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
Roper Technologies 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
= 1,275,289 – 16.21% × 26,216,800 = -2,975,309
An analysis of the financial performance from 2018 to 2022 reveals a consistent trend of negative economic profit, indicating that the returns generated from operations were insufficient to cover the cost of the capital employed. The economic deficit widened significantly over the five-year period, reflecting a growing gap between net operating profit after taxes (NOPAT) and the capital charge.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, peaking in 2019 at 1,986,174 thousand dollars before declining in 2020. While a slight recovery occurred in 2021, the figure retreated to 1,275,289 thousand dollars by 2022. The lack of a sustained upward trajectory in operational profitability suggests an inability to scale earnings in proportion to the company's growth in assets.
- Invested Capital
- A strong upward trend in invested capital is observed, increasing from 14,785,177 thousand dollars in 2018 to 26,216,800 thousand dollars by 2022. A particularly sharp increase occurred between 2019 and 2020, where capital expanded by approximately 34%. This aggressive expansion of the capital base has served as the primary driver for the deteriorating economic profit.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 14.82% and 16.21%. A marginal dip was noted in 2020, but the rate returned to its higher baseline by 2022. Because the cost of capital remained high and stable, any increase in invested capital without a corresponding surge in NOPAT automatically intensified the economic loss.
- Economic Profit Trends
- Economic profit remained negative for all reported years, with the deficit deepening from -1,222,582 thousand dollars in 2018 to -2,975,309 thousand dollars in 2022. The most favorable result occurred in 2019, coinciding with the peak in NOPAT. However, the subsequent expansion of invested capital, combined with stagnant operating profits, led to a compounding negative effect, resulting in the largest economic loss of the period in 2022.
The overarching pattern suggests that capital allocation has not yielded returns exceeding the required threshold. The widening economic deficit is attributed to the fact that the growth rate of the invested capital base has significantly outpaced the growth rate of net operating profits, thereby increasing the total cost of financing without a commensurate increase in operational value creation.
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Net Operating Profit after Taxes (NOPAT)
Roper Technologies 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 doubtful accounts and sales allowances.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 210,600 × 2.40% = 5,054
6 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 197,454 × 21.00% = 41,465
7 Addition of after taxes interest expense to net earnings.
8 Elimination of discontinued operations.
- Net Earnings
- Net earnings exhibited considerable fluctuation over the analyzed period. Beginning at approximately $944 million in 2018, earnings nearly doubled to about $1.77 billion in 2019. However, there was a notable decline to roughly $950 million in 2020, followed by a moderate increase to approximately $1.15 billion in 2021. The most significant change occurred in 2022, when net earnings surged sharply to approximately $4.54 billion, representing the highest value in the time series by a wide margin. This pattern indicates substantial volatility, with a pronounced financial performance improvement in the latest year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a relatively more stable trajectory compared to net earnings. Starting at about $1.15 billion in 2018, NOPAT increased substantially to nearly $2.0 billion in 2019. After this peak, it declined to roughly $1.25 billion in 2020 but experienced a slight recovery in 2021 with a value of approximately $1.34 billion. In 2022, NOPAT decreased marginally to about $1.28 billion. Despite some fluctuations, the variations in NOPAT were less extreme, suggesting consistent operating profitability even during periods of net earnings volatility.
- Comparative Insights
- When comparing net earnings and NOPAT trends, it is evident that while both metrics showed increases in 2019, net earnings were subject to greater volatility in the subsequent years. The sharp rise in net earnings in 2022 was not paralleled to the same extent by NOPAT, which remained relatively stable. This may indicate that extraordinary or non-operational factors significantly influenced net earnings in that year. Overall, operating profitability remained relatively steady throughout the period, despite fluctuations in reported net income.
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Cash Operating Taxes
Roper Technologies Inc., cash operating taxes calculation
US$ 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).
- Income Tax Expense
- The income tax expense shows a notable increase from 254,000 thousand US dollars in 2018 to a peak of 459,500 thousand US dollars in 2019. Following this peak, there is a sharp decline to 259,600 thousand US dollars in 2020, indicating a significant fluctuation. The values then exhibit a gradual increase in the subsequent years, rising to 288,400 thousand US dollars in 2021 and slightly further to 296,400 thousand US dollars in 2022. Overall, the tax expense demonstrates volatility over the five-year period while maintaining a level in the upper 200,000s to near 300,000 thousand US dollars range in the latest years.
- Cash Operating Taxes
- Cash operating taxes also exhibit a fluctuating pattern. Starting at 356,809 thousand US dollars in 2018, the figure grows substantially to 590,630 thousand US dollars in 2019, nearly a 65% increase. This is followed by a considerable reduction to 364,900 thousand US dollars in 2020. Subsequently, the cash operating taxes decline slightly in 2021 to 332,378 thousand US dollars, before escalating again sharply in 2022 to 511,065 thousand US dollars. Despite the fluctuations, the overall trend indicates significant variability with the cash operating taxes generally remaining above 300,000 thousand US dollars except for the exceptional peak and trough years.
- Comparison and Insights
- Both income tax expense and cash operating taxes experience their highest values in 2019, succeeded by a sharp decrease in 2020. The income tax expense shows more stability from 2020 onwards relative to cash operating taxes, which remains more volatile, especially with the substantial increase in 2022. This variance between income tax expense and cash operating taxes could suggest changes in tax payment timings or strategies impacting cash flow versus accounting recognition. The patterns imply that while accounting tax expenses are somewhat steady post-2020, actual cash tax payments are subject to larger swings.
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Invested Capital
Roper Technologies 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 deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases increased significantly from 2018 to 2020, rising from approximately $5.19 billion to $9.85 billion. However, in the following years, debt decreased, falling to about $8.15 billion in 2021 and further to $6.87 billion by the end of 2022. This trend indicates an initial period of increased leverage followed by a reduction in debt obligations over the last two years of the period analyzed.
- Stockholders’ Equity
- Stockholders’ equity showed consistent growth throughout the entire time frame. Starting at around $7.74 billion in 2018, equity increased steadily each year, reaching approximately $16.04 billion by the end of 2022. The growth became more pronounced from 2021 to 2022, suggesting a strong strengthening of the company's capital base during the most recent year.
- Invested Capital
- Invested capital mirrored the trends observed in equity and debt, rising from about $14.79 billion in 2018 to a peak of $23 billion in 2020. A slight decrease occurred in 2021 to roughly $22.5 billion, followed by a rebound to approximately $26.2 billion in 2022. This reflects overall growth in the capital deployed by the company with some variability corresponding to changes in debt and equity levels.
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Cost of Capital
Roper Technologies Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,577,303) | 45,577,303) | ÷ | 51,773,203) | = | 0.88 | 0.88 | × | 18.14% | = | 15.97% | ||
| Long-term debt, including current portion3 | 5,985,300) | 5,985,300) | ÷ | 51,773,203) | = | 0.12 | 0.12 | × | 2.63% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 210,600) | 210,600) | ÷ | 51,773,203) | = | 0.00 | 0.00 | × | 2.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 51,773,203) | 1.00 | 16.21% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 46,381,821) | 46,381,821) | ÷ | 54,735,421) | = | 0.85 | 0.85 | × | 18.14% | = | 15.37% | ||
| Long-term debt, including current portion3 | 8,121,300) | 8,121,300) | ÷ | 54,735,421) | = | 0.15 | 0.15 | × | 2.57% × (1 – 21.00%) | = | 0.30% | ||
| Operating lease liability4 | 232,300) | 232,300) | ÷ | 54,735,421) | = | 0.00 | 0.00 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 54,735,421) | 1.00 | 15.68% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 40,288,410) | 40,288,410) | ÷ | 50,733,910) | = | 0.79 | 0.79 | × | 18.14% | = | 14.40% | ||
| Long-term debt, including current portion3 | 10,161,200) | 10,161,200) | ÷ | 50,733,910) | = | 0.20 | 0.20 | × | 2.59% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 284,300) | 284,300) | ÷ | 50,733,910) | = | 0.01 | 0.01 | × | 2.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 50,733,910) | 1.00 | 14.82% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,318,769) | 37,318,769) | ÷ | 43,134,269) | = | 0.87 | 0.87 | × | 18.14% | = | 15.69% | ||
| Long-term debt, including current portion3 | 5,538,700) | 5,538,700) | ÷ | 43,134,269) | = | 0.13 | 0.13 | × | 3.35% × (1 – 21.00%) | = | 0.34% | ||
| Operating lease liability4 | 276,800) | 276,800) | ÷ | 43,134,269) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 43,134,269) | 1.00 | 16.05% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,087,145) | 33,087,145) | ÷ | 38,251,122) | = | 0.86 | 0.86 | × | 18.14% | = | 15.69% | ||
| Long-term debt, including current portion3 | 4,912,000) | 4,912,000) | ÷ | 38,251,122) | = | 0.13 | 0.13 | × | 3.53% × (1 – 21.00%) | = | 0.36% | ||
| Operating lease liability4 | 251,977) | 251,977) | ÷ | 38,251,122) | = | 0.01 | 0.01 | × | 3.53% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 38,251,122) | 1.00 | 16.06% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Roper Technologies 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 | (2,975,309) | (2,185,119) | (2,157,006) | (766,392) | (1,222,582) | |
| Invested capital2 | 26,216,800) | 22,504,600) | 23,002,900) | 17,154,600) | 14,785,177) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.35% | -9.71% | -9.38% | -4.47% | -8.27% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 199.07% | 195.44% | 143.41% | — | — | |
| Arista Networks Inc. | 16.12% | 31.17% | — | — | — | |
| Cisco Systems Inc. | 3.35% | 2.59% | — | — | — | |
| Dell Technologies Inc. | 3.17% | -1.35% | — | — | — | |
| Lumentum Holdings Inc. | -6.35% | 5.97% | — | — | — | |
| Super Micro Computer Inc. | -9.69% | -18.15% | — | — | — | |
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 × -2,975,309 ÷ 26,216,800 = -11.35%
4 Click competitor name to see calculations.
The financial performance over the five-year period from 2018 to 2022 is characterized by persistent negative economic profit and a substantial expansion of the invested capital base, indicating a consistent failure to generate returns above the cost of capital.
- Economic Profit Trends
- Economic profit remained negative throughout the entire period, signaling continuous shareholder value destruction. A brief recovery was observed in 2019, when losses narrowed to -766,392 thousand US$. However, this was followed by a sharp decline in 2020 and a continuing downward trend through 2022, where economic profit reached its lowest level of -2,975,309 thousand US$.
- Invested Capital Growth
- Invested capital exhibited a strong upward trajectory, increasing from 14,785,177 thousand US$ in 2018 to 26,216,800 thousand US$ in 2022. This represents a significant growth in the capital employed by the organization, with only a minor contraction occurring in 2021 before resuming growth in the final year.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative across all reported years, confirming that the return on invested capital did not meet the cost of capital. Following a temporary improvement to -4.47% in 2019, the ratio deteriorated consistently from 2020 onward, reaching -11.35% by the end of 2022. The widening of this negative spread, occurring simultaneously with the increase in invested capital, suggests that the additional capital deployed has failed to improve the efficiency of value creation.
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Economic Profit Margin
Roper Technologies 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 | (2,975,309) | (2,185,119) | (2,157,006) | (766,392) | (1,222,582) | |
| Net revenues | 5,371,800) | 5,777,800) | 5,527,100) | 5,366,800) | 5,191,200) | |
| Add: Increase (decrease) in deferred revenue | 306,000) | 172,600) | 172,700) | 157,300) | 109,500) | |
| Adjusted net revenues | 5,677,800) | 5,950,400) | 5,699,800) | 5,524,100) | 5,300,700) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -52.40% | -36.72% | -37.84% | -13.87% | -23.06% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 23.53% | 22.71% | 18.79% | — | — | |
| Arista Networks Inc. | 11.11% | 18.26% | — | — | — | |
| Cisco Systems Inc. | 3.76% | 2.89% | — | — | — | |
| Dell Technologies Inc. | 1.66% | -1.16% | — | — | — | |
| Lumentum Holdings Inc. | -9.27% | 6.73% | — | — | — | |
| Super Micro Computer Inc. | -4.12% | -6.54% | — | — | — | |
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 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × -2,975,309 ÷ 5,677,800 = -52.40%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by persistent negative economic profit and a deteriorating economic profit margin, indicating that the company failed to generate returns in excess of its cost of capital throughout the observed period.
- Economic Profit Trajectory
- Economic profit remained consistently negative over the five-year span. Although a temporary improvement occurred in 2019, with losses narrowing to 766.39 million from 1.22 billion in 2018, this trend reversed sharply in 2020. Losses expanded significantly in the subsequent years, reaching a peak deficit of approximately 2.98 billion by December 31, 2022.
- Revenue Dynamics and Value Creation
- Adjusted net revenues demonstrated a steady upward trend from 2018 through 2021, rising from 5.30 billion to 5.95 billion. However, this growth did not translate into positive economic value. A revenue contraction was observed in 2022, where figures fell to 5.68 billion, coinciding with the most severe economic profit loss of the period.
- Economic Profit Margin Analysis
- The economic profit margin exhibited significant volatility and an overall downward trend. After reaching a peak of -13.87% in 2019, the margin deteriorated to -37.84% in 2020 and stabilized briefly in 2021 at -36.72%. By 2022, the margin declined further to -52.40%, suggesting a substantial decrease in the efficiency of capital utilization relative to revenue generation.
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