenues exhibited a general upward trend, increasing from 14,504 million USD in 2018 to 30,014 million USD in 2022. This indicates a substantial expansion in top-line scale; however, this growth did not translate into value creation, suggesting that the capital investments required to drive these revenues exceeded the returns they generated.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates severe volatility and overall deterioration. Starting at -1.21% in 2018, the margin contracted sharply to -11.19% in 2020 and reached its lowest point of -15.58% in 2022. The observation that the margin reached its most negative point in 2022 despite revenues being at their highest indicates a decoupling between revenue growth and economic efficiency.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?