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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Economic Profit
Accenture PLC, economic profit calculation
US$ in thousands
| 12 months ended: | Aug 31, 2024 | Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a consistently increasing trend from 2019 through 2024, rising from approximately 4.99 billion USD to about 7.52 billion USD. The growth is steady each year, with particularly notable increases between 2019 and 2021. There is a slight decline observed between 2022 and 2023, followed by a recovery in 2024.
- Cost of Capital
- The cost of capital remains relatively stable across the years, fluctuating slightly around 16.5%. It starts at 16.23% in 2019 and remains within a tight range, reaching 16.53% in 2024. This stability indicates minimal changes in the company’s overall cost to finance its operations during the period.
- Invested Capital
- Invested capital exhibits a consistent upward trajectory, increasing from about 20.1 billion USD in 2019 to approximately 36.96 billion USD in 2024. The increases each year are substantial, reflecting significant investment and expansion over the period.
- Economic Profit
- Economic profit rises from around 1.73 billion USD in 2019 to a peak of about 2.43 billion USD in 2021. However, from 2021 onward, economic profit declines steadily, reaching approximately 1.41 billion USD in 2024. Despite positive values throughout, this downward trend in economic profit indicates a reduction in value creation relative to the cost of capital after 2021.
- Overall Analysis
- The data reveals that while operational profitability (NOPAT) and invested capital both show strong growth trends, the economic profit declines after 2021 despite these increases. This suggests that the incremental returns generated on the rising invested capital are diminishing relative to the cost of capital. The stable cost of capital further emphasizes that the decrease in economic profit is more likely driven by lower returns on the expanding capital base rather than increased capital costs. This pattern may indicate a potential pressure on value creation efficiency despite robust revenue-generating capability.
Net Operating Profit after Taxes (NOPAT)
Accenture PLC, NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Accenture plc.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Accenture plc.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net Income Attributable to Accenture plc
- The net income exhibited a consistent upward trend over the analyzed period. Starting at approximately 4.78 billion US dollars in 2019, the figure increased annually, reaching about 7.26 billion US dollars by 2024. There was a notable acceleration in growth between 2020 and 2022, where net income rose from around 5.11 billion to nearly 6.88 billion US dollars. The increase plateaued slightly in 2023 but regained momentum going into 2024.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also showed a generally positive trajectory from 2019 to 2024. Beginning near 4.99 billion US dollars in 2019, it rose consistently each year, peaking at approximately 7.52 billion US dollars in 2024. The period between 2019 and 2021 reflected robust growth, with significant increases each year. Growth decelerated between 2022 and 2023, with a slight decline from roughly 7.13 billion to 7.01 billion US dollars, followed by a rebound in 2024. Overall, NOPAT growth aligns closely with net income trends but shows a modest dip in the mid-period.
- Comparative Insights
- Both profitability metrics reflect healthy financial performance with strong upward momentum. The slight divergence in 2023, where net income held steady but NOPAT decreased mildly, may suggest variations in tax expenses, operating efficiencies, or non-operating factors impacting net income. The recovery in 2024 implies successful management interventions or favorable operating conditions resuming. The sustained increase reinforces a solid capacity for generating profit from operations and retaining earnings attributable to the company.
Cash Operating Taxes
Accenture PLC, cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
- Income Tax Expense
- The income tax expense shows a generally upward trend over the six-year period. Starting at approximately 1.41 billion in 2019, it increased steadily to reach about 2.28 billion by 2024. Notably, there is a significant rise between 2021 and 2022, where the expense increased by approximately 436 million. Although there is a slight dip in 2023 compared to 2022, the expense resumes its upward trajectory in 2024.
- Cash Operating Taxes
- Cash operating taxes demonstrate more variability over the years. In 2019, the amount was roughly 1.49 billion, which declined slightly in 2020 to about 1.44 billion. Subsequently, there was a pronounced increase in 2021 and 2022, peaking near 2.45 billion. The amount stabilized thereafter, with a slight decrease in both 2023 and 2024, maintaining levels just above 2.35 billion.
- Comparison Between Income Tax Expense and Cash Operating Taxes
- Throughout the period, cash operating taxes consistently exceed the recorded income tax expense, suggesting timing or classification differences between reported expenses and actual cash outflows. Both metrics exhibit growth trends, but cash operating taxes show a more pronounced surge in the middle years (2021-2022) followed by stabilization, whereas income tax expense rises more steadily with minor fluctuations.
Invested Capital
Accenture PLC, invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
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 deferred revenues.
5 Addition of equity equivalents to total Accenture plc shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of short-term investments.
- Total reported debt & leases
- The total reported debt and leases exhibit a fluctuating trend over the observed period. Starting at approximately 3.86 billion US dollars in August 2019, the figure declines consistently each year until August 2023, reaching about 3.15 billion. However, in the final year reported (August 2024), there is a notable increase to approximately 4.12 billion, representing the highest point in the period.
- Total Accenture plc shareholders’ equity
- Shareholders' equity shows a steady and significant upward trajectory throughout the time span. Commencing at roughly 14.41 billion US dollars in August 2019, equity increases annually without any dip, reaching about 28.29 billion by August 2024. This almost doubles the initial value and indicates consistent growth in retained earnings, capital injections, or revaluation reserves.
- Invested capital
- Invested capital follows a persistent growth trend across the six years. Beginning from around 20.11 billion US dollars in August 2019, it rises each year to culminate at approximately 36.96 billion in August 2024. This increase demonstrates expanding capital deployment in operations, assets, or acquisitions, growing by over 80% from the start to the end of the period.
- Overall Analysis
- The company shows robust equity growth coupled with an increase in invested capital, signaling expansion and possibly increased business activities or asset base. The fluctuation in total debt and leases, with an initial reduction followed by a pronounced rise in the latest year, suggests a possible strategic shift in financing structure or capital raising efforts in the most recent period. This latest increase in debt might warrant further review to assess its impact on financial risk and capital cost.
Cost of Capital
Accenture PLC, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-08-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Accenture PLC, economic spread ratio calculation, comparison to benchmarks
| Aug 31, 2024 | Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
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.
- Economic Profit
- The economic profit shows an overall declining trend after peaking in the year ending August 31, 2021. Starting at 1,728,372 thousand US dollars in 2019, it increased to 2,251,700 in 2020 and further to 2,433,668 in 2021. Subsequently, there is a noticeable decline through 2022 to 1,408,894 thousand US dollars by 2024. This decrease suggests diminishing profitability or increased costs relative to capital employed during this period.
- Invested Capital
- Invested capital steadily increased year over year from 20,110,534 thousand US dollars in 2019 to 36,963,067 thousand US dollars in 2024. This consistent growth indicates ongoing investment in assets or operations, reflecting expansion or scaling of the business base.
- Economic Spread Ratio
- The economic spread ratio displays a declining pattern beginning from 8.59% in 2019, peaking slightly at 9.86% in 2020, and thereafter decreasing consistently to 3.8% in 2024. This trend indicates a reduction in the differential between the return on invested capital and its cost, which aligns with the observed decrease in economic profit despite expanded invested capital.
- Overall Insights
- The combined analysis reveals that while the company has been increasing its invested capital substantially, the efficiency in generating economic profit from this capital has diminished over the period reviewed. The contraction in economic spread ratio alongside falling economic profit suggests pressure on returns, potentially due to increased capital costs, operational challenges, or competitive factors impacting profitability.
Economic Profit Margin
Accenture PLC, economic profit margin calculation, comparison to benchmarks
| Aug 31, 2024 | Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | |||||||
| Revenues | |||||||
| Add: Increase (decrease) in deferred revenues | |||||||
| Adjusted revenues | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Palo Alto Networks Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 10-K (reporting date: 2024-08-31), 10-K (reporting date: 2023-08-31), 10-K (reporting date: 2022-08-31), 10-K (reporting date: 2021-08-31), 10-K (reporting date: 2020-08-31), 10-K (reporting date: 2019-08-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit shows an overall increasing trend from 2019 to 2021, starting at approximately 1.73 billion US dollars and rising to about 2.43 billion US dollars. However, from 2022 onward, there is a noticeable decline, dropping to roughly 1.41 billion US dollars by 2024. This suggests diminishing profitability in economic terms in the most recent years despite the initial growth phase.
- Adjusted Revenues
- Adjusted revenues exhibit a consistent upward trajectory throughout the entire period, increasing steadily from around 43.5 billion US dollars in 2019 to approximately 65.2 billion US dollars in 2024. This indicates robust top-line growth over these six years.
- Economic Profit Margin
- The economic profit margin initially improves from 3.97% in 2019 to a peak of 5.01% in 2020. Subsequently, it experiences a declining trend, dropping to 2.16% by 2024. This decline in margin, alongside increasing revenues, suggests that profitability relative to revenue is contracting, potentially due to increased costs or other financial pressures.
- Summary
- While revenue growth is strong and consistent, both economic profit and the economic profit margin have declined significantly in recent years after an earlier period of improvement. The divergence between rising revenues and shrinking profitability margins highlights possible challenges in cost management or investment returns. The data intimates an increased focus may be required to address the efficiency of generating economic profits despite expanding revenues.