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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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
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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 period under review demonstrates significant fluctuations in economic profit. Initially, the company experienced a substantial loss, followed by a period of positive economic profit, then a return to loss, and ultimately, a strong recovery and sustained positive economic profit generation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a dramatic increase from a loss of US$482 million in 2019 to a profit of US$5,245 million in 2020. This was followed by a decrease to US$2,233 million in 2021, then a further increase to US$5,753 million in 2022, culminating in US$8,681 million in 2023. This indicates improving operational profitability over the latter part of the period.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating between 9.08% and 9.75% throughout the period. A slight upward trend was observed from 2020 to 2022, followed by a decrease in 2023. These changes were modest and likely reflect broader market conditions.
- Invested Capital
- Invested capital decreased consistently from US$42,624 million in 2019 to US$28,647 million in 2023. This suggests a reduction in the company’s capital base over the period, potentially through asset sales, share repurchases, or decreased investment in operations.
- Economic Profit
- Economic profit mirrored the trend in NOPAT, starting with a loss of US$4,425 million in 2019. It became positive in 2020 at US$1,475 million, then negative again in 2021 at US$952 million. A substantial recovery occurred in 2022 with a profit of US$2,945 million, and this trend continued strongly in 2023, reaching US$5,961 million. The increasing economic profit in the later years suggests the company is generating returns exceeding its cost of capital.
The correlation between NOPAT and economic profit is strong, as expected. The decline in invested capital, coupled with increasing NOPAT, contributed to the significant improvement in economic profit observed in 2022 and 2023. The initial negative economic profit was driven by the substantial loss in NOPAT and the relatively consistent cost of capital.
Net Operating Profit after Taxes (NOPAT)
Altria Group Inc., NOPAT calculation
US$ 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 economic spread ratio exhibited significant fluctuations between 2019 and 2023. Initially negative, the ratio demonstrated improvement before experiencing further volatility. A detailed examination of the period reveals a clear progression from value destruction to value creation, culminating in a substantial increase in economic spread.
- Economic Spread Ratio Trend
- In 2019, the economic spread ratio stood at -10.38%, indicating that the company’s returns on invested capital were insufficient to cover its cost of capital, resulting in economic value destruction. A substantial positive shift occurred in 2020, with the ratio rising to 3.56%, signifying a move towards generating economic profit. However, this improvement was not sustained, as the ratio declined to -2.84% in 2021, returning to a state of value destruction, albeit less severe than in 2019. The years 2022 and 2023 witnessed a strong recovery, with the ratio increasing to 10.22% and then to 20.81% respectively. This indicates a progressively increasing ability to generate returns exceeding the cost of capital.
The economic spread ratio’s movement correlates with changes in economic profit. The negative ratios in 2019 and 2021 align with periods of negative economic profit, while the positive ratios in 2020, 2022, and 2023 correspond with positive economic profit. The magnitude of the ratio’s change in 2023 is particularly noteworthy, suggesting a significant improvement in the company’s profitability relative to its invested capital.
- Invested Capital
- Invested capital decreased consistently from 2019 to 2023, moving from US$42,624 million to US$28,647 million. This decrease occurred alongside the improvements in the economic spread ratio in later years, suggesting that the company became more efficient in generating returns with a smaller capital base.
The observed trend in the economic spread ratio suggests a strengthening of the company’s financial performance and an increasing capacity to create economic value. The substantial increase in the ratio during the latter part of the analyzed period warrants further investigation to understand the underlying drivers of this improvement.
Economic Profit Margin
Altria Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 economic profit margin exhibited significant fluctuation between 2019 and 2023. Initially negative, it demonstrated substantial improvement before experiencing another decline, ultimately culminating in a strong positive margin by the end of the period.
- Economic Profit Margin Trend
- In 2019, the economic profit margin stood at -17.62%. This indicates that the company’s return on capital employed was less than its cost of capital, resulting in value destruction. A considerable shift occurred in 2020, with the margin rising to 5.64%, signifying a move towards value creation. However, this positive trend was interrupted in 2021, as the margin decreased to -3.66%, returning to a position of value destruction, albeit less severe than in 2019. The margin then experienced a substantial increase in 2022, reaching 11.73%, demonstrating a strong improvement in economic profitability. This positive momentum continued into 2023, with the economic profit margin reaching 24.35%, representing the highest value observed during the analyzed period.
The economic profit margin’s movement closely mirrors the changes in economic profit. The negative margins in 2019 and 2021 correspond with negative economic profit values, while the positive margins in 2020, 2022, and 2023 align with positive economic profit. The magnitude of the margin increase in 2022 and 2023 suggests that improvements in profitability were outpacing any changes in revenue.
- Relationship to Net Revenues
- Net revenues generally remained stable between 2019 and 2021, fluctuating around the $26 billion mark. A slight decrease was observed in 2022, followed by a more pronounced decline in 2023, reaching $24.483 billion. Despite the revenue decrease in 2023, the economic profit margin increased significantly, indicating that the company improved its efficiency in generating economic profit from its revenue base. This suggests that cost management or capital efficiency improvements played a crucial role in the margin expansion.
Overall, the analysis reveals a volatile but ultimately improving trend in economic profitability. The company transitioned from value destruction to substantial value creation over the five-year period, even as net revenues experienced a decline in the final year.