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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Trade Desk Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Assets
- Cash Flow Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2016
- Total Asset Turnover since 2016
- Price to Operating Profit (P/OP) since 2016
- Price to Book Value (P/BV) since 2016
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Economic Profit
Trade Desk Inc., economic profit calculation
US$ in thousands
| 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 analysis reveals a consistently negative economic profit over the five-year period. While net operating profit after taxes (NOPAT) fluctuates significantly, it does not generate sufficient returns to cover the cost of capital employed. Invested capital increased substantially over the period, contributing to the persistent negative economic profit.
- Economic Profit Trend
- Economic profit demonstrates a worsening trend from 2020 to 2022, with losses escalating from US$23.671 thousand to US$403.649 thousand. A slight improvement is observed in 2023 and 2024, with economic profit reaching US$334.865 thousand and US$302.264 thousand respectively, though remaining negative. This suggests that while the company may be improving its operational efficiency, it is still not generating returns exceeding its cost of capital.
- NOPAT Performance
- Net operating profit after taxes experienced a substantial decline from US$221.768 thousand in 2020 to US$27.018 thousand in 2022. A recovery occurred in 2023, reaching US$73.055 thousand, followed by a significant increase to US$264.450 thousand in 2024. This volatility in NOPAT directly impacts the economic profit, highlighting the sensitivity of profitability to operational performance.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating between 23.08% and 23.12%. This consistency indicates that external factors influencing the cost of funding did not significantly change during these years. The stable cost of capital emphasizes that the negative economic profit is primarily driven by insufficient profitability relative to the capital employed, rather than changes in funding costs.
- Invested Capital Growth
- Invested capital increased from US$1.062.113 thousand in 2020 to US$2.455.827 thousand in 2024. This substantial growth in invested capital, coupled with the consistently negative economic profit, suggests that the company is deploying capital in a manner that does not generate adequate returns. The increasing capital base exacerbates the economic losses.
In summary, the company consistently failed to generate economic profit over the analyzed period. While NOPAT showed improvement in the later years, it was insufficient to offset the high cost of capital and the growing invested capital base. The trend suggests a need to evaluate capital allocation strategies and improve operational efficiency to achieve positive economic profit.
Net Operating Profit after Taxes (NOPAT)
Trade Desk Inc., NOPAT calculation
US$ in thousands
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 equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data exhibits considerable fluctuations in both net income and net operating profit after taxes (NOPAT) over the observed five-year period. The net income demonstrates a significant decline from US$242,317 thousand in 2020 to a low point of US$53,385 thousand in 2022. Following this trough, there is a marked recovery with net income rising to US$178,940 thousand in 2023 and further accelerating to US$393,076 thousand in 2024, surpassing the initial 2020 level.
In parallel, NOPAT follows a somewhat similar pattern. It begins at US$221,768 thousand in 2020, sharply decreases to US$27,018 thousand by 2022, indicating a challenging operational environment or increased costs impacting profitability. However, NOPAT recovers noticeably in the subsequent years, reaching US$73,055 thousand in 2023 and significantly improving to US$264,450 thousand in 2024. Despite this recovery, the NOPAT in 2024 remains below the 2020 level, suggesting operational gains that have yet to fully match earlier performance.
- Trends in Profitability
- The data reveals a period of financial stress or restructuring through 2021 and 2022, where both net income and NOPAT declined substantially. The subsequent years indicate a robust turnaround, with profitability recovering and net income achieving new highs by 2024.
- Comparative Analysis of Net Income and NOPAT
- While net income shows a strong rebound exceeding initial levels, NOPAT, which represents operating efficiency after taxes, though improved, does not fully return to or exceed its starting position by 2024. This differential may reflect changes in non-operating items or tax impacts influencing net income beyond core operational performance.
- Implications
- The patterns suggest a company that experienced significant challenges impacting profitability mid-period but took actions resulting in considerable improvement by the end of the timeframe. The divergence in recovery levels between net income and NOPAT warrants close monitoring to understand the sustainability and drivers of net income growth.
Cash Operating Taxes
Trade Desk Inc., cash operating taxes calculation
US$ in thousands
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 financial data reveals significant changes in the tax-related items over the five-year period from 2020 to 2024. Both the provision for income taxes and the cash operating taxes exhibit distinct trends that can be analyzed to understand their financial impacts.
- Provision for (benefit from) income taxes
- This item shows a substantial shift over the analyzed period. Starting with a negative figure of -98,414 thousand USD in 2020, indicating a tax benefit, the amount decreases sharply in magnitude to -15,726 thousand USD in 2021. From 2022 onwards, the provision turns positive, indicating a tax provision rather than a benefit, increasing to 73,985 thousand USD in 2022, then to 89,055 thousand USD in 2023, and further to 114,226 thousand USD in 2024. This pattern suggests a significant turnaround from tax benefits to increasing tax expenses during the period, which may reflect changes in profitability, tax strategies, or tax law impacts.
- Cash operating taxes
- Starting from a negative value of -65,246 thousand USD in 2020, indicating tax refunds or tax credits received, the cash operating taxes turn positive in the following years and show a rising trend. In 2021, it is reported at 4,359 thousand USD and escalates markedly each year to 98,789 thousand USD in 2022, 137,273 thousand USD in 2023, and further to 175,853 thousand USD in 2024. This upward trend in cash tax payments reflects increasing tax cash outflows, which could be due to higher taxable income or changes in payment timing and tax policy compliance.
Overall, the data illustrates a transition from a tax benefit situation with tax credits or refunds in 2020 to progressively higher tax provisions and cash operating tax payments through 2024. This transition highlights significant changes in the company’s tax position that could be influenced by operational growth, profitability improvements, or external tax environment changes. The consistent increases in both provision and cash taxes imply growing tax obligations and cash tax outflows over the recent years.
Invested Capital
Trade Desk Inc., invested capital calculation (financing approach)
US$ in thousands
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 equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of short-term investments, net.
- Total reported debt & leases
- The total reported debt and leases show a generally declining trend from 2020 to 2023, decreasing from approximately 292 million USD to 236 million USD. However, there is a notable increase in 2024, rising sharply to 312 million USD, which represents the highest value in the five-year period.
- Stockholders’ equity
- Stockholders’ equity exhibits a consistent upward trajectory over the entire period, growing significantly each year. Starting at roughly 1.0 billion USD in 2020, it nearly doubles by 2022 to over 2.1 billion USD and continues to rise to nearly 2.95 billion USD by 2024, indicating strengthening financial stability and increased retained earnings or capital contributions.
- Invested capital
- Invested capital increases markedly from about 1.06 billion USD in 2020 to a peak of approximately 1.87 billion USD in 2022. There is a slight contraction in 2023 to around 1.76 billion USD, followed by a significant expansion in 2024, reaching approximately 2.46 billion USD. This pattern suggests fluctuating but overall growing investment in the company's assets supported by equity and liabilities.
Cost of Capital
Trade Desk Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
Economic Spread Ratio
Trade Desk 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Walt Disney Co. | ||||||
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 demonstrates a concerning trend over the five-year period. Initially negative, the ratio exhibits a substantial decline, followed by a modest recovery in the most recent year. This suggests a worsening, then partial improvement, in the company’s ability to generate returns exceeding its cost of capital.
- Economic Spread Ratio
- The economic spread ratio began at -2.23% in 2020 and deteriorated significantly to -21.63% in 2022. This indicates an increasing gap between the return on invested capital and the cost of that capital. The ratio experienced a partial recovery to -12.31% in 2024, suggesting some improvement in profitability relative to invested capital, but remains negative.
The magnitude of the negative economic spread ratio consistently indicates that invested capital is not generating returns sufficient to cover its cost. The most substantial decline occurred between 2020 and 2022, coinciding with a considerable increase in invested capital. While invested capital decreased slightly in 2023, the economic spread ratio remained high in absolute value. The 2024 figures show a further increase in invested capital alongside a less severe negative economic spread ratio, implying a potential shift in the efficiency of capital allocation.
- Relationship to Economic Profit
- The negative economic profit values align with the negative economic spread ratios. As the economic spread ratio became more negative, the absolute value of economic profit also increased, demonstrating a strong correlation between the two metrics. The partial recovery in the economic spread ratio in 2024 is mirrored by a smaller decrease in the absolute value of economic profit.
The increasing invested capital, coupled with consistently negative economic profit and a declining, then partially recovering, economic spread ratio, warrants further investigation into the company’s capital allocation strategy and operational efficiency. The recent improvement in the economic spread ratio, while positive, requires continued monitoring to determine if it represents a sustainable trend.
Economic Profit Margin
Trade Desk 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 thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Walt Disney Co. | ||||||
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 ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin demonstrates a concerning trend over the five-year period. Initially negative, the margin exhibits a substantial deterioration before showing signs of stabilization. Economic profit itself consistently remains negative throughout the observed timeframe, indicating the company is not generating returns exceeding its cost of capital.
- Economic Profit Margin Trend
- The economic profit margin began at -2.83% in 2020. It then experienced a significant decline, reaching -19.08% in 2021. This downward trajectory continued into 2022, with the margin reaching its lowest point at -25.58%. A moderate improvement is observed in 2023, with the margin increasing to -17.21%. This positive shift continues into 2024, where the margin further improves to -12.36%, suggesting a potential stabilization, although still representing a substantial loss relative to capital costs.
- Relationship between Revenue and Economic Profit
- Despite consistent revenue growth throughout the period – increasing from US$836,033 thousand in 2020 to US$2,444,831 thousand in 2024 – the economic profit remains negative. This indicates that while the company is increasing sales, the associated costs, including the cost of capital, are growing at a faster rate, or the profitability of those sales is insufficient to cover those costs. The increasing revenue does not translate into positive economic profit.
- Economic Profit Trend
- The absolute value of economic profit increased significantly from 2020 to 2022, moving from a loss of -US$23,671 thousand to -US$403,649 thousand. While the loss decreased in 2023 to -US$334,865 thousand, it remains substantial. The trend continues with a further reduction in the loss to -US$302,264 thousand in 2024. This suggests that while the company is still destroying economic value, the rate of destruction is slowing.
The observed improvements in the economic profit margin and the reduction in the absolute economic loss in the later years warrant further investigation. Understanding the drivers behind these changes – such as cost management initiatives, changes in capital structure, or shifts in operational efficiency – is crucial for assessing the company’s long-term financial health.