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 – 19.68% × 4,117,969 = 536,980
An analysis of the financial performance from February 2018 to January 2023 reveals a significant transition from value destruction to substantial value creation. While the company faced a period of volatility and a severe contraction in 2021, the subsequent recovery indicates a strong improvement in operational efficiency and economic profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory, growing from 527,431 thousand US$ in 2018 to 1,347,343 thousand US$ by 2023. A critical anomaly occurred in January 2021, where NOPAT plummeted to 242,025 thousand US$, representing a sharp decline from the preceding year. However, the company demonstrated strong resilience, with NOPAT rebounding to over 1 billion US$ in 2022 and reaching its peak in 2023.
- Cost of Capital
- The cost of capital remained relatively stable but showed a gradual increasing trend over the six-year period. Starting at 17.74% in 2018, it rose steadily to 19.68% by 2023. This incremental increase suggests a rising hurdle rate that the company must overcome to generate positive economic value.
- Invested Capital
- Invested capital remained remarkably consistent, fluctuating within a narrow range between 3.68 billion US$ and 4.34 billion US$. The lack of aggressive expansion in the capital base suggests that the growth in economic profit was driven primarily by operational improvements and increased profitability rather than an increase in the scale of invested assets.
- Economic Profit
- Economic profit shifted from negative territory in the early years to a strongly positive position by the end of the period. The company reported negative economic profits in 2018 and 2019, indicating that the returns were insufficient to cover the cost of capital. After a brief positive result in 2020, a significant deficit of -558,400 thousand US$ was recorded in 2021. This was followed by a robust recovery, with economic profit climbing to 371,475 thousand US$ in 2022 and peaking at 536,980 thousand US$ in 2023, confirming a sustained period of shareholder value creation.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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.
An analysis of financial performance between 2018 and 2023 reveals a volatile yet ultimately upward trajectory in both Net Income and Net Operating Profit After Taxes (NOPAT). While both metrics experienced a substantial contraction in 2021, the subsequent recovery in 2022 and 2023 indicates a strong rebound in operational profitability.
- NOPAT Performance and Growth Trends
- NOPAT exhibited steady growth from 2018 to 2020, rising from US$ 527,431 thousand to US$ 813,424 thousand. A sharp decline occurred in 2021, with NOPAT falling to US$ 242,025 thousand. This was followed by a rapid recovery, with NOPAT increasing to US$ 1,087,749 thousand in 2022 and further climbing to US$ 1,347,343 thousand by 2023. This overall progression indicates a significant expansion of operational earning power over the analyzed period.
- Relationship Between NOPAT and Net Income
- A consistent correlation is observed between Net Income and NOPAT. In the majority of the periods analyzed—specifically from 2019 through 2023—NOPAT remained higher than Net Income. This variance suggests that the core operational profitability of the entity was higher than the final net profit, reflecting the impact of non-operating items such as interest expenses and financing costs on the bottom line.
- Analysis of Volatility and Recovery
- The most significant fluctuation occurred during the fiscal year ending January 30, 2021, where Net Income dropped to US$ 175,835 thousand and NOPAT to US$ 242,025 thousand. The subsequent surge in 2022 and 2023, where both metrics surpassed their 2020 peaks, suggests that the factors causing the 2021 decline were temporary. The ability to achieve a record NOPAT of US$ 1,347,343 thousand in 2023 demonstrates a robust recovery in operational efficiency.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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).
The tax-related expenditures from 2018 through 2023 exhibit significant volatility, characterized by a period of relative stability, a sharp contraction in 2021, and a subsequent aggressive upward trajectory in the final two years of the period.
- Provision for Income Taxes Trends
- Tax provisions remained within a range of $200 million to $232 million between 2018 and 2020. A precipitous decline occurred in the fiscal year ending January 30, 2021, where the provision dropped to $55.25 million, representing the lowest point in the analyzed period. This was followed by a rapid recovery, with the provision increasing to $309.99 million in 2022 and further escalating to $401.14 million by January 28, 2023.
- Cash Operating Taxes Trends
- Cash operating taxes followed a similar overall trajectory but demonstrated higher variance in the early years. After a decrease to $166.50 million in 2019 and a slight rebound to $211.39 million in 2020, cash taxes plummeted to $93.60 million in 2021. A strong recovery ensued, with payments rising to $348.46 million in 2022 and peaking at $398.27 million in 2023.
- Comparative Analysis and Correlation
- A strong positive correlation is observed between the provision for income taxes and cash operating taxes, although timing differences are evident. In 2021, cash taxes exceeded the tax provision by approximately $38.35 million. This trend continued into 2022, where cash taxes were $38.46 million higher than the recorded provision. By 2023, the two metrics converged significantly, with the provision exceeding cash operating taxes by a narrow margin of $2.87 million, suggesting a realignment between accrued tax liabilities and actual cash outflows.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
Ulta Beauty Inc., invested capital calculation (financing approach)
US$ 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.
Invested capital exhibits a fluctuating trend over the six-year period, characterized by a peak in 2019 and a significant contraction in 2022, followed by a recovery in 2023. The overall capital structure demonstrates a shift toward lower debt levels and higher volatility in equity components.
- Total Reported Debt and Leases
- A general downward trajectory is observed after a peak of US$ 2,285,412 thousand in February 2019. Debt and lease obligations decreased consistently through January 2022, reaching a low of US$ 1,846,756 thousand. A slight increase was recorded by January 2023, with the balance rising to US$ 1,903,176 thousand, though it remains well below 2018 and 2019 levels.
- Stockholders’ Equity
- Equity showed steady growth from February 2018 (US$ 1,774,217 thousand) through January 2021, where it reached a period high of US$ 1,999,549 thousand. A sharp contraction occurred in January 2022, with equity falling to US$ 1,535,373 thousand. This was followed by a substantial recovery in January 2023, returning to US$ 1,959,811 thousand.
- Invested Capital
- Invested capital peaked in February 2019 at US$ 4,338,625 thousand. This figure experienced a decline in 2020, a partial recovery in 2021, and reached its lowest point in January 2022 at US$ 3,684,509 thousand. The decline in 2022 is primarily attributable to the sharp reduction in stockholders' equity. By January 2023, invested capital rebounded to US$ 4,117,969 thousand, indicating a restoration of the capital base.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 | × | 20.94% | = | 19.51% | ||
| 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 | 19.68% | ||||||||||
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 | × | 20.94% | = | 19.23% | ||
| 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 | 19.44% | ||||||||||
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 | × | 20.94% | = | 18.84% | ||
| 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 | 19.13% | ||||||||||
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 | × | 20.94% | = | 17.49% | ||
| 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 | 18.03% | ||||||||||
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 | × | 20.94% | = | 18.84% | ||
| 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 | 18.84% | ||||||||||
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 | × | 20.94% | = | 17.74% | ||
| 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 | 17.74% | ||||||||||
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 | 536,980) | 371,475) | (558,400) | 98,447) | (39,387) | (171,697) | |
| 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 | 13.04% | 10.08% | -13.35% | 2.48% | -0.91% | -4.36% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -10.78% | -21.72% | -1.96% | — | — | — | |
| Home Depot Inc. | 16.92% | 21.37% | 12.21% | — | — | — | |
| Lowe’s Cos. Inc. | 13.66% | 21.63% | 9.18% | — | — | — | |
| TJX Cos. Inc. | 4.23% | 4.25% | -12.60% | — | — | — | |
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 × 536,980 ÷ 4,117,969 = 13.04%
4 Click competitor name to see calculations.
The economic value creation for the period between 2018 and 2023 is characterized by significant volatility, culminating in a strong upward trajectory in the final two years. Initial periods of value destruction transitioned into value creation, despite a severe contraction in 2021.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibited a volatile trend, beginning at -4.36% in 2018 and improving to 2.48% by 2020. A substantial decline occurred in 2021, where the ratio dropped to -13.35%, indicating that the returns on capital failed to cover the cost of capital. However, a rapid recovery followed, with the ratio climbing to 10.08% in 2022 and reaching a peak of 13.04% in 2023, signifying a heightened ability to generate returns exceeding the capital charge.
- Economic Profit Trends
- Economic profit mirrored the movements of the spread ratio. After fluctuating between negative and marginally positive values from 2018 to 2020, a significant deficit of 558.4 million US dollars was recorded in 2021. This was followed by a sharp reversal to a positive 371.5 million US dollars in 2022 and a further increase to 537.0 million US dollars in 2023, demonstrating a robust restoration of economic value added.
- Invested Capital Stability
- Invested capital remained relatively stable throughout the analyzed period, fluctuating within a range of 3.68 billion to 4.34 billion US dollars. The absence of proportional growth in invested capital relative to the surge in economic profit suggests that the improvement in the economic spread ratio was driven by increased operational efficiency and profitability rather than a substantial expansion of the capital base.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 | 536,980) | 371,475) | (558,400) | 98,447) | (39,387) | (171,697) | |
| 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 | 5.24% | 4.26% | -9.02% | 1.32% | -0.58% | -2.92% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -6.07% | -11.34% | -0.84% | — | — | — | |
| Home Depot Inc. | 5.95% | 6.79% | 4.60% | — | — | — | |
| Lowe’s Cos. Inc. | 3.49% | 5.88% | 2.91% | — | — | — | |
| TJX Cos. Inc. | 1.73% | 1.73% | -8.77% | — | — | — | |
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 × 536,980 ÷ 10,249,678 = 5.24%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant volatility followed by a robust recovery in capital efficiency. The trajectory demonstrates a transition from initial value destruction to consistent value generation, characterized by a sharp contraction in 2021 and a subsequent strong rebound in both absolute economic profit and profit margins.
- Economic Profit Trends
- Economic profit exhibited an inconsistent pattern throughout the observed period. After starting at negative 171.7 million US dollars in 2018, the figure improved to a positive 98.4 million US dollars by 2020. However, a severe decline occurred in 2021, where economic profit dropped to negative 558.4 million US dollars. This was followed by a rapid recovery, with profit climbing to 371.5 million US dollars in 2022 and peaking at 537.0 million US dollars in 2023.
- Adjusted Net Sales Performance
- Adjusted net sales showed a general upward trend, growing from 5.88 billion US dollars in 2018 to 10.25 billion US dollars in 2023. A notable exception occurred in 2021, when sales contracted to 6.19 billion US dollars from the previous year's 7.44 billion US dollars. The period between 2021 and 2023 marked the most aggressive growth phase, with sales increasing by approximately 65% over two years.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility seen in absolute profit, shifting from negative 2.92% in 2018 to a peak of 5.24% in 2023. The margin reached its lowest point in 2021 at negative 9.02%, indicating a period where the cost of capital significantly exceeded the net operating profit after adjusted taxes. The recovery to a 4.26% margin in 2022 and 5.24% in 2023 suggests a substantial improvement in the efficiency of capital utilization and operational profitability.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?