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
Shockwave Medical Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 170,498 – 14.61% × 672,462 = 72,238
The financial trajectory from 2019 to 2023 demonstrates a fundamental transition from economic value destruction to sustainable value creation. The period is characterized by an initial phase of operating losses and capital volatility, followed by a significant pivot toward operational profitability and aggressive capital expansion.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trend is evident in NOPAT, which evolved from a deficit of US$ 49,755 thousand in 2019 to a surplus of US$ 170,498 thousand by 2023. While the deficit widened slightly in 2020, a rapid recovery began in 2021, culminating in a shift to positive operating profitability in 2022. This progression indicates a successful scaling of operations and improved operational efficiency.
- Invested Capital and Cost of Capital
- Invested capital experienced a sharp increase, particularly between 2021 and 2023, growing from US$ 174,255 thousand to US$ 672,462 thousand. This expansion suggests significant reinvestment into the business to drive growth. Concurrently, the cost of capital remained relatively stable, fluctuating slightly around 15.5% before declining to 14.61% in 2023, which marginally lowered the threshold for achieving positive economic profit.
- Economic Profit
- Economic profit followed a recovery curve, moving from a low of negative US$ 78,341 thousand in 2020 to a positive position starting in 2022. Despite the substantial increase in invested capital in 2023, economic profit remained stable at US$ 72,238 thousand. The transition to a positive economic profit signifies that the return on invested capital has exceeded the weighted average cost of capital, marking the point where the entity began generating real economic value above its required return.
In summary, the analysis reveals a company that has successfully navigated a period of early-stage losses to establish a profitable operating model. The ability to maintain positive economic profit while simultaneously quadrupling invested capital since 2020 indicates a strong correlation between capital deployment and operational yield.
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Net Operating Profit after Taxes (NOPAT)
Shockwave Medical Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income (loss).
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 38,744 × 5.20% = 2,015
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 8,920 × 21.00% = 1,873
6 Addition of after taxes interest expense to net income (loss).
7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 5 × 21.00% = 1
8 Elimination of after taxes investment income.
The financial data reveals significant fluctuations in both net income and net operating profit after taxes (NOPAT) for the observed periods.
- Net income (loss)
- There is a pronounced negative trend in net income from 2019 through 2021, starting with a substantial loss of approximately $51.1 million in 2019, increasing to a loss of $65.7 million in 2020, and then markedly reducing to a loss of $9.1 million in 2021. In 2022, the company achieved a dramatic turnaround with a substantial net income of $216.0 million, which though declining somewhat, remained strong at $147.3 million in 2023.
- Net operating profit after taxes (NOPAT)
- The NOPAT follows a similar trajectory but shows somewhat less volatility. It starts with a negative value near $49.8 million in 2019 and further decreases to about $64.1 million in 2020. The loss diminishes substantially in 2021 to approximately $7.1 million. From 2022 onward, NOPAT becomes positive, reaching $122.1 million in 2022 and increasing further to $170.5 million in 2023.
Overall, the data indicates an initial period of losses followed by a sharp and significant improvement in profitability starting in 2022. This suggests effective operational and financial adjustments that positively impacted both bottom-line net income and operating profitability after taxes. The considerable net income realized in 2022 diminished somewhat in 2023, but NOPAT increased, indicating improving operational efficiency with respect to tax impacts or non-operating items.
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Cash Operating Taxes
Shockwave Medical Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
The financial data reveals significant variability in the provision for income taxes over the examined five-year period. Starting with a relatively modest provision of 62 thousand US dollars in 2019, there was a gradual increase to 80 thousand in 2020 followed by a more substantial rise to 301 thousand in 2021. However, in 2022, there was a dramatic shift to a large tax benefit, reflected in a negative provision of -95,168 thousand US dollars, indicating a considerable tax benefit or reversal during that year. This situation appears to have reversed again in 2023, with the provision rising sharply to 27,003 thousand US dollars.
The cash paid for operating taxes also exhibited a rising trend throughout the period, increasing steadily each year. From 390 thousand US dollars in 2019, the amount grew moderately to 453 thousand in 2020 and 847 thousand in 2021. The upward trend accelerated in the last two years, with cash operating taxes reaching 2,898 thousand in 2022 and further increasing to 14,167 thousand in 2023. This suggests rising cash outflows related to tax obligations despite the large tax benefit recorded in the accrual-based provision for income taxes in 2022.
Overall, the pattern highlights a divergence between the accounting treatment of tax provisions and actual cash tax payments in 2022 and 2023. The substantial tax benefit recorded in 2022 was not reflected in reduced cash tax payments, which instead continued to increase. The subsequent rebound in the provision in 2023 to a positive figure exceeding prior years, alongside further increased cash operating taxes, points to potentially complex tax circumstances or adjustments affecting the company's tax position during these years.
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Invested Capital
Shockwave Medical Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 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).
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 equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of marketable securities.
The analysis of the financial data reveals significant changes in the company's capital structure and financing activities over the five-year period.
- Total reported debt & leases
- The total reported debt and leases increased steadily from 22,718 thousand US dollars in 2019 to 60,404 thousand US dollars in 2022, showing a moderate growth trend. However, there is a pronounced spike in 2023, where the value surged to 770,607 thousand US dollars. This sharp increase suggests a substantial rise in leverage or the use of debt financing during the last reported year.
- Stockholders’ equity
- Stockholders’ equity displayed a consistent upward trend throughout the period. It increased from 192,653 thousand US dollars in 2019 to 668,677 thousand US dollars in 2023. A noteworthy acceleration is evident from 2021 onward, with a particularly large increase between 2021 and 2022. This pattern indicates enhanced retained earnings, capital injections, or overall improved financial strength.
- Invested capital
- Invested capital fluctuated somewhat in the early years, decreasing notably from 158,673 thousand US dollars in 2019 to 91,274 thousand US dollars in 2020. Subsequently, it rebounded and grew substantially to 672,462 thousand US dollars by 2023. This indicates a significant expansion in the company’s asset base or long-term investments, especially evident from 2021 onwards, aligning with the growth in both equity and reported debt.
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Cost of Capital
Shockwave Medical Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,719,059) | 9,719,059) | ÷ | 10,488,303) | = | 0.93 | 0.93 | × | 15.66% | = | 14.51% | ||
| Convertible and long-term debt, current and noncurrent3 | 730,500) | 730,500) | ÷ | 10,488,303) | = | 0.07 | 0.07 | × | 1.50% × (1 – 21.00%) | = | 0.08% | ||
| Operating lease liability4 | 38,744) | 38,744) | ÷ | 10,488,303) | = | 0.00 | 0.00 | × | 5.20% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 10,488,303) | 1.00 | 14.61% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible and long-term debt, current and noncurrent. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,916,606) | 6,916,606) | ÷ | 6,977,010) | = | 0.99 | 0.99 | × | 15.66% | = | 15.53% | ||
| Convertible and long-term debt, current and noncurrent3 | 24,198) | 24,198) | ÷ | 6,977,010) | = | 0.00 | 0.00 | × | 5.30% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 36,206) | 36,206) | ÷ | 6,977,010) | = | 0.01 | 0.01 | × | 5.20% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 6,977,010) | 1.00 | 15.56% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible and long-term debt, current and noncurrent. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,260,409) | 6,260,409) | ÷ | 6,307,598) | = | 0.99 | 0.99 | × | 15.66% | = | 15.55% | ||
| Convertible and long-term debt, current and noncurrent3 | 17,130) | 17,130) | ÷ | 6,307,598) | = | 0.00 | 0.00 | × | 3.50% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 30,059) | 30,059) | ÷ | 6,307,598) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 6,307,598) | 1.00 | 15.57% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible and long-term debt, current and noncurrent. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,068,239) | 4,068,239) | ÷ | 4,093,219) | = | 0.99 | 0.99 | × | 15.66% | = | 15.57% | ||
| Convertible and long-term debt, current and noncurrent3 | 16,619) | 16,619) | ÷ | 4,093,219) | = | 0.00 | 0.00 | × | 3.50% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 8,361) | 8,361) | ÷ | 4,093,219) | = | 0.00 | 0.00 | × | 6.98% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 4,093,219) | 1.00 | 15.59% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible and long-term debt, current and noncurrent. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 921,204) | 921,204) | ÷ | 943,922) | = | 0.98 | 0.98 | × | 15.66% | = | 15.29% | ||
| Convertible and long-term debt, current and noncurrent3 | 13,819) | 13,819) | ÷ | 943,922) | = | 0.01 | 0.01 | × | 5.87% × (1 – 21.00%) | = | 0.07% | ||
| Operating lease liability4 | 8,899) | 8,899) | ÷ | 943,922) | = | 0.01 | 0.01 | × | 6.97% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 943,922) | 1.00 | 15.41% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible and long-term debt, current and noncurrent. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Shockwave Medical Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 72,238) | 72,553) | (34,248) | (78,341) | (74,200) | |
| Invested capital2 | 672,462) | 318,057) | 174,255) | 91,274) | 158,673) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.74% | 22.81% | -19.65% | -85.83% | -46.76% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -4.52% | -2.28% | -1.81% | — | — | |
| Elevance Health Inc. | -0.71% | 0.32% | 1.64% | — | — | |
| Intuitive Surgical Inc. | -3.00% | -3.28% | 12.33% | — | — | |
| Medtronic PLC | -6.17% | -4.93% | -6.57% | — | — | |
| UnitedHealth Group Inc. | 5.23% | 4.27% | 4.12% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 72,238 ÷ 672,462 = 10.74%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2019 to 2023 reveals a significant transition from economic loss to value creation. The company shifted from a period of negative economic profit and value destruction to a state of positive economic profit starting in 2022.
- Economic Profit Trends
- Economic profit remained negative between 2019 and 2021, reaching a trough of -78,341 thousand US dollars in 2020. A reversal occurred in 2022, when economic profit climbed to 72,553 thousand US dollars, and remained relatively stable at 72,238 thousand US dollars in 2023. This indicates that the company's net operating profit after taxes began to exceed its cost of capital during the 2022 fiscal year.
- Invested Capital Expansion
- Invested capital experienced a decrease in 2020 to 91,274 thousand US dollars before initiating a period of rapid growth. Between 2021 and 2023, invested capital surged from 174,255 thousand US dollars to 672,462 thousand US dollars. This substantial increase suggests significant capital deployment to support operational scaling or strategic expansion.
- Economic Spread Ratio Performance
- The economic spread ratio reflects a volatile recovery path. From 2019 to 2021, the ratio was negative, indicating that the return on invested capital was below the cost of capital, with the most severe value destruction occurring in 2020 at -85.83%. The ratio turned positive in 2022, peaking at 22.81%. However, a decline to 10.74% is observed in 2023. This downward movement in the spread, despite positive economic profit, suggests that the rapid increase in invested capital has outpaced the growth in economic profit, thereby compressing the margin of value creation.
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Economic Profit Margin
Shockwave Medical Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 72,238) | 72,553) | (34,248) | (78,341) | (74,200) | |
| Revenue | 730,230) | 489,733) | 237,146) | 67,789) | 42,927) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 9.89% | 14.81% | -14.44% | -115.57% | -172.85% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -6.73% | -3.21% | -2.60% | — | — | |
| Elevance Health Inc. | -0.29% | 0.14% | 0.76% | — | — | |
| Intuitive Surgical Inc. | -2.99% | -2.83% | 9.70% | — | — | |
| Medtronic PLC | -13.94% | -10.82% | -15.76% | — | — | |
| UnitedHealth Group Inc. | 2.60% | 2.19% | 2.02% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × 72,238 ÷ 730,230 = 9.89%
3 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 indicates a successful transition from value destruction to sustainable value creation, characterized by exponential revenue growth and a shift toward positive economic profitability.
- Revenue Expansion
- A consistent and aggressive upward trend in revenue is observed, increasing from US$ 42,927 thousand in 2019 to US$ 730,230 thousand by the end of 2023. This represents a substantial scale-up in operations and market presence over the five-year period.
- Economic Profit Transition
- Economic profit remained negative from 2019 through 2021, signaling that the company was not generating returns sufficient to cover its cost of capital during its early growth phase. A significant inflection point occurred in 2022, when economic profit shifted to a positive US$ 72,553 thousand, maintaining a similar level of US$ 72,238 thousand in 2023.
- Economic Profit Margin Evolution
- The economic profit margin demonstrated a dramatic recovery, moving from a deep deficit of -172.85% in 2019 to a peak of 14.81% in 2022. While the company remained economically profitable in 2023, the margin contracted to 9.89%. This suggests that while absolute economic profit remained stable, the rapid increase in revenue in the final year resulted in a lower percentage of economic value generated per dollar of sales.
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