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 – 19.71% × 4,117,969 = 535,878
Analysis of the economic value added indicates a transition from an initial period of value destruction toward a state of substantial value creation, characterized by significant volatility between 2018 and 2023.
- Net Operating Profit After Taxes (NOPAT)
- An overall growth trajectory is observed, despite a severe contraction in January 2021. NOPAT rose from 527.4 million in February 2018 to 813.4 million in February 2020, followed by a sharp decline to 242.0 million in January 2021. A robust recovery followed, with profits escalating to 1.09 billion in January 2022 and reaching 1.35 billion by January 2023.
- Cost of Capital
- A gradual and consistent upward trend in the cost of capital is evident. The rate increased from 17.77% in February 2018 to 19.71% in January 2023, indicating a rising threshold for the returns required to generate economic value.
- Invested Capital
- Invested capital remained relatively stable throughout the period, exhibiting fluctuations rather than a clear directional trend. The capital base peaked at 4.34 billion in February 2019 and reached its lowest point of 3.68 billion in January 2022, before returning to 4.12 billion in January 2023.
- Economic Profit
- Economic profit shifted from negative to positive territory in a non-linear fashion. Initial losses of 172.7 million in February 2018 improved to a modest gain of 97.5 million by February 2020. A significant deficit of 559.5 million was recorded in January 2021, coinciding with the drop in NOPAT. However, the final two years show a strong positive trend, with economic profit increasing to 370.5 million in January 2022 and further expanding to 535.9 million by January 2023.
The evidence suggests that the recent surge in economic profit is primarily driven by a substantial increase in operating efficiency and profitability (NOPAT), which has more than offset the rising cost of capital and the stability of the invested capital base.
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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 | × | 20.97% | = | 19.53% | ||
| 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 | 19.71% | ||||||||||
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 | × | 20.97% | = | 19.25% | ||
| 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 | 19.47% | ||||||||||
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 | × | 20.97% | = | 18.87% | ||
| 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 | 19.16% | ||||||||||
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 | × | 20.97% | = | 17.52% | ||
| 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 | 18.05% | ||||||||||
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 | × | 20.97% | = | 18.86% | ||
| 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 | 18.86% | ||||||||||
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 | × | 20.97% | = | 17.77% | ||
| 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 | 17.77% | ||||||||||
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 | 535,878) | 370,503) | (559,482) | 97,496) | (40,508) | (172,656) | |
| 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 | 13.01% | 10.06% | -13.37% | 2.46% | -0.93% | -4.38% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -10.81% | -21.75% | -1.99% | — | — | — | |
| Home Depot Inc. | 16.92% | 21.36% | 12.21% | — | — | — | |
| Lowe’s Cos. Inc. | 13.65% | 21.62% | 9.17% | — | — | — | |
| TJX Cos. Inc. | 4.24% | 4.26% | -12.59% | — | — | — | |
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 × 535,878 ÷ 4,117,969 = 13.01%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits significant volatility over the six-year period, characterized by a sharp contraction in 2021 followed by a robust recovery. While the initial years showed a struggle to generate positive economic value, the most recent data indicates a strong upward trajectory in efficiency and value creation.
- Economic Spread Ratio Trends
- The economic spread ratio fluctuated considerably, starting at -4.38% in 2018 and improving to 2.46% by 2020. A severe decline occurred in 2021, where the ratio dropped to -13.37%, representing the lowest point in the observed period. This was followed by a rapid reversal, with the ratio climbing to 10.06% in 2022 and reaching a peak of 13.01% in 2023, indicating a substantial increase in the return over the cost of capital.
- Economic Profit Analysis
- Economic profit mirrors the movements of the spread ratio. The period began with losses of 172,656 thousand dollars in 2018, transitioning to a gain of 97,496 thousand dollars in 2020. A significant loss of 559,482 thousand dollars was recorded in 2021, suggesting a period of severe underperformance or an increase in capital costs. This trend was reversed in the subsequent two years, with economic profit rising to 370,503 thousand dollars in 2022 and 535,878 thousand dollars in 2023.
- Invested Capital Stability
- Invested capital remained relatively stable despite the volatility of profits, fluctuating within a range between 3,684,509 thousand dollars and 4,338,625 thousand dollars. The increase to 4,117,969 thousand dollars in 2023, coinciding with the highest observed economic spread ratio, suggests that the entity is successfully generating higher returns on its deployed capital than in previous years.
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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 | 535,878) | 370,503) | (559,482) | 97,496) | (40,508) | (172,656) | |
| 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 | 5.23% | 4.25% | -9.04% | 1.31% | -0.60% | -2.93% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -6.09% | -11.35% | -0.85% | — | — | — | |
| Home Depot Inc. | 5.94% | 6.79% | 4.59% | — | — | — | |
| Lowe’s Cos. Inc. | 3.48% | 5.88% | 2.90% | — | — | — | |
| 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 × 535,878 ÷ 10,249,678 = 5.23%
3 Click competitor name to see calculations.
An analysis of the economic value creation over the six-year period reveals significant volatility followed by a strong upward trajectory in both absolute economic profit and efficiency margins. The data indicates a transition from value destruction in the early years to consistent value creation by the end of the period.
- Economic Profit Trends
- Economic profit exhibited high instability between 2018 and 2021, characterized by a recovery from -172,656 thousand USD in 2018 to a positive 97,496 thousand USD in 2020. A substantial decline occurred in 2021, where economic profit dropped to -559,482 thousand USD. However, a sharp reversal followed, with profits rising to 370,503 thousand USD in 2022 and reaching a period peak of 535,878 thousand USD by January 28, 2023.
- Adjusted Net Sales Growth
- Adjusted net sales demonstrated a general growth pattern, increasing from 5,884,506 thousand USD in 2018 to 10,249,678 thousand USD in 2023. A notable contraction is observed in 2021, where sales fell to 6,188,801 thousand USD from the previous year's 7,436,549 thousand USD. This dip was followed by aggressive expansion, with sales increasing by approximately 40% in 2022 and continuing to climb in 2023.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of absolute profits, starting at -2.93% in 2018 and improving to 1.31% by 2020. The margin experienced a severe compression in 2021, plummeting to -9.04%. Subsequent years show a robust recovery and expansion, with the margin climbing to 4.25% in 2022 and further increasing to 5.23% in 2023, indicating improved capital efficiency and higher value generation relative to sales.
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