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
Albemarle Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,022,027 – 21.72% × 10,052,399 = 838,157
The analysis of economic value added reveals a distinct transition from a prolonged period of value erosion to a significant recovery in the most recent fiscal year. From 2018 through 2021, the entity consistently failed to generate returns exceeding its cost of capital, resulting in an widening gap of negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A sustained contraction in NOPAT was observed between 2018 and 2021, with values declining from $827.2 million to a low of $230.4 million. This downward trend suggests a period of operational challenges or margin compression. However, 2022 marked a pivotal shift, with NOPAT increasing exponentially to $3.022 billion, representing a substantial recovery in operating profitability.
- Invested Capital and Cost of Capital
- Invested capital exhibited a general upward trajectory, growing from $5.43 billion in 2018 to $10.05 billion by 2022. This expansion of the capital base occurred alongside a high and relatively volatile cost of capital, which fluctuated between 17.84% and 21.72%. The increase in the cost of capital toward 2022 raised the financial hurdle required to achieve positive economic value.
- Economic Profit Performance
- Economic profit remained negative for four consecutive years, deteriorating from a loss of $271.9 million in 2018 to a peak deficit of $1.21 billion in 2021. This indicates that for the majority of the period, the return on invested capital was insufficient to cover the cost of financing. This trend reversed sharply in 2022, when the surge in NOPAT overcame both the expanded capital base and the peak cost of capital, resulting in a positive economic profit of $838.2 million.
In summary, the financial trajectory demonstrates that the entity moved from a state of value destruction to value creation. The substantial increase in operating profit in 2022 was the decisive factor in reversing the trend of negative economic profit, effectively offsetting the impact of increased investment and a high cost of capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Albemarle Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income attributable to Albemarle Corporation.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 134,784 × 3.60% = 4,852
6 2022 Calculation
Tax benefit of interest and financing expenses = Adjusted interest and financing expenses × Statutory income tax rate
= 127,825 × 21.00% = 26,843
7 Addition of after taxes interest expense to net income attributable to Albemarle Corporation.
The financial trajectory from 2018 to 2022 is characterized by a multi-year period of operational contraction followed by an exponential increase in profitability. Both Net Operating Profit After Taxes (NOPAT) and net income attributable to the corporation exhibit a strong positive correlation, moving in tandem across the analyzed timeframe.
- Operational Profitability Trend (2018–2021)
- A consistent downward trend is observed from 2018 through 2021. NOPAT declined from 827,216 thousand US$ to 230,394 thousand US$, representing a cumulative decrease of approximately 72%. Net income followed a similar path of deterioration, reaching its lowest point in 2021 at 123,672 thousand US$. This period indicates a significant reduction in the company's ability to generate operating profits.
- Fiscal Expansion (2022)
- The year 2022 reflects a dramatic reversal in performance. NOPAT surged to 3,022,027 thousand US$, an increase of more than 1,200% relative to the 2021 low. Net income similarly spiked to 2,689,816 thousand US$. The scale of this growth indicates a fundamental shift in the operating environment or a substantial increase in market pricing and demand for the company's primary outputs.
- NOPAT and Net Income Variance
- NOPAT consistently remained higher than net income across all five years. This variance highlights the impact of non-operating expenses, such as interest payments on debt, which reduce the operational profit to the final net income figure. The convergence of these two metrics in 2022, where both reached unprecedented levels, suggests that the surge was driven primarily by core operating activities rather than one-time non-operating gains.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cash Operating Taxes
Albemarle Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of tax liabilities over the five-year period ending December 31, 2022, reveals a volatile trajectory characterized by a multi-year decline followed by a sharp escalation. Both income tax expense and cash operating taxes exhibited a general contraction from 2018 through 2021, before experiencing a significant surge in the final year of the period.
- Income Tax Expense Trends
- A consistent downward trend is observed from 2018 to 2021, with expenses decreasing from US$ 144.8 million to a period low of US$ 29.4 million. This decline was abruptly reversed in 2022, when the expense rose to US$ 390.6 million, representing a substantial increase compared to the previous four years.
- Cash Operating Taxes Trends
- Cash operating taxes decreased from US$ 107.7 million in 2018 to US$ 72.9 million in 2020. Unlike the income tax expense, cash taxes showed a slight uptick in 2021 to US$ 82.0 million. In 2022, cash operating taxes escalated dramatically to US$ 324.1 million, mirroring the surge seen in the total tax expense.
- Correlation Between Expense and Cash Outflow
- A notable divergence between accounting tax expense and actual cash tax payments occurred between 2020 and 2021. During these years, cash operating taxes exceeded the reported income tax expense, with the gap widening in 2021 where cash payments were approximately 2.78 times the reported expense. By 2022, the relationship inverted, as income tax expense exceeded cash operating taxes by US$ 66.5 million, despite both metrics reaching their peak values for the period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Invested Capital
Albemarle Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 LIFO reserve. See details »
5 Addition of equity equivalents to total Albemarle Corporation shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of marketable securities.
The analysis of invested capital from 2018 to 2022 reveals a substantial expansion in the total capital base deployed by the organization. Total invested capital grew from $5.43 billion to $10.05 billion, representing an overall increase of approximately 85% over the five-year period.
- Invested Capital Trajectory
- A general upward trend is observed, with invested capital rising steadily from 2018 through 2020. A brief contraction occurred in 2021, where the value declined to $6.79 billion, followed by a significant surge in 2022, reaching a period high of $10.05 billion. This final increase indicates a substantial deployment of resources toward the company's asset base.
- Shareholders' Equity Growth
- Shareholders' equity exhibited consistent and uninterrupted growth throughout the analyzed timeframe. Starting at $3.59 billion in 2018, equity increased annually to reach $7.98 billion by December 31, 2022. The acceleration of equity growth, particularly between 2021 and 2022, suggests a strengthening of the internal capital position and a larger equity contribution to the total invested capital.
- Debt and Lease Volatility
- Total reported debt and leases showed a more volatile pattern compared to the steady growth of equity. Debt levels rose sharply from $1.84 billion in 2018 to a peak of $3.71 billion in 2020. A meaningful reduction was recorded in 2021, with debt falling to $2.55 billion, before returning to a higher level of $3.35 billion in 2022. This volatility suggests active management of leverage and periodic shifts in the company's financing strategy.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
Albemarle Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,970,436) | 31,970,436) | ÷ | 35,098,247) | = | 0.91 | 0.91 | × | 23.55% | = | 21.45% | ||
| Long-term debt3 | 2,993,027) | 2,993,027) | ÷ | 35,098,247) | = | 0.09 | 0.09 | × | 3.94% × (1 – 21.00%) | = | 0.27% | ||
| Operating lease liability4 | 134,784) | 134,784) | ÷ | 35,098,247) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 35,098,247) | 1.00 | 21.72% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 22,453,475) | 22,453,475) | ÷ | 25,205,665) | = | 0.89 | 0.89 | × | 23.55% | = | 20.98% | ||
| Long-term debt3 | 2,593,590) | 2,593,590) | ÷ | 25,205,665) | = | 0.10 | 0.10 | × | 2.57% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 158,600) | 158,600) | ÷ | 25,205,665) | = | 0.01 | 0.01 | × | 3.44% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 25,205,665) | 1.00 | 21.20% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,214,488) | 18,214,488) | ÷ | 22,136,775) | = | 0.82 | 0.82 | × | 23.55% | = | 19.37% | ||
| Long-term debt3 | 3,783,225) | 3,783,225) | ÷ | 22,136,775) | = | 0.17 | 0.17 | × | 2.37% × (1 – 21.00%) | = | 0.32% | ||
| Operating lease liability4 | 139,062) | 139,062) | ÷ | 22,136,775) | = | 0.01 | 0.01 | × | 3.94% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 22,136,775) | 1.00 | 19.71% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,096,557) | 9,096,557) | ÷ | 12,407,721) | = | 0.73 | 0.73 | × | 23.55% | = | 17.26% | ||
| Long-term debt3 | 3,173,341) | 3,173,341) | ÷ | 12,407,721) | = | 0.26 | 0.26 | × | 2.70% × (1 – 21.00%) | = | 0.55% | ||
| Operating lease liability4 | 137,823) | 137,823) | ÷ | 12,407,721) | = | 0.01 | 0.01 | × | 3.84% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 12,407,721) | 1.00 | 17.84% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,758,967) | 9,758,967) | ÷ | 11,622,335) | = | 0.84 | 0.84 | × | 23.55% | = | 19.77% | ||
| Long-term debt3 | 1,731,271) | 1,731,271) | ÷ | 11,622,335) | = | 0.15 | 0.15 | × | 3.62% × (1 – 21.00%) | = | 0.43% | ||
| Operating lease liability4 | 132,098) | 132,098) | ÷ | 11,622,335) | = | 0.01 | 0.01 | × | 3.62% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 11,622,335) | 1.00 | 20.23% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Albemarle Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 838,157) | (1,209,667) | (951,653) | (565,414) | (271,911) | |
| Invested capital2 | 10,052,399) | 6,792,146) | 7,383,741) | 6,900,307) | 5,433,093) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 8.34% | -17.81% | -12.89% | -8.19% | -5.00% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | -8.94% | -8.90% | — | — | — | |
| Sherwin-Williams Co. | -3.14% | -2.69% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 838,157 ÷ 10,052,399 = 8.34%
4 Click competitor name to see calculations.
The financial trajectory between 2018 and 2022 is characterized by a prolonged period of value destruction followed by a sharp reversal toward value creation. From 2018 through 2021, there was a consistent deterioration in the organization's ability to generate returns above its cost of capital, culminating in a significant recovery in 2022.
- Economic Spread Ratio Trends
- The economic spread ratio exhibited a steady decline for four consecutive years, moving from -5.00% in 2018 to a trough of -17.81% in 2021. This downward trend indicates that the gap between the return on invested capital and the cost of capital widened significantly during this period. In 2022, a pivot occurred, with the ratio shifting to a positive 8.34%, marking the transition from destroying economic value to creating it.
- Economic Profit Analysis
- Economic profit mirrored the trajectory of the spread ratio, recording increasing losses from 2018 to 2021. Annual losses expanded from -US$271.9 million in 2018 to -US$1.21 billion in 2021. This trend was abruptly reversed in 2022, when economic profit shifted to a positive US$838.2 million, representing a substantial recovery in the company's capacity to generate surplus value.
- Invested Capital Correlation
- Invested capital showed an overall upward trend, growing from US$5.43 billion in 2018 to US$10.05 billion in 2022. While the increase in capital from 2018 to 2020 coincided with worsening economic spreads, the significant expansion of the capital base in 2022 occurred simultaneously with the return to positive economic profit. This suggests that the most recent capital allocations have been highly effective in driving value creation.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Economic Profit Margin
Albemarle Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 838,157) | (1,209,667) | (951,653) | (565,414) | (271,911) | |
| Net sales | 7,320,104) | 3,327,957) | 3,128,909) | 3,589,427) | 3,374,950) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 11.45% | -36.35% | -30.41% | -15.75% | -8.06% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Linde plc | -19.37% | -20.97% | — | — | — | |
| Sherwin-Williams Co. | -2.46% | -2.13% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 838,157 ÷ 7,320,104 = 11.45%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by a prolonged period of economic value destruction followed by a sharp recovery and a pivot toward positive value creation in the final year of the period.
- Economic Profit Trajectory
- A consistent downward trend in economic profit is observed between 2018 and 2021, with losses expanding from -271,911 thousand US$ to a peak deficit of -1,209,667 thousand US$. This trajectory indicates that the entity failed to generate returns exceeding its cost of capital for four consecutive years. However, 2022 represents a significant inflection point, with economic profit shifting to a positive 838,157 thousand US$, marking a complete reversal of the previous trend.
- Revenue Dynamics
- Net sales remained relatively stable but volatile between 2018 and 2021, fluctuating between approximately 3.1 billion and 3.6 billion US$. The period of economic loss coincided with this relative stagnation in revenue. In 2022, a substantial increase in net sales occurred, with revenue rising to 7,320,104 thousand US$, which is more than double the sales volume recorded in 2021.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates a severe erosion from 2018 to 2021, deteriorating from -8.06% to -36.35%. This contraction highlights an increasing inability to cover the cost of capital relative to the scale of operations. The subsequent recovery in 2022, where the margin rose to 11.45%, indicates that the surge in net sales was accompanied by sufficient operational efficiency to generate a positive economic return on the capital employed.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?