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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Economic Profit
Teradyne Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes demonstrated an overall increasing trend from 2019 to 2021, rising from approximately $499 million to $1.03 billion. However, this trend reversed significantly in the subsequent years, with a sharp decline to around $659 million in 2022 and further down to approximately $314 million in 2023.
- Cost of Capital
- The cost of capital exhibited a gradual increase over the five-year period, starting at 19% in 2019 and reaching 20.52% by the end of 2023. This rise, though moderate, indicates slightly higher capital expenses or risks perceived by investors.
- Invested Capital
- Invested capital expanded steadily from $1.85 billion in 2019 to a peak of $2.59 billion in 2022. In 2023, there was a modest reduction to approximately $2.42 billion, suggesting some divestment or asset optimization occurred following the peak.
- Economic Profit
- Economic profit, which reflects the value created beyond the cost of capital, showed strong positive growth from $149 million in 2019 to over $522 million in 2021. Nevertheless, this figure dropped drastically in 2022 to $132 million and fell into negative territory in 2023, recording a loss of about $182 million. This decline highlights a deterioration in value creation and suggests that the returns on invested capital did not cover the increasing cost of capital in recent years.
- Summary of Trends
- Initially, the company exhibited strong profitability and value creation, supported by rising NOPAT and invested capital along with economic profits that well exceeded the cost of capital. Over time, despite continued investment, growing capital costs and a substantial drop in operating profit eroded economic profit, ultimately resulting in negative value creation by 2023. The data indicates challenges in maintaining profitability and justifying invested capital under increasing financial costs, signaling potential operational or market-related pressures impacting financial performance in the last two years of the period analyzed.
Net Operating Profit after Taxes (NOPAT)
Teradyne Inc., NOPAT calculation
US$ 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 credit losses.
3 Addition of increase (decrease) in deferred revenue and customer advances.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Income
- Net income demonstrated a strong upward trend from 2019 through 2021, rising from approximately 467 million US dollars in 2019 to over 1 billion US dollars in 2021. However, this pattern reversed in the subsequent two years, with net income declining to about 715 million in 2022 and further decreasing to approximately 449 million in 2023.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a similar trajectory, increasing notably from around 499 million US dollars in 2019 to approximately 1.03 billion US dollars in 2021. After this peak, NOPAT experienced a significant decrease to roughly 659 million in 2022 and almost halved to 314 million in 2023.
- Overall Trend Analysis
- Both net income and NOPAT showed strong growth over the first three years before entering a period of marked contraction in the last two years. The declines in 2022 and 2023 suggest a reduced profitability from operations and overall earnings, potentially indicating operational challenges or external factors adversely affecting financial performance during this period.
Cash Operating Taxes
Teradyne 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).
- Provision for Income Taxes
- The provision for income taxes exhibited an overall increasing trend from 2019 through 2021, rising from 58,304 thousand US dollars in 2019 to a peak of 146,366 thousand US dollars in 2021. This increase suggests higher taxable income or possibly less favorable tax conditions during this period. However, from 2021 onward, there was a decline in the provision, falling to 124,884 thousand US dollars in 2022 and further to 76,820 thousand US dollars in 2023, indicating a reduction in income tax expense or changes in tax strategy or rates.
- Cash Operating Taxes
- Cash operating taxes also followed a rising trajectory from 2019 to 2021, with amounts increasing from 66,842 thousand US dollars in 2019 to 166,173 thousand US dollars in 2021. This upward movement corresponded with the trend seen in the provision for income taxes, reflecting potentially higher tax payments aligned with reported taxable earnings. After 2021, cash operating taxes remained relatively stable in 2022, slightly decreasing to 165,914 thousand US dollars, before a more pronounced reduction to 108,845 thousand US dollars in 2023.
- Comparative Insights
- Both the provision for income taxes and cash operating taxes indicate growth during 2019–2021, peaking in 2021, followed by notable declines in the subsequent years. The gap between provision and cash taxes narrows slightly by 2023, implying a convergence between estimated tax liabilities and actual cash outflows. The trends suggest possible fluctuations in taxable income levels, tax planning measures, or regulatory environments affecting the company’s tax expenses and payments during the observed timeframe.
Invested Capital
Teradyne 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 deferred revenue and customer advances.
5 Addition of product warranty liability.
6 Addition of equity equivalents to shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate a significant downward trend throughout the analyzed period. Beginning at $460,012 thousand as of December 31, 2019, the amount slightly increased to $472,757 thousand in 2020, then sharply decreased to $184,581 thousand in 2021. This declining trajectory continued in subsequent years, reaching $132,885 thousand in 2022 and further reducing to $82,614 thousand by the end of 2023. This pattern indicates a strategic reduction in leverage over time, suggesting efforts to lower financial risk or improve debt management.
- Shareholders’ Equity
- Shareholders’ equity shows an overall increasing trend with slight fluctuations. Starting at $1,480,158 thousand in 2019, it substantially grew to $2,207,018 thousand in 2020, followed by a continued rise to $2,562,444 thousand in 2021. However, in 2022, equity slightly decreased to $2,451,294 thousand before recovering to $2,525,897 thousand in 2023. This overall growth points towards retained earnings accumulation or capital infusions, enhancing the company's net worth and financial stability.
- Invested Capital
- Invested capital displays a gradual increase in the earlier years, moving from $1,845,838 thousand in 2019 to $2,183,213 thousand in 2020, and then to $2,564,053 thousand in 2021. After peaking in 2022 at $2,587,403 thousand, it slightly contracted to $2,415,179 thousand in 2023. The steady increase through most of the periods indicates ongoing investments in operational assets and business growth, while the recent decline may reflect asset disposals, depreciation effects, or a strategic contraction.
Cost of Capital
Teradyne Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Teradyne 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed a significant increase from 2019 to 2021, rising from approximately 149 million USD to over 522 million USD. This upward trend peaked in 2021 before experiencing a sharp decline in 2022 to around 132 million USD, followed by a further decline into negative territory in 2023, reaching approximately -182 million USD. This reversal indicates a deterioration in the company's ability to generate economic profit in the later years of the period analyzed.
- Invested Capital
- Invested capital demonstrated a steady increase from 2019 through 2022, growing from about 1.85 billion USD to nearly 2.59 billion USD. However, in 2023, there was a slight reduction to approximately 2.42 billion USD. This suggests that the company expanded its capital base steadily for most of the period, with a minor contraction in the most recent year.
- Economic Spread Ratio
- The economic spread ratio followed a trend similar to economic profit. It rose substantially from 8.05% in 2019 to a peak of 20.37% in 2021, indicating improved profitability relative to invested capital. Thereafter, it dropped markedly to 5.12% in 2022 and turned negative to -7.52% in 2023. The negative ratio in 2023 signals that the company’s returns fell below its cost of capital, reflecting a loss in economic value for shareholders during that year.
Economic Profit Margin
Teradyne 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 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue and customer advances | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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 ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed a significant upward trend from 2019 through 2021, increasing from approximately 149 million USD to over 522 million USD. However, in 2022, there was a sharp decline to around 132 million USD, followed by a negative value of approximately -182 million USD in 2023, indicating a loss in economic profit that year.
- Adjusted Revenues
- Adjusted revenues demonstrated a strong growth from 2019 to 2021, rising from about 2.34 billion USD to roughly 3.71 billion USD. This was followed by a decline over the next two years, dropping to approximately 3.15 billion USD in 2022 and further down to about 2.62 billion USD in 2023. This indicates revenue contraction after a period of growth.
- Economic Profit Margin
- The economic profit margin mirrored the trend in economic profit, increasing from 6.37% in 2019 to a peak of 14.07% in 2021. From there, it substantially decreased to 4.21% in 2022 and moved into negative territory at -6.93% in 2023, reflecting decreasing profitability relative to revenues during this period.
Overall, the data reveal a period of growth and improving profitability between 2019 and 2021, followed by a marked deterioration in both economic profit and profit margin beginning in 2022 and continuing into 2023. The decline in adjusted revenues during the latter years underscores challenges in maintaining sales levels, which, combined with reduced profitability, suggests operational or market difficulties impacting financial performance during the most recent periods.