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
Steel Dynamics Inc., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,611,424 – 19.30% × 8,550,168 = 1,961,056
The financial performance from 2017 to 2021 is characterized by significant volatility in value creation, shifting from periods of economic loss to a substantial surge in economic profit by the end of the period. While invested capital grew steadily, the ability to generate returns exceeding the cost of capital remained inconsistent until a sharp recovery in 2021.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability exhibited a cyclical pattern, with a notable peak in 2018 at 1,420,457 thousand US$ followed by a decline through 2020, where it reached a period low of 696,079 thousand US$. A transformative increase occurred in 2021, with NOPAT rising to 3,611,424 thousand US$, representing a more than five-fold increase from the previous year.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 16.82% and 19.79%, indicating a consistent hurdle rate for investment returns. Simultaneously, invested capital showed a continuous upward trajectory, increasing from 5,964,900 thousand US$ in 2017 to 8,550,168 thousand US$ in 2021. The most significant capital expansion occurred between 2020 and 2021, aligning with the surge in operating profits.
- Economic Profit Trends
- Economic profit remained negative for three of the five years analyzed, signifying that the returns on invested capital were insufficient to cover the cost of capital during those periods. Negative values were observed in 2017, 2019, and 2020, with the deepest value destruction occurring in 2020 at -510,315 thousand US$. This trend was reversed in 2021, resulting in a substantial economic profit of 1,961,056 thousand US$, indicating that the company successfully generated returns far exceeding its cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Steel Dynamics Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Steel Dynamics, Inc..
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 100,074 × 3.60% = 3,603
5 2021 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 60,812 × 21.00% = 12,770
6 Addition of after taxes interest expense to net income attributable to Steel Dynamics, Inc..
- Net income attributable to Steel Dynamics, Inc.
- The net income shows a volatile trend over the period analyzed. It increased significantly from 812,741 thousand USD in 2017 to a peak of 1,258,379 thousand USD in 2018. However, this was followed by a sharp decline to 671,103 thousand USD in 2019 and a further decrease to 550,822 thousand USD in 2020. In 2021, net income experienced a remarkable surge, reaching 3,214,066 thousand USD, the highest level in the five-year span.
- Net operating profit after taxes (NOPAT)
- The NOPAT values exhibit a similar pattern to net income, indicating operational profitability dynamics. Starting at 755,373 thousand USD in 2017, NOPAT rose substantially to 1,420,457 thousand USD in 2018. Subsequently, it experienced a decline, reaching 827,375 thousand USD in 2019 and decreasing slightly to 696,079 thousand USD in 2020. In 2021, NOPAT showed a significant increase to 3,611,424 thousand USD, surpassing prior years and indicating improved operational efficiency or favorable business conditions.
- Insights
- Both net income and NOPAT demonstrate a pattern of considerable increase in 2018, followed by a decline over the next two years, and then a substantial recovery in 2021. The pronounced increases in 2021 suggest that the company may have benefited from external or internal factors that significantly enhanced profitability. However, the volatility in prior years highlights potential operational challenges or market fluctuations impacting earnings. The alignment between net income and NOPAT trends suggests that both operational performance and overall profitability were similarly affected throughout the period.
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Cash Operating Taxes
Steel Dynamics Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
- Income tax expense
- The income tax expense exhibited significant fluctuation over the five-year period. Starting at approximately $129 million in 2017, it sharply increased to nearly $364 million in 2018. This was followed by a marked reduction to about $197 million in 2019 and further declined to approximately $135 million in 2020. However, in 2021, there was a dramatic spike to over $962 million, representing the highest value in the observed timeframe.
- Cash operating taxes
- Cash operating taxes showed a different pattern compared to the income tax expense. Initially, there was a moderate rise from roughly $317 million in 2017 to $332 million in 2018. This was succeeded by a substantial decrease to about $176 million in 2019, continuing downward to $110 million in 2020. In 2021, cash operating taxes reversed the downward trend, surging significantly to around $656 million, though still below the 2017 and 2018 levels.
- Comparison and analysis
- Both income tax expense and cash operating taxes experienced fluctuations with a notable peak in 2021. Income tax expense showed more volatility with its lowest value in 2017 and highest in 2021, while cash operating taxes maintained a relatively higher baseline in the earlier years before a marked decline and subsequent increase in 2021. The considerable rise in both metrics in 2021 might indicate higher taxable income or changes in tax policy or company financial structure. The differing trajectories from 2017 to 2020 between the two measures suggest variations in timing or recognition of tax-related cash flows versus accrued tax expenses.
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Invested Capital
Steel Dynamics Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
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 total Steel Dynamics, Inc. equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of trading securities.
- Total reported debt & leases
- The total reported debt and leases show a generally increasing trend over the analyzed period. Starting at approximately 2.43 billion USD in 2017, the figure rose steadily each year up to around 3.21 billion USD by the end of 2021. This indicates a growing leverage or financing through debt and lease obligations over time.
- Total Steel Dynamics, Inc. equity
- Equity values exhibit consistent growth throughout the five-year span. Beginning at approximately 3.35 billion USD in 2017, equity increased to about 6.30 billion USD by 2021, with a notable acceleration between 2020 and 2021. This substantial rise in equity suggests significant retained earnings, capital infusions, or revaluation impacts that strengthened the company’s equity base.
- Invested capital
- Invested capital experienced steady growth from 5.96 billion USD in 2017 to 8.55 billion USD in 2021. The increase is somewhat consistent year over year, with a marked jump in the final year analyzed. This growth reflects an expansion in the total capital allocated in the business, combining both debt and equity financing sources, which supports the company’s operational capacity and potential for value creation.
- Overall trend and insights
- The data reveals a balanced expansion financed through both higher liabilities and substantially increased equity, leading to larger invested capital over the five years. The proportionally higher increase in equity compared to debt may indicate a strategic emphasis on strengthening the financial position and reducing financial risk. The rising invested capital underscores ongoing investments in operational assets or business growth initiatives. Such trends typically reflect robust financial health and an upward trajectory in the company’s scale and capital structure sophistication.
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Cost of Capital
Steel Dynamics Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 13,501,895) | 13,501,895) | ÷ | 16,901,969) | = | 0.80 | 0.80 | × | 23.54% | = | 18.80% | ||
| Long-term debt, including current maturities3 | 3,300,000) | 3,300,000) | ÷ | 16,901,969) | = | 0.20 | 0.20 | × | 3.12% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 100,074) | 100,074) | ÷ | 16,901,969) | = | 0.01 | 0.01 | × | 3.60% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 16,901,969) | 1.00 | 19.30% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,286,334) | 9,286,334) | ÷ | 12,776,650) | = | 0.73 | 0.73 | × | 23.54% | = | 17.11% | ||
| Long-term debt, including current maturities3 | 3,400,000) | 3,400,000) | ÷ | 12,776,650) | = | 0.27 | 0.27 | × | 3.14% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 90,316) | 90,316) | ÷ | 12,776,650) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 12,776,650) | 1.00 | 17.79% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,742,479) | 5,742,479) | ÷ | 8,617,908) | = | 0.67 | 0.67 | × | 23.54% | = | 15.69% | ||
| Long-term debt, including current maturities3 | 2,800,000) | 2,800,000) | ÷ | 8,617,908) | = | 0.32 | 0.32 | × | 4.31% × (1 – 21.00%) | = | 1.11% | ||
| Operating lease liability4 | 75,429) | 75,429) | ÷ | 8,617,908) | = | 0.01 | 0.01 | × | 3.96% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 8,617,908) | 1.00 | 16.82% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,504,794) | 8,504,794) | ÷ | 10,977,855) | = | 0.77 | 0.77 | × | 23.54% | = | 18.24% | ||
| Long-term debt, including current maturities3 | 2,400,000) | 2,400,000) | ÷ | 10,977,855) | = | 0.22 | 0.22 | × | 5.06% × (1 – 21.00%) | = | 0.87% | ||
| Operating lease liability4 | 73,061) | 73,061) | ÷ | 10,977,855) | = | 0.01 | 0.01 | × | 5.06% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 10,977,855) | 1.00 | 19.14% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 11,215,751) | 11,215,751) | ÷ | 13,762,850) | = | 0.81 | 0.81 | × | 23.54% | = | 19.18% | ||
| Long-term debt, including current maturities3 | 2,500,000) | 2,500,000) | ÷ | 13,762,850) | = | 0.18 | 0.18 | × | 5.04% × (1 – 35.00%) | = | 0.60% | ||
| Operating lease liability4 | 47,100) | 47,100) | ÷ | 13,762,850) | = | 0.00 | 0.00 | × | 5.04% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 13,762,850) | 1.00 | 19.79% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Steel Dynamics Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 1,961,056) | (510,315) | (303,164) | 195,089) | (425,034) | |
| Invested capital2 | 8,550,168) | 6,781,124) | 6,721,821) | 6,403,131) | 5,964,900) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 22.94% | -7.53% | -4.51% | 3.05% | -7.13% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | -2.72% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,961,056 ÷ 8,550,168 = 22.94%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by significant volatility in value creation, transitioning from a period of intermittent economic losses to a substantial surplus by the end of the period. While the capital base expanded consistently throughout the five-year window, the ability to generate returns exceeding the cost of capital fluctuated sharply.
- Invested Capital Expansion
- Invested capital grew steadily from 5.96 billion US dollars in 2017 to 8.55 billion US dollars in 2021. The growth remained gradual between 2017 and 2020, followed by a significant acceleration in 2021, where invested capital increased by approximately 26% over the previous year.
- Economic Profit Volatility
- Economic profit exhibited an inconsistent trend, recording negative values in 2017, 2019, and 2020. A brief period of positive economic profit was observed in 2018 at 195.09 million US dollars. This instability culminated in a sharp reversal in 2021, with economic profit rising to 1.96 billion US dollars, representing a dramatic shift from the loss of 510.32 million US dollars recorded in 2020.
- Economic Spread Ratio Performance
- The economic spread ratio mirrored the volatility of economic profit, serving as a primary indicator of value creation versus value destruction. The ratio was negative for the majority of the period, reaching its lowest point of -7.53% in 2020, which indicates that the return on invested capital did not cover the cost of that capital. This trend reversed aggressively in 2021, with the ratio climbing to 22.94%, signifying a high level of efficiency in generating value relative to the expanded capital base.
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Economic Profit Margin
Steel Dynamics Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 1,961,056) | (510,315) | (303,164) | 195,089) | (425,034) | |
| Net sales | 18,408,850) | 9,601,482) | 10,464,991) | 11,821,839) | 9,538,797) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 10.65% | -5.31% | -2.90% | 1.65% | -4.46% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | -4.15% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,961,056 ÷ 18,408,850 = 10.65%
3 Click competitor name to see calculations.
The financial trajectory from 2017 to 2021 is characterized by significant volatility in economic value creation, culminating in a substantial expansion in both operational scale and profitability in the final year of the period.
- Economic Profit Trends
- Economic profit exhibited inconsistent results throughout the period, alternating between value destruction and value creation. A deficit of 425 million USD in 2017 was followed by a brief recovery to a surplus of 195 million USD in 2018. However, a downward trend resumed in 2019 and 2020, with the economic deficit deepening to 510 million USD by the end of 2020. This trend reversed sharply in 2021, as economic profit surged to 1.96 billion USD, representing a major inflection point in the company's ability to generate returns above its cost of capital.
- Net Sales Trajectory
- Net sales remained relatively range-bound between 2017 and 2020, fluctuating between 9.6 billion USD and 11.8 billion USD. This period of stability was followed by an abrupt and significant increase in 2021, where sales rose to 18.4 billion USD. This spike represents an increase of approximately 91% over the 2020 level, indicating a massive expansion in revenue generation.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrored the volatility observed in absolute economic profit. The margin remained negative for the majority of the period, reaching a low of -5.31% in 2020. The transition to a positive margin of 10.65% in 2021 demonstrates that the surge in net sales was accompanied by an improvement in efficiency and capital utilization, allowing the company to convert a significantly higher proportion of its revenue into economic value.
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