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
Twenty-First Century Fox Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,669 – 16.71% × 47,272 = -3,232
The financial performance regarding economic value creation demonstrates a period of significant volatility and a general failure to consistently exceed the cost of capital. Economic profit remained negative for four out of the six analyzed years, indicating that operating returns were frequently insufficient to cover the required return on invested capital.
- Economic Profit Trends
- A highly inconsistent trend is observed in economic profit, which shifted from a positive 557 million in 2013 to a deficit of 3,309 million in 2014. Although a recovery occurred in 2015 with a profit of 2,435 million, the subsequent three years showed a sustained negative trajectory, culminating in a loss of 3,232 million by June 30, 2018.
- Net Operating Profit After Taxes (NOPAT) Volatility
- NOPAT exhibited extreme fluctuations throughout the period. A peak of 9,417 million was reached in 2015, representing the highest operating efficiency in the set. However, this was followed by a sharp decline to 4,025 million in 2016. The instability of NOPAT serves as the primary driver for the erratic shifts in economic profit.
- Invested Capital and Cost of Capital Correlation
- Invested capital remained relatively stable, fluctuating between a low of 42,462 million in 2016 and a high of 48,265 million in 2014. The cost of capital remained largely consistent, ranging from 14.69% to 16.71%. The increase of the cost of capital to its peak of 16.71% in 2018, combined with a NOPAT that failed to scale proportionally with invested capital, intensified the economic profit deficit in the final year of the analysis.
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Net Operating Profit after Taxes (NOPAT)
Twenty-First Century Fox Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for returns and doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in restructuring program liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Twenty-First Century Fox, Inc. stockholders.
6 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,553 × 6.01% = 93
7 2018 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 1,341 × 28.00% = 376
8 Addition of after taxes interest expense to net income attributable to Twenty-First Century Fox, Inc. stockholders.
9 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 39 × 28.00% = 11
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The financial performance between June 30, 2013, and June 30, 2018, is characterized by significant volatility in both net income and net operating profit after taxes (NOPAT). A cyclical trend is evident, with a pronounced peak in 2015 followed by a sharp contraction in 2016 and a subsequent gradual recovery leading into 2018.
- NOPAT Trend Analysis
- Net operating profit after taxes exhibited substantial fluctuations over the six-year period. After a decline from US$ 7,896 million in 2013 to US$ 4,517 million in 2014, NOPAT surged to a peak of US$ 9,417 million in 2015. This peak was followed by a steep decline to US$ 4,025 million in 2016. In the final two years of the period, a modest but consistent recovery was observed, with NOPAT rising to US$ 4,273 million in 2017 and US$ 4,669 million in 2018.
- Net Income Correlation
- Net income attributable to stockholders mirrored the general trajectory of NOPAT, suggesting that the volatility was primarily driven by operating performance. The most significant divergence is noted in 2015, where net income reached US$ 8,306 million, and 2016, where it dropped precipitously to US$ 2,755 million. The recovery phase from 2016 to 2018 shows net income increasing from US$ 2,755 million to US$ 4,464 million.
- Operating Profit vs. Net Income Spread
- NOPAT remained consistently higher than net income for nearly the entire period, with the exception of 2014, where the two figures were nearly equal (US$ 4,517 million for NOPAT versus US$ 4,514 million for net income). The spread widened significantly between 2016 and 2017, with NOPAT exceeding net income by over US$ 1.2 billion in both years. This widening gap indicates that while operating profitability remained relatively stable during those years, non-operating factors—such as interest expenses or taxes—exerted a greater downward pressure on the final net income.
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Cash Operating Taxes
Twenty-First Century Fox Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
The analysis of tax-related expenditures between June 2013 and June 2018 reveals significant volatility and a widening divergence between accrual-based tax provisions and actual cash outflows. While the provision for income taxes from continuing operations generally trended downward over the six-year period, cash operating taxes exhibited a more fluctuating pattern, remaining positive even when accounting provisions indicated a tax benefit.
- Provision for Income Taxes Trends
- The provision for income taxes from continuing operations experienced a general decline from 1,690 million USD in 2013 to 1,130 million USD in 2016. After a temporary increase to 1,419 million USD in 2017, the figure shifted dramatically to a negative 364 million USD in 2018, representing a transition from a tax expense to a tax benefit in the final year of the period.
- Cash Operating Tax Fluctuations
- Cash operating taxes demonstrated a non-linear trend, peaking at 1,781 million USD in 2017. The lowest cash outlay occurred in 2018, dropping to 904 million USD. Unlike the provision for income taxes, cash operating taxes remained positive throughout the entire duration, indicating consistent cash outflows for tax obligations regardless of accounting provisions.
- Divergence Between Accrual and Cash Taxes
- A notable discrepancy is observed in the relationship between accounting provisions and cash payments. In 2014 and 2017, cash operating taxes exceeded the provision for income taxes. This divergence reached its peak in 2018, where a significant gap emerged: the company recorded a tax benefit of 364 million USD on an accrual basis, yet maintained a cash tax expenditure of 904 million USD.
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Invested Capital
Twenty-First Century Fox Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
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 program liabilities.
6 Addition of equity equivalents to total Twenty-First Century Fox, Inc. stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of available-for-sale securities.
The analysis of invested capital from 2013 to 2018 reveals a fluctuating trajectory characterized by an initial expansion, a mid-period contraction, and a subsequent recovery phase.
- Invested Capital Volatility
- Invested capital peaked at US$ 48,265 million in 2014 before experiencing a steady decline over the next two years, reaching a minimum of US$ 42,462 million in 2016. A reversal occurred thereafter, with capital increasing to US$ 45,055 million in 2017 and ending the period at US$ 47,272 million in 2018.
- Debt and Lease Performance
- Total reported debt and leases remained relatively stable over the six-year period, fluctuating between a low of US$ 19,912 million in 2013 and a high of US$ 22,748 million in 2014. From 2015 onwards, these obligations maintained a narrow range, ending at US$ 21,076 million in 2018, indicating that debt was not the primary driver of the volatility seen in total invested capital.
- Equity Contribution and Impact
- Stockholders' equity exhibited a significant dip in 2016, falling to US$ 13,661 million from previous levels of approximately US$ 17 billion. This contraction directly correlates with the trough in invested capital observed in the same year. The subsequent growth in equity to US$ 19,564 million by 2018 served as the principal catalyst for the restoration of the invested capital base.
The relationship between the components suggests that while debt levels remained consistent, the overall capital structure was heavily influenced by shifts in equity. The recovery in invested capital from 2016 to 2018 was driven primarily by equity growth, offsetting the relative stagnation in debt and lease obligations.
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Cost of Capital
Twenty-First Century Fox Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 83,959) | 83,959) | ÷ | 108,102) | = | 0.78 | 0.78 | × | 20.28% | = | 15.75% | ||
| Borrowings3 | 22,591) | 22,591) | ÷ | 108,102) | = | 0.21 | 0.21 | × | 6.01% × (1 – 28.00%) | = | 0.90% | ||
| Operating lease liability4 | 1,553) | 1,553) | ÷ | 108,102) | = | 0.01 | 0.01 | × | 6.01% × (1 – 28.00%) | = | 0.06% | ||
| Total: | 108,102) | 1.00 | 16.71% | ||||||||||
Based on: 10-K (reporting date: 2018-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 52,218) | 52,218) | ÷ | 77,801) | = | 0.67 | 0.67 | × | 20.28% | = | 13.61% | ||
| Borrowings3 | 23,853) | 23,853) | ÷ | 77,801) | = | 0.31 | 0.31 | × | 6.03% × (1 – 35.00%) | = | 1.20% | ||
| Operating lease liability4 | 1,729) | 1,729) | ÷ | 77,801) | = | 0.02 | 0.02 | × | 6.03% × (1 – 35.00%) | = | 0.09% | ||
| Total: | 77,801) | 1.00 | 14.90% | ||||||||||
Based on: 10-K (reporting date: 2017-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,724) | 48,724) | ÷ | 74,216) | = | 0.66 | 0.66 | × | 20.28% | = | 13.31% | ||
| Borrowings3 | 23,986) | 23,986) | ÷ | 74,216) | = | 0.32 | 0.32 | × | 6.17% × (1 – 35.00%) | = | 1.30% | ||
| Operating lease liability4 | 1,506) | 1,506) | ÷ | 74,216) | = | 0.02 | 0.02 | × | 6.17% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 74,216) | 1.00 | 14.69% | ||||||||||
Based on: 10-K (reporting date: 2016-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 60,826) | 60,826) | ÷ | 84,394) | = | 0.72 | 0.72 | × | 20.28% | = | 14.61% | ||
| Borrowings3 | 21,998) | 21,998) | ÷ | 84,394) | = | 0.26 | 0.26 | × | 6.30% × (1 – 35.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,570) | 1,570) | ÷ | 84,394) | = | 0.02 | 0.02 | × | 6.30% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 84,394) | 1.00 | 15.76% | ||||||||||
Based on: 10-K (reporting date: 2015-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 78,316) | 78,316) | ÷ | 104,698) | = | 0.75 | 0.75 | × | 20.28% | = | 15.17% | ||
| Borrowings3 | 22,692) | 22,692) | ÷ | 104,698) | = | 0.22 | 0.22 | × | 6.40% × (1 – 35.00%) | = | 0.90% | ||
| Operating lease liability4 | 3,690) | 3,690) | ÷ | 104,698) | = | 0.04 | 0.04 | × | 6.40% × (1 – 35.00%) | = | 0.15% | ||
| Total: | 104,698) | 1.00 | 16.21% | ||||||||||
Based on: 10-K (reporting date: 2014-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 72,612) | 72,612) | ÷ | 94,822) | = | 0.77 | 0.77 | × | 20.28% | = | 15.53% | ||
| Borrowings3 | 18,756) | 18,756) | ÷ | 94,822) | = | 0.20 | 0.20 | × | 6.51% × (1 – 35.00%) | = | 0.84% | ||
| Operating lease liability4 | 3,454) | 3,454) | ÷ | 94,822) | = | 0.04 | 0.04 | × | 6.51% × (1 – 35.00%) | = | 0.15% | ||
| Total: | 94,822) | 1.00 | 16.52% | ||||||||||
Based on: 10-K (reporting date: 2013-06-30).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Twenty-First Century Fox Inc., economic spread ratio calculation, comparison to benchmarks
| Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2015 | Jun 30, 2014 | Jun 30, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,232) | (2,439) | (2,212) | 2,435) | (3,309) | 557) | |
| Invested capital2 | 47,272) | 45,055) | 42,462) | 44,315) | 48,265) | 44,434) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -6.84% | -5.41% | -5.21% | 5.49% | -6.86% | 1.25% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Alphabet Inc. | — | — | — | — | — | — | |
| AppLovin Corp. | — | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,232 ÷ 47,272 = -6.84%
4 Click competitor name to see calculations.
An analysis of the financial performance between June 30, 2013, and June 30, 2018, reveals a pattern of inconsistent value creation. The company experienced significant volatility in its ability to generate returns exceeding its cost of capital, with economic profit and the corresponding economic spread ratio fluctuating between positive and negative territories throughout the period.
- Economic Spread Ratio Trends
- The economic spread ratio demonstrates a predominantly negative trend. After an initial positive spread of 1.25% in 2013, the ratio dropped sharply to -6.86% in 2014. Although a recovery occurred in 2015, reaching a peak of 5.49%, the ratio returned to negative values for the remainder of the period, ending at -6.84% in 2018. This indicates that for four out of the six years analyzed, the returns on invested capital were insufficient to cover the cost of that capital.
- Economic Profit Volatility
- Economic profit mirrors the volatility seen in the spread ratio. Positive value creation was limited to 2013 (557 million US$) and 2015 (2,435 million US$). Conversely, substantial economic losses were recorded in the other years, with the most significant deficit occurring in 2014 at -3,309 million US$ and a further decline to -3,232 million US$ by 2018. The recurring negative figures suggest a persistent struggle to generate economic value.
- Invested Capital Stability
- Invested capital remained relatively stable throughout the six-year window, fluctuating within a range of 42,462 million US$ to 48,265 million US$. Because the capital base did not undergo drastic shifts, the volatility in economic profit and the spread ratio can be attributed to fluctuations in operational profitability or changes in the cost of capital rather than significant expansions or contractions of the invested asset base.
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Economic Profit Margin
Twenty-First Century Fox Inc., economic profit margin calculation, comparison to benchmarks
| Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2015 | Jun 30, 2014 | Jun 30, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,232) | (2,439) | (2,212) | 2,435) | (3,309) | 557) | |
| Revenues | 30,400) | 28,500) | 27,326) | 28,987) | 31,867) | 27,675) | |
| Add: Increase (decrease) in deferred revenue | 98) | 75) | 57) | (242) | 13) | (203) | |
| Adjusted revenues | 30,498) | 28,575) | 27,383) | 28,745) | 31,880) | 27,472) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -10.60% | -8.54% | -8.08% | 8.47% | -10.38% | 2.03% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Alphabet Inc. | — | — | — | — | — | — | |
| AppLovin Corp. | — | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).
1 Economic profit. See details »
2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -3,232 ÷ 30,498 = -10.60%
3 Click competitor name to see calculations.
The financial performance regarding economic value addition exhibits significant volatility and a general trend of value destruction over the six-year period ending June 30, 2018. While revenues remained relatively stable, the ability to generate returns above the cost of capital was inconsistent and predominantly negative.
- Economic Profit Trends
- Economic profit fluctuated sharply between 2013 and 2015, moving from a positive 557 million USD to a loss of 3,309 million USD, before recovering to a peak of 2,435 million USD. However, from 2016 through 2018, a trend of sustained economic losses is observed, with the deficit widening to 3,232 million USD by the end of the period.
- Adjusted Revenue Performance
- Revenues showed moderate fluctuations, peaking at 31,880 million USD in 2014 and reaching 30,498 million USD in 2018. The absence of a direct correlation between revenue growth and economic profit indicates that increases in top-line scale did not translate into consistent value creation.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute profit figures, shifting from a positive 2.03% in 2013 to a low of -10.38% in 2014, and reaching a period high of 8.47% in 2015. From 2016 onwards, the margin remained negative and experienced a steady decline, concluding at -10.60% in 2018, which signifies a persistent failure to meet the required return on capital.
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