Economic Value Added (EVA)
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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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Altria Group Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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Economic Profit
Altria Group Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
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
= – × =
The financial performance from 2019 to 2023 demonstrates a significant transition from economic value destruction to substantial value creation. A notable recovery in operating profitability combined with a strategic and consistent reduction in the capital base has resulted in a sharp increase in economic profit by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited high volatility in the initial years, beginning with a deficit of 482 million in 2019 before fluctuating between 2,233 million and 5,245 million in 2020 and 2021. However, a strong growth trajectory emerged starting in 2022, with profits rising to 5,753 million and peaking at 8,681 million by 2023.
- Invested Capital and Cost of Capital
- A persistent downward trend in invested capital is observed, with a decrease from 42,624 million in 2019 to 28,647 million in 2023. This represents a significant reduction in the total capital employed over the five-year period. During this same timeframe, the cost of capital remained relatively stable, fluctuating within a narrow range between 10.30% and 11.11%.
- Economic Profit Analysis
- Economic profit was characterized by instability between 2019 and 2021, recording negative values of 4,957 million and 1,390 million in 2019 and 2021, respectively. A decisive reversal occurred in 2022, as economic profit reached 2,553 million, followed by a further acceleration to 5,590 million in 2023. This trend indicates that the increase in operating efficiency and NOPAT, coupled with a contracting capital base, has significantly widened the spread between the return on invested capital and the company's cost of capital.
Net Operating Profit after Taxes (NOPAT)
Altria Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net earnings (losses) attributable to Altria.
4 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
5 Addition of after taxes interest expense to net earnings (losses) attributable to Altria.
6 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
7 Elimination of after taxes investment income.
- Net earnings (losses) attributable to Altria
- The net earnings attributable to the company demonstrated significant volatility over the analyzed period. In 2019, the company reported a net loss of $1,293 million. However, a substantial recovery occurred in 2020, with net earnings increasing sharply to $4,467 million. This positive trend continued, albeit with fluctuations, as earnings decreased to $2,475 million in 2021 before rising again to $5,764 million in 2022 and further to $8,130 million in 2023. Overall, the data indicates a strong recovery and growth in earnings after the initial loss in 2019.
- Net operating profit after taxes (NOPAT)
- NOPAT mirrored the pattern observed in net earnings, starting with a negative value of $482 million in 2019. This figure increased significantly to $5,245 million in 2020, reflecting improved operational profitability. After a decline to $2,233 million in 2021, NOPAT rebounded to $5,753 million in 2022 and further increased to $8,681 million in 2023. These trends signify a recovery in operating performance, with NOPAT surpassing net earnings figures consistently from 2020 onward, indicating effective operational management and tax impact considerations.
Cash Operating Taxes
Altria Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
- Provision (benefit) for income taxes
- The provision for income taxes experienced fluctuations over the five-year period. Starting at 2,064 million USD in 2019, it rose substantially to 2,436 million USD in 2020. A marked decline occurred in 2021, with the provision dropping to 1,349 million USD, followed by a moderate increase to 1,625 million USD in 2022. In 2023, the provision escalated sharply to 2,798 million USD, reaching its highest level in the observed period.
- Cash operating taxes
- Cash operating taxes showed a consistent upward trend across the years. The amount increased from 2,428 million USD in 2019 to 2,854 million USD in 2020. Although there was a minor decrease in 2021 to 2,753 million USD, the overall trajectory remained positive, with values climbing to 2,794 million USD in 2022 and further rising to 3,236 million USD in 2023. This indicates a steady growth in cash outflows related to operating taxes over the period.
- Comparative Insights
- While cash operating taxes demonstrated a relatively stable and progressive increase, the provision for income taxes displayed more volatility, with notable decreases and increases. The divergence between provision and cash taxes in some years, particularly in 2021 and 2023, could suggest variations in deferred tax accounting or changing tax planning strategies. The significant rise in both provisions and cash taxes in 2023 warrants careful examination to understand underlying drivers such as changes in taxable income or tax rates.
Invested Capital
Altria Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Elimination of deferred taxes from assets and liabilities. See details »
2 Addition of LIFO reserve. See details »
3 Addition of equity equivalents to stockholders’ equity (deficit) attributable to Altria.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
- Total reported debt & leases
-
The total reported debt and leases show a relatively stable yet slightly declining trend over the five-year period. Starting at $28,042 million in 2019, the figure increased moderately to $29,471 million in 2020, signaling a short-term rise in liabilities. However, from 2021 onwards, the debt levels consistently decreased each year, falling to $28,044 million in 2021, $26,680 million in 2022, and further down to $26,233 million in 2023. This pattern suggests an effort to reduce overall debt and lease obligations after a peak in 2020.
- Stockholders’ equity (deficit) attributable to Altria
-
The stockholders' equity attributable to the company experienced a marked and continuous decline throughout the period. Beginning at $6,222 million in 2019, equity reduced sharply to $2,839 million in 2020. In 2021, equity became negative, registering at -$1,606 million, indicating that liabilities exceeded assets. The negative trend intensified in subsequent years, reaching -$3,973 million in 2022 and slightly improving to -$3,540 million in 2023. This deterioration reflects possible sustained losses, share repurchases, or other factors diminishing equity value over time.
- Invested capital
-
Invested capital demonstrated a clear downward trend from 2019 through 2023. It started relatively high at $42,624 million in 2019, followed by a moderate decline to $41,498 million in 2020. The reduction accelerated thereafter, with invested capital dropping to $33,524 million in 2021, and further to $28,802 million in 2022 and $28,647 million in 2023. The consistent decrease in invested capital suggests contraction in assets employed in the business or disposition of investments over the analyzed timeframe.
Cost of Capital
Altria Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
Economic Spread Ratio
Altria Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial trajectory between 2019 and 2023 is characterized by a significant transition from value destruction to substantial value creation. This shift is evidenced by the reversal of negative economic profits and a marked expansion in the economic spread ratio, coinciding with a strategic reduction in the total capital invested in the business.
- Economic Spread Ratio
- A volatile but overall upward trend is observed in the economic spread ratio. The period began with a significant deficit of -11.63% in 2019, indicating that returns were well below the cost of capital. Despite a brief recovery in 2020 and a subsequent dip to -4.15% in 2021, the ratio experienced an accelerated expansion in the final two years, reaching 8.87% in 2022 and peaking at 19.51% in 2023. This suggests a widening margin between the return on invested capital and the weighted average cost of capital.
- Invested Capital
- A consistent downward trend in invested capital is evident over the five-year period. Capital employed decreased from 42,624 million US dollars in 2019 to 28,647 million US dollars by 2023. This represents a total reduction of approximately 32.8%. The steady decline in the capital base has contributed to the improvement of the economic spread ratio by reducing the denominator required to generate economic profit.
- Economic Profit
- Economic profit shifted from a deep negative position of -4,957 million US dollars in 2019 to a positive 5,590 million US dollars in 2023. The fluctuations observed between 2019 and 2021 suggest a period of instability or adjustment. However, the growth from 2022 to 2023 indicates a strong acceleration in the company's ability to generate returns exceeding its cost of capital, resulting in significant absolute value addition for shareholders.
The convergence of declining invested capital and increasing economic profit suggests an improvement in capital efficiency. The substantial rise in the economic spread ratio by 2023 reflects a strengthened financial position where the business is generating returns far in excess of its capital costs.
Economic Profit Margin
Altria Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic profit and margin reveals a significant transition from value destruction to substantial value creation between 2019 and 2023. While net revenues remained relatively stagnant with a slight downward trajectory in recent years, the capacity to generate returns exceeding the cost of capital improved markedly.
- Economic Profit Trajectory
- Economic profit exhibited high volatility in the early part of the period, beginning with a deficit of US$ 4,957 million in 2019, recovering to a surplus in 2020, and retreating to a deficit of US$ 1,390 million in 2021. A strong and consistent upward trend emerged subsequently, with economic profit increasing to US$ 2,553 million in 2022 and reaching US$ 5,590 million by the end of 2023.
- Net Revenue Trends
- Net revenues peaked in 2020 at US$ 26,153 million and have since experienced a gradual decline, falling to US$ 24,483 million by 2023. The divergence between declining revenues and increasing economic profit suggests that value creation was driven by operational efficiencies, cost reductions, or optimized capital allocation rather than top-line growth.
- Economic Profit Margin Expansion
- The economic profit margin reflects the volatility of absolute economic profit, fluctuating from -19.74% in 2019 to 3.72% in 2020, and dipping to -5.35% in 2021. A decisive recovery occurred in 2022, with the margin rising to 10.17% and further accelerating to 22.83% in 2023. This expansion indicates a substantial improvement in the efficiency of generating economic value relative to the scale of operations.