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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Ross Stores Inc., economic profit calculation

US$ in thousands

12 months ended:	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Net operating profit after taxes (NOPAT)¹	1,877,216)	209,948)	1,766,422)	1,716,686)	1,421,644)	1,203,081)
Cost of capital²	12.45%	12.74%	13.00%	13.11%	12.98%	12.90%
Invested capital³	9,245,498)	8,769,230)	6,807,292)	6,884,089)	6,397,687)	6,022,627)

Economic profit⁴	726,413)	(907,047)	881,781)	814,322)	591,141)	426,251)

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

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
= 1,877,216 – 12.45% × 9,245,498 = 726,413

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Ross Stores Inc. economic profit decreased from 2020 to 2021 but then increased from 2021 to 2022 not reaching 2020 level.

Ross Stores Inc., NOPAT calculation

US$ in thousands

12 months ended:	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Net earnings	1,722,589)	85,382)	1,660,928)	1,587,457)	1,362,753)	1,117,654)
Deferred income tax expense (benefit)¹	15,775)	(27,812)	32,009)	31,777)	(34,903)	(8,703)
Increase (decrease) in equity equivalents²	15,775)	(27,812)	32,009)	31,777)	(34,903)	(8,703)
Interest expense	75,161)	88,064)	9,740)	16,407)	18,847)	19,569)
Interest expense, operating lease liability³	101,434)	109,470)	111,125)	133,519)	134,436)	128,327)
Adjusted interest expense	176,595)	197,534)	120,865)	149,926)	153,283)	147,896)
Tax benefit of interest expense⁴	(37,085)	(41,482)	(25,382)	(31,485)	(52,116)	(51,764)
Adjusted interest expense, after taxes⁵	139,510)	156,052)	95,484)	118,442)	101,167)	96,133)
Interest income	(833)	(4,651)	(27,846)	(26,569)	(11,171)	(3,081)
Investment income, before taxes	(833)	(4,651)	(27,846)	(26,569)	(11,171)	(3,081)
Tax expense (benefit) of investment income⁶	175)	977)	5,848)	5,579)	3,798)	1,078)
Investment income, after taxes⁷	(658)	(3,674)	(21,998)	(20,990)	(7,373)	(2,003)
Net operating profit after taxes (NOPAT)	1,877,216)	209,948)	1,766,422)	1,716,686)	1,421,644)	1,203,081)

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in equity equivalents to net earnings.

³ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,169,814 × 3.20% = 101,434

⁴ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 176,595 × 21.00% = 37,085

⁵ Addition of after taxes interest expense to net earnings.

⁶ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 833 × 21.00% = 175

⁷ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Ross Stores Inc. NOPAT decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Ross Stores Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Provision for income taxes	535,951)	20,915)	503,360)	463,419)	677,967)	668,502)
Less: Deferred income tax expense (benefit)	15,775)	(27,812)	32,009)	31,777)	(34,903)	(8,703)
Add: Tax savings from interest expense	37,085)	41,482)	25,382)	31,485)	52,116)	51,764)
Less: Tax imposed on investment income	175)	977)	5,848)	5,579)	3,798)	1,078)
Cash operating taxes	557,086)	89,232)	490,885)	457,547)	761,188)	727,890)

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Ross Stores Inc. cash operating taxes decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Ross Stores Inc., invested capital calculation (financing approach)

US$ in thousands

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Current portion of long-term debt	—)	64,910)	—)	—)	84,973)	—)
Long-term debt, excluding current portion	2,452,325)	2,448,175)	312,891)	312,440)	311,994)	396,493)
Operating lease liability¹	3,169,814)	3,219,714)	3,175,009)	3,313,133)	2,967,687)	2,826,590)
Total reported debt & leases	5,622,139)	5,732,799)	3,487,900)	3,625,573)	3,364,654)	3,223,083)
Stockholders’ equity	4,060,050)	3,290,640)	3,359,249)	3,305,746)	3,049,308)	2,748,017)
Net deferred tax (assets) liabilities²	137,642)	121,867)	149,679)	124,308)	85,806)	121,385)
Equity equivalents³	137,642)	121,867)	149,679)	124,308)	85,806)	121,385)
Accumulated other comprehensive (income) loss, net of tax⁴	—)	—)	—)	—)	(27)	(91)
Adjusted stockholders’ equity	4,197,692)	3,412,507)	3,508,928)	3,430,054)	3,135,087)	2,869,311)
Construction-in-progress⁵	(574,333)	(376,076)	(189,536)	(171,538)	(102,054)	(69,767)
Invested capital	9,245,498)	8,769,230)	6,807,292)	6,884,089)	6,397,687)	6,022,627)

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of equity equivalents to stockholders’ equity.

⁴ Removal of accumulated other comprehensive income.

⁵ Subtraction of construction-in-progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Ross Stores Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

Ross Stores Inc., cost of capital calculations

Jan 29, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	33,527,776)	33,527,776)	÷	39,297,590)	=	0.85	0.85	×	14.15%	=	12.07%
Senior Notes³	2,600,000)	2,600,000)	÷	39,297,590)	=	0.07	0.07	×	3.25% × (1 – 21.00%)	=	0.17%
Operating lease liability⁴	3,169,814)	3,169,814)	÷	39,297,590)	=	0.08	0.08	×	3.20% × (1 – 21.00%)	=	0.20%
Total:	39,297,590)					1.00					12.45%

Based on: 10-K (reporting date: 2022-01-29).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Jan 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,918,281)	42,918,281)	÷	48,937,995)	=	0.88	0.88	×	14.15%	=	12.41%
Senior Notes³	2,800,000)	2,800,000)	÷	48,937,995)	=	0.06	0.06	×	3.33% × (1 – 21.00%)	=	0.15%
Operating lease liability⁴	3,219,714)	3,219,714)	÷	48,937,995)	=	0.07	0.07	×	3.40% × (1 – 21.00%)	=	0.18%
Total:	48,937,995)					1.00					12.74%

Based on: 10-K (reporting date: 2021-01-30).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Feb 1, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	30,952,347)	30,952,347)	÷	34,462,356)	=	0.90	0.90	×	14.15%	=	12.71%
Senior Notes³	335,000)	335,000)	÷	34,462,356)	=	0.01	0.01	×	4.03% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	3,175,009)	3,175,009)	÷	34,462,356)	=	0.09	0.09	×	3.50% × (1 – 21.00%)	=	0.25%
Total:	34,462,356)					1.00					13.00%

Based on: 10-K (reporting date: 2020-02-01).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Feb 2, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	34,526,840)	34,526,840)	÷	38,155,973)	=	0.90	0.90	×	14.15%	=	12.81%
Senior Notes³	316,000)	316,000)	÷	38,155,973)	=	0.01	0.01	×	4.03% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	3,313,133)	3,313,133)	÷	38,155,973)	=	0.09	0.09	×	4.03% × (1 – 21.00%)	=	0.28%
Total:	38,155,973)					1.00					13.11%

Based on: 10-K (reporting date: 2019-02-02).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Feb 3, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,857,959)	28,857,959)	÷	32,236,646)	=	0.90	0.90	×	14.15%	=	12.67%
Senior Notes³	411,000)	411,000)	÷	32,236,646)	=	0.01	0.01	×	4.53% × (1 – 34.00%)	=	0.04%
Operating lease liability⁴	2,967,687)	2,967,687)	÷	32,236,646)	=	0.09	0.09	×	4.53% × (1 – 34.00%)	=	0.28%
Total:	32,236,646)					1.00					12.98%

Based on: 10-K (reporting date: 2018-02-03).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Jan 28, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	25,774,944)	25,774,944)	÷	29,020,534)	=	0.89	0.89	×	14.15%	=	12.57%
Senior Notes³	419,000)	419,000)	÷	29,020,534)	=	0.01	0.01	×	4.54% × (1 – 35.00%)	=	0.04%
Operating lease liability⁴	2,826,590)	2,826,590)	÷	29,020,534)	=	0.10	0.10	×	4.54% × (1 – 35.00%)	=	0.29%
Total:	29,020,534)					1.00					12.90%

Based on: 10-K (reporting date: 2017-01-28).

¹ US$ in thousands

² Equity. See details »

³ Senior Notes. See details »

⁴ Operating lease liability. See details »

Ross Stores Inc., economic spread ratio calculation, comparison to benchmarks

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	726,413)	(907,047)	881,781)	814,322)	591,141)	426,251)
Invested capital²	9,245,498)	8,769,230)	6,807,292)	6,884,089)	6,397,687)	6,022,627)
Performance Ratio
Economic spread ratio³	7.86%	-10.34%	12.95%	11.83%	9.24%	7.08%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	-15.37%	4.71%	2.08%	-1.27%	—	—
Home Depot Inc.	25.60%	16.42%	23.50%	23.94%	—	—
Lowe’s Cos. Inc.	24.85%	12.34%	8.42%	-1.07%	—	—
TJX Cos. Inc.	7.48%	-9.45%	8.26%	7.53%	—	—

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 726,413 ÷ 9,245,498 = 7.86%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Ross Stores Inc. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 not reaching 2020 level.

Ross Stores Inc., economic profit margin calculation, comparison to benchmarks

	Jan 29, 2022	Jan 30, 2021	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	726,413)	(907,047)	881,781)	814,322)	591,141)	426,251)
Sales	18,916,244)	12,531,565)	16,039,073)	14,983,541)	14,134,732)	12,866,757)
Performance Ratio
Economic profit margin²	3.84%	-7.24%	5.50%	5.43%	4.18%	3.31%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	-8.02%	2.02%	0.81%	-0.57%	—	—
Home Depot Inc.	8.14%	6.18%	7.80%	7.56%	—	—
Lowe’s Cos. Inc.	6.76%	3.91%	3.12%	-0.37%	—	—
TJX Cos. Inc.	3.03%	-6.58%	3.70%	3.36%	—	—

Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × 726,413 ÷ 18,916,244 = 3.84%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Ross Stores Inc. economic profit margin deteriorated from 2020 to 2021 but then improved from 2021 to 2022 not reaching 2020 level.

Ross Stores Inc. (NASDAQ:ROST)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin