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
Ulta Beauty Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
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
= 1,347,343 – 19.77% × 4,117,969 = 533,342
The analysis of economic value addition reveals a period of significant volatility followed by a strong recovery in value creation. The overall trend indicates a transition from initial value destruction to a state of consistent economic profit, despite a severe contraction in 2021.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrates a general growth trajectory, increasing from 527,431 thousand in 2018 to 1,347,343 thousand by 2023. A significant outlier is observed in 2021, where NOPAT dropped sharply to 242,025 thousand. Following this decline, a robust recovery occurred, with profits expanding rapidly in 2022 and 2023, suggesting an enhancement in operational profitability.
- Cost of Capital and Invested Capital
- The cost of capital shows a gradual and consistent increase, rising from 17.82% in 2018 to 19.77% in 2023. Invested capital remained relatively stable throughout the period, fluctuating within a range between 3,684,509 thousand and 4,338,625 thousand. The slight increase in the cost of capital over time placed higher pressure on the required operating returns to achieve a positive economic profit.
- Economic Profit Performance
- Economic profit was negative in 2018 and 2019, indicating that the returns were insufficient to cover the cost of capital. Although a positive turn was achieved in 2020 with 95,304 thousand, a substantial deficit of -561,972 thousand was recorded in 2021. However, the most recent two years show a strong positive trend, with economic profit rising to 368,266 thousand in 2022 and 533,342 thousand in 2023, confirming that the entity is now generating returns well in excess of its capital costs.
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Net Operating Profit after Taxes (NOPAT)
Ulta Beauty Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,903,176 × 3.20% = 60,902
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 60,902 × 21.00% = 12,789
7 Addition of after taxes interest expense to net income.
The financial data indicates notable fluctuations and a general upward trend in both net income and net operating profit after taxes (NOPAT) over the analyzed periods.
- Net Income
- Net income began at 555,234 thousand US dollars in 2018 and displayed a steady increase through 2019 and 2020, reaching 705,945 thousand US dollars. However, there was a pronounced decline in the fiscal year ending January 2021, where net income dropped substantially to 175,835 thousand US dollars. This downturn was temporary as net income rebounded significantly in subsequent years, rising to 985,837 thousand US dollars in 2022 and further to 1,242,408 thousand US dollars in 2023, marking the highest value in the period reviewed.
- Net Operating Profit After Taxes (NOPAT)
- Similar to net income, NOPAT showed growth from 527,431 thousand US dollars in 2018 to a peak of 813,424 thousand US dollars in 2020. A sharp decrease followed in 2021, with NOPAT falling drastically to 242,025 thousand US dollars. After this significant dip, NOPAT recovered strongly, rising to 1,087,749 thousand US dollars in 2022 and reaching 1,347,343 thousand US dollars in 2023, surpassing all previous values.
- Trend Analysis and Insights
-
Both net income and NOPAT exhibit similar movement patterns over the six-year period, with consistent growth from 2018 through 2020, a steep decline in 2021, and a robust recovery afterwards. The notable decline in 2021 could indicate extraordinary circumstances or operational challenges that impacted profitability. The subsequent recovery and surpassing of previous profit levels suggest effective management responses, possibly including operational improvements, cost controls, or strategic initiatives. The strong growth in the last two years positions the company at its highest profitability levels within the timeframe.
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Cash Operating Taxes
Ulta Beauty Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
- Provision for Income Taxes
- The provision for income taxes exhibited a fluctuating pattern over the analyzed periods. Beginning at 231,625 thousand USD in 2018, it decreased slightly in 2019 and 2020, settling near 200,000 thousand USD in both years. A notable decline occurred in 2021, with the provision dropping to 55,250 thousand USD. However, this was followed by a substantial increase in the subsequent years, reaching 309,992 thousand USD in 2022 and further rising to 401,136 thousand USD in 2023. This pattern suggests variability in taxable income or changes in tax rates or tax planning strategies during these years.
- Cash Operating Taxes
- Cash operating taxes generally follow a trend similar to that of the provision for income taxes but with some distinct variations. Starting at 258,720 thousand USD in 2018, the value decreased sharply in 2019 to 166,502 thousand USD, before increasing again to 211,391 thousand USD in 2020. In 2021, there was a significant drop to 93,598 thousand USD, mirroring the decline observed in the provision for income taxes. Subsequently, cash operating taxes increased markedly to 348,456 thousand USD in 2022 and reached 398,271 thousand USD in 2023. The closeness in values between the two metrics in recent years implies a convergence of accounting provisions and actual cash outflows related to taxes.
- Overall Trends and Insights
- Both the provision for income taxes and cash operating taxes show a pattern of declining values up to 2021 followed by sharp increases in 2022 and 2023. The substantial drop in 2021 for both metrics suggests an anomalous event or a shift in tax-related circumstances during that fiscal year. Post-2021 increases may indicate recovery or changes in earnings compositions, tax rates, or tax management approaches. The increasing proximity between the provision and the cash paid indicates improved alignment between accounting estimates and actual cash taxes paid in recent periods.
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Invested Capital
Ulta Beauty Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
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 equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
8 Subtraction of short-term investments.
The financial data reveals several noteworthy trends in the capital structure over the examined periods.
- Total Reported Debt & Leases
- This metric showed an overall declining trend from fiscal year 2018 to 2022, decreasing from approximately $2.23 billion to around $1.85 billion. However, in fiscal year 2023, there was a slight increase to about $1.90 billion, interrupting the prior downward trend. This suggests a cautious approach to debt management, with some recent increased leverage or lease obligations.
- Stockholders’ Equity
- Equity exhibited a generally upward trajectory from 2018 through 2021, growing from about $1.77 billion to nearly $2.00 billion. In 2022, stockholders’ equity experienced a significant reduction to approximately $1.54 billion, followed by a recovery in 2023, reaching nearly $1.96 billion. This dip in 2022 may indicate a notable event affecting retained earnings or equity accounts, such as a large dividend payment, share buyback, or an extraordinary loss, subsequently corrected the following year.
- Invested Capital
- Invested capital fluctuated throughout the period but showed no consistent upward or downward pattern. It increased sharply from 2018 to 2019, rising from roughly $3.94 billion to $4.34 billion, then declined substantially in 2020 to about $3.97 billion. A modest increase followed in 2021, reaching around $4.18 billion, which was then outweighed by a decrease in 2022 to approximately $3.68 billion. The last data point in 2023 reveals a rebound to about $4.12 billion. These variations indicate changes in capital deployment, possibly due to acquisitions, asset purchases, divestitures, or working capital fluctuations.
In summary, the data suggests a dynamic capital structure, characterized by controlled debt levels with slight recent growth, fluctuating equity impacted notably in 2022, and variable invested capital reflecting ongoing adjustments in asset base or financing strategies. This overall pattern denotes responsiveness to changing financial conditions and strategic capital management.
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Cost of Capital
Ulta Beauty Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,799,272) | 25,799,272) | ÷ | 27,702,448) | = | 0.93 | 0.93 | × | 21.04% | = | 19.59% | ||
| Operating lease liability3 | 1,903,176) | 1,903,176) | ÷ | 27,702,448) | = | 0.07 | 0.07 | × | 3.20% × (1 – 21.00%) | = | 0.17% | ||
| Total: | 27,702,448) | 1.00 | 19.77% | ||||||||||
Based on: 10-K (reporting date: 2023-01-28).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 20,672,932) | 20,672,932) | ÷ | 22,519,688) | = | 0.92 | 0.92 | × | 21.04% | = | 19.31% | ||
| Operating lease liability3 | 1,846,756) | 1,846,756) | ÷ | 22,519,688) | = | 0.08 | 0.08 | × | 3.30% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 22,519,688) | 1.00 | 19.53% | ||||||||||
Based on: 10-K (reporting date: 2022-01-29).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,030,294) | 17,030,294) | ÷ | 18,927,095) | = | 0.90 | 0.90 | × | 21.04% | = | 18.93% | ||
| Operating lease liability3 | 1,896,801) | 1,896,801) | ÷ | 18,927,095) | = | 0.10 | 0.10 | × | 3.60% × (1 – 21.00%) | = | 0.29% | ||
| Total: | 18,927,095) | 1.00 | 19.22% | ||||||||||
Based on: 10-K (reporting date: 2021-01-30).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,823,188) | 9,823,188) | ÷ | 11,761,535) | = | 0.84 | 0.84 | × | 21.04% | = | 17.57% | ||
| Operating lease liability3 | 1,938,347) | 1,938,347) | ÷ | 11,761,535) | = | 0.16 | 0.16 | × | 4.10% × (1 – 21.00%) | = | 0.53% | ||
| Total: | 11,761,535) | 1.00 | 18.11% | ||||||||||
Based on: 10-K (reporting date: 2020-02-01).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 20,422,540) | 20,422,540) | ÷ | 22,707,952) | = | 0.90 | 0.90 | × | 21.04% | = | 18.92% | ||
| Operating lease liability3 | 2,285,412) | 2,285,412) | ÷ | 22,707,952) | = | 0.10 | 0.10 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 22,707,952) | 1.00 | 18.92% | ||||||||||
Based on: 10-K (reporting date: 2019-02-02).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,387,744) | 12,387,744) | ÷ | 14,622,265) | = | 0.85 | 0.85 | × | 21.04% | = | 17.82% | ||
| Operating lease liability3 | 2,234,521) | 2,234,521) | ÷ | 14,622,265) | = | 0.15 | 0.15 | × | 0.00% × (1 – 33.70%) | = | 0.00% | ||
| Total: | 14,622,265) | 1.00 | 17.82% | ||||||||||
Based on: 10-K (reporting date: 2018-02-03).
Economic Spread Ratio
Ulta Beauty Inc., economic spread ratio calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 533,342) | 368,266) | (561,972) | 95,304) | (43,089) | (174,864) | |
| Invested capital2 | 4,117,969) | 3,684,509) | 4,184,136) | 3,966,351) | 4,338,625) | 3,940,229) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 12.95% | 9.99% | -13.43% | 2.40% | -0.99% | -4.44% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -10.87% | -21.81% | -2.05% | — | — | — | |
| Home Depot Inc. | 16.86% | 21.31% | 12.15% | — | — | — | |
| Lowe’s Cos. Inc. | 13.60% | 21.57% | 9.12% | — | — | — | |
| TJX Cos. Inc. | 4.19% | 4.21% | -12.64% | — | — | — | |
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 533,342 ÷ 4,117,969 = 12.95%
4 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant instability followed by a strong upward trajectory in value creation. While the early years were marked by negative spreads, the most recent data indicates a substantial improvement in the efficiency of capital utilization.
- Economic Spread Ratio Trends
- The economic spread ratio fluctuated considerably, beginning at -4.44% in February 2018 and improving to 2.40% by February 2020. A significant contraction occurred in January 2021, where the ratio dropped to -13.43%, marking the lowest point in the analyzed period. However, a sharp recovery followed, with the ratio climbing to 9.99% in January 2022 and reaching a peak of 12.95% by January 2023, signaling an increasing margin between the return on invested capital and the cost of capital.
- Economic Profit Volatility
- Economic profit mirrored the trends of the spread ratio, shifting from a loss of $174.86 million in 2018 to a modest profit of $95.30 million in 2020. The 2021 fiscal year saw a substantial deficit of $561.97 million, representing a critical period of value destruction. This was reversed in subsequent years, with profits increasing to $368.27 million in 2022 and further ascending to $533.34 million in 2023.
- Invested Capital Stability
- Invested capital remained relatively stable throughout the period, oscillating within a range of approximately $3.68 billion to $4.34 billion. The absence of drastic shifts in the capital base suggests that the volatility in economic profit and the spread ratio was driven by operational performance and the cost of capital rather than significant changes in the scale of the underlying investment.
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Economic Profit Margin
Ulta Beauty Inc., economic profit margin calculation, comparison to benchmarks
| Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 533,342) | 368,266) | (561,972) | 95,304) | (43,089) | (174,864) | |
| Net sales | 10,208,580) | 8,630,889) | 6,151,953) | 7,398,068) | 6,716,615) | 5,884,506) | |
| Add: Increase (decrease) in deferred revenue | 41,098) | 79,196) | 36,848) | 38,481) | 85,918) | —) | |
| Adjusted net sales | 10,249,678) | 8,710,085) | 6,188,801) | 7,436,549) | 6,802,533) | 5,884,506) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 5.20% | 4.23% | -9.08% | 1.28% | -0.63% | -2.97% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -6.13% | -11.39% | -0.88% | — | — | — | |
| Home Depot Inc. | 5.92% | 6.77% | 4.57% | — | — | — | |
| Lowe’s Cos. Inc. | 3.47% | 5.87% | 2.89% | — | — | — | |
| TJX Cos. Inc. | 1.71% | 1.71% | -8.80% | — | — | — | |
Based on: 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 533,342 ÷ 10,249,678 = 5.20%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility followed by a robust recovery and expansion in value generation. While the initial years were marked by negative economic profit, the company achieved a substantial turnaround, concluding the period with its highest recorded economic profit and margin.
- Adjusted Net Sales Trends
- Net sales demonstrated a general upward trajectory, increasing from approximately 5.88 billion USD in 2018 to 10.25 billion USD in 2023. A notable contraction occurred in 2021, where sales dropped to 6.19 billion USD, before rebounding sharply in the subsequent two fiscal years to exceed 10 billion USD.
- Economic Profit Performance
- Economic profit exhibited extreme fluctuations over the six-year period. Initial deficits were recorded in 2018 and 2019, followed by a move into positive territory in 2020. A severe decline occurred in 2021, with economic profit falling to -561.97 million USD. This was followed by a strong recovery, with economic profit rising to 368.27 million USD in 2022 and reaching 533.34 million USD by 2023, indicating that the entity began generating returns significantly above its cost of capital.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrors the volatility of absolute economic profit. The margin transitioned from -2.97% in 2018 to a peak of 5.20% in 2023. The sharp decline to -9.08% in 2021 represents the lowest point of efficiency in value creation relative to sales. The subsequent acceleration to 4.23% in 2022 and 5.20% in 2023 suggests a marked improvement in the capacity to convert sales into economic value.
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