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.
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T-Mobile US Inc. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Analysis of Solvency Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2013
- Return on Assets (ROA) since 2013
- Analysis of Revenues
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Economic Profit
T-Mobile US Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial performance, as measured by economic profit, exhibited a notable shift over the five-year period. Initially, the company experienced negative economic profit, which gradually diminished before turning positive. This evolution is closely tied to changes in net operating profit after taxes, cost of capital, and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated an initial decline from 2020 to 2021, followed by a period of moderate growth through 2022. A substantial increase in NOPAT occurred between 2022 and 2023, and this upward trajectory continued into 2024, reaching the highest level observed during the analyzed timeframe. This suggests improving operational efficiency and/or revenue generation.
- Cost of Capital
- The cost of capital remained relatively stable between 2020 and 2022, with minor fluctuations. A gradual increase was observed in 2023 and a more pronounced rise in 2024. This indicates increasing financing costs, potentially due to changes in market interest rates or the company’s capital structure.
- Invested Capital
- Invested capital showed a consistent, albeit modest, increase throughout the period. The growth rate slowed between 2021 and 2022, and remained minimal in subsequent years. This suggests a measured approach to capital allocation and expansion.
- Economic Profit
- Economic profit was negative from 2020 through 2023, indicating that the company’s returns were insufficient to cover its cost of capital. The magnitude of the negative economic profit decreased each year, signaling improving performance. In 2024, economic profit turned positive, signifying that the company generated returns exceeding its cost of capital. This positive shift is attributable to the significant increase in NOPAT, which outpaced the rise in the cost of capital, despite the increase in invested capital.
The trend suggests a successful turnaround in value creation. While the company initially destroyed value, recent performance indicates an ability to generate economic profit and deliver returns to investors above the required rate of return. Continued monitoring of NOPAT, cost of capital, and invested capital will be crucial to sustain this positive trend.
Net Operating Profit after Taxes (NOPAT)
T-Mobile US Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 revenue.
4 Addition of increase (decrease) in restructuring initiatives.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 Elimination of discontinued operations.
The financial data reveals significant fluctuations and overall growth in the profitability metrics over the five-year period.
- Net Income
-
Net income shows a moderate decline from 3,064 million USD in 2020 to 2,590 million USD in 2022. Subsequently, there is a marked increase to 8,317 million USD in 2023, followed by a further rise to 11,339 million USD in 2024. This indicates a strong recovery and substantial growth in the last two years after a period of decline.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibits a decrease from 7,224 million USD in 2020 to 6,394 million USD in 2021, before increasing to 7,149 million USD in 2022. A significant surge is observed thereafter, with NOPAT reaching 14,313 million USD in 2023 and further climbing to 18,486 million USD in 2024. This trend reflects an improvement in operating efficiency and profitability after the initial decline.
Overall, while both net income and NOPAT experienced declines in the early years of the data, the subsequent periods demonstrate substantial growth. The acceleration in profitability metrics from 2023 onwards suggests successful operational improvements or favorable market conditions contributing to strengthened financial performance.
Cash Operating Taxes
T-Mobile US Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
The analysis of the company's tax-related financial data over the five-year period reveals fluctuating trends with a notable increase in the most recent years.
- Income tax expense
- The income tax expense displays variability across the years. Initially, there was a decrease from $786 million in 2020 to $327 million in 2021, followed by a moderate increase to $556 million in 2022. However, a significant surge occurred in 2023, with the expense rising sharply to $2,682 million, and this upward trend continued into 2024, reaching $3,373 million. This pattern suggests a considerable change in taxable income or tax rates impacting the corporation during the latest two years.
- Cash operating taxes
- Cash operating taxes showed a gradual upward trend over the period. Starting at $895 million in 2020, this figure increased steadily to $1,053 million in 2021 and $1,058 million in 2022. The growth continued more modestly to $1,069 million in 2023 and then more notably to $1,244 million in 2024. The consistent increase indicates higher cash outflows related to operating taxes, potentially reflecting growth in operating activities or changes in tax payment structures.
Invested Capital
T-Mobile US Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 restructuring initiatives.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
The financial data over the five-year period displays several notable trends in key capital structure metrics. The total reported debt and leases have shown a consistent and gradual increase each year. This trend indicates a growing reliance on debt financing, as the total amount rose from approximately $104.2 billion at the end of 2020 to about $110.3 billion by the end of 2024.
In contrast, stockholders’ equity presented a different pattern. It increased from 2020 to 2022, peaking at nearly $69.7 billion, but then declined in the subsequent years, reaching approximately $61.7 billion by the end of 2024. This decline in equity after 2022 may suggest dividend distributions, share repurchases, or reduced retained earnings impacting the equity base.
Invested capital exhibited a steady rise over the period, though the rate of increase slowed towards the latter years. The invested capital grew from about $177.9 billion in 2020 to nearly $187.6 billion in 2024. This rise primarily reflects the combined effect of incremental increases in both debt and equity, despite the decrease in equity in later years.
- Total Reported Debt & Leases
- Consistently increased each year, signaling a rising debt burden and possibly a strategic shift towards leveraging external financing.
- Stockholders’ Equity
- Increased initially but then showed a declining trend after 2022, which may indicate capital return actions or earnings impacts on retained earnings.
- Invested Capital
- Grew steadily throughout the period, reflecting an overall expansion in capital resources, supported mainly by debt increases given the equity decline in the later years.
Overall, the period reflects a growing balance sheet with a greater proportion of financing coming through debt, coupled with a decreasing equity base after a certain point. This could suggest increased financial risk or a deliberate strategy to optimize the capital structure and shareholder returns. Further analysis on profitability and cash flows would be necessary to assess the sustainability of these trends.
Cost of Capital
T-Mobile US Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including financing lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including financing lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including financing lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including financing lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including financing lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including financing lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including financing lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including financing lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including financing lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including financing lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
T-Mobile US Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AT&T Inc. | ||||||
| Verizon Communications Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited a notable shift over the five-year period. Initially negative, the ratio transitioned to positive territory between 2023 and 2024. This change correlates with a diminishing negative economic profit and a relatively stable invested capital base.
- Economic Spread Ratio Trend
- From 2020 to 2022, the economic spread ratio consistently declined, moving from -4.17% to -4.87%. This indicates a widening gap between the cost of capital and the return generated from invested capital. The ratio then experienced a substantial improvement in 2023, increasing to -1.10%, suggesting a narrowing of this gap. By 2024, the ratio became positive at 0.43%, signifying that the company’s returns exceeded its cost of capital.
Economic profit remained negative for the majority of the observed period. However, the magnitude of the negative economic profit decreased significantly from 2022 (-9,063 US$ millions) to 2023 (-2,054 US$ millions), and ultimately became positive in 2024 (809 US$ millions). This reduction in negative economic profit is a key driver of the improvement in the economic spread ratio.
- Invested Capital
- Invested capital remained relatively stable throughout the period, fluctuating between 177,902 US$ millions and 187,599 US$ millions. The modest increase observed over the five years does not appear to be a primary factor influencing the changes in the economic spread ratio; rather, the changes in economic profit appear to be the dominant influence.
The progression from a negative to a positive economic spread ratio suggests an improvement in the company’s ability to generate returns above its cost of capital. The substantial shift in 2023 and 2024 warrants further investigation to understand the underlying operational and financial drivers contributing to this positive trend.
Economic Profit Margin
T-Mobile US Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AT&T Inc. | ||||||
| Verizon Communications Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited a notable shift over the five-year period. Initially negative, the metric demonstrated improvement, culminating in a positive value by the end of the observed timeframe. This progression is closely tied to changes in both economic profit and adjusted revenues.
- Economic Profit Margin
- The economic profit margin began at -10.78% in 2020 and decreased to -11.40% in 2022, indicating a widening gap between the cost of capital and the returns generated from revenues. However, a substantial improvement occurred in 2023, with the margin increasing to -2.61%. This positive trend continued into 2024, where the economic profit margin reached 0.99%, signifying that the company generated economic profit relative to its adjusted revenues.
The movement in the economic profit margin directly reflects the trend in economic profit. While adjusted revenues fluctuated modestly, the significant turnaround in economic profit – from negative values exceeding US$9 billion to a positive US$809 million – was the primary driver of the margin’s improvement. The largest single-year improvement in economic profit occurred between 2022 and 2023, which subsequently led to a corresponding increase in the economic profit margin.
- Adjusted Revenues
- Adjusted revenues increased from US$68,796 million in 2020 to US$79,944 million in 2021, representing substantial growth. Revenues experienced a slight decrease in 2022 to US$79,495 million, followed by another decrease in 2023 to US$78,603 million. However, revenues rebounded in 2024, reaching US$81,797 million, surpassing the 2021 peak. Despite these fluctuations, revenue growth alone does not explain the dramatic shift in economic profit margin; the improvement is primarily attributable to the reduction in negative economic profit.
In conclusion, the observed trend suggests a strengthening of financial performance, as evidenced by the transition from negative to positive economic profit margin. This improvement is largely due to a substantial increase in economic profit, despite moderate fluctuations in adjusted revenues.