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
Amphenol Corp., economic profit calculation
US$ in thousands
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
= 2,010,042 – 19.84% × 13,752,400 = -719,051
An analysis of the financial performance from 2019 to 2023 reveals a persistent disconnect between operational profitability and the cost of capital employed. Although operational earnings grew substantially over the period, the company consistently failed to generate a positive economic profit, indicating that the returns on invested capital remained below the required hurdle rate.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory is observed in NOPAT, which rose from 1,277,245 thousand USD in 2019 to a peak of 2,040,201 thousand USD in 2022. This represents a significant increase in operational earnings capacity. However, a slight contraction occurred in 2023, with NOPAT declining to 2,010,042 thousand USD.
- Capital Investment and Cost of Capital
- Invested capital demonstrated continuous growth, increasing from 9,029,400 thousand USD in 2019 to 13,752,400 thousand USD by 2023. Concurrently, the cost of capital experienced a steady incremental rise, moving from 18.93% to 19.84% over the same period. The combination of a larger capital base and a higher cost of capital significantly increased the total annual capital charge required to justify the investment.
- Economic Profit Trajectory
- Economic profit remained negative throughout the five-year period, signifying that the company did not create economic value above its cost of capital. The deficit deepened from 432,135 thousand USD in 2019 to 719,051 thousand USD in 2023. While 2022 showed a temporary improvement—where the deficit narrowed to 449,467 thousand USD due to a surge in NOPAT—the subsequent increase in invested capital and the cost of capital in 2023 resulted in the widest economic profit deficit of the analyzed period.
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Net Operating Profit after Taxes (NOPAT)
Amphenol Corp., NOPAT calculation
US$ in thousands
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 allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Amphenol Corporation.
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 303,700 × 3.60% = 10,933
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 150,433 × 21.00% = 31,591
6 Addition of after taxes interest expense to net income attributable to Amphenol Corporation.
7 Elimination of discontinued operations.
Financial performance between 2019 and 2023 is characterized by a consistent upward trajectory in both bottom-line earnings and operational profitability, with a slight divergence observed in the final year of the period.
- Net Income Growth Trends
- Net income attributable to the corporation exhibited steady growth, rising from 1,155,000 thousand USD in 2019 to 1,928,000 thousand USD in 2023. The most significant acceleration occurred between 2020 and 2022, where earnings grew from 1,203,400 thousand USD to 1,902,300 thousand USD, representing a substantial increase in overall profitability.
- NOPAT Performance and Volatility
- Net operating profit after taxes (NOPAT) mirrored the growth of net income for the majority of the period, increasing from 1,277,245 thousand USD in 2019 to a peak of 2,040,201 thousand USD in 2022. However, a slight contraction is observed in 2023, with NOPAT declining to 2,010,042 thousand USD, marking a departure from the consistent growth trend seen in previous years.
- Analysis of Operational vs. Net Profitability
- NOPAT remained consistently higher than net income across all reported years. This persistent gap indicates that the company's operating performance, adjusted for taxes but excluding the influence of capital structure and financing costs, is stronger than its final net profit. The narrowing of this gap in 2023, coupled with the slight decline in NOPAT while net income continued to rise, suggests a shift in the impact of non-operating items or financing costs on the final bottom line.
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Cash Operating Taxes
Amphenol Corp., cash operating taxes calculation
US$ in thousands
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).
The analysis of tax-related expenditures from 2019 to 2023 reveals a general upward trajectory in both accounting provisions and actual cash outflows, although the two metrics exhibit divergent behaviors in the most recent fiscal year.
- Provision for Income Taxes Trend
- The provision for income taxes experienced a slight decline in 2020 to 313,300 thousand US$ from 331,900 thousand US$ in 2019. This was followed by a period of significant growth, peaking in 2022 at 550,600 thousand US$. However, 2023 saw a reversal of this trend, with the provision decreasing to 509,300 thousand US$, representing a 7.5% reduction from the previous year's peak.
- Cash Operating Taxes Trend
- Cash operating taxes followed a similar initial pattern, dipping to 307,985 thousand US$ in 2020 before entering a phase of consistent and aggressive growth. Unlike the tax provision, cash operating taxes did not decline in 2023; instead, they reached their highest point in the analyzed period at 599,691 thousand US$. The increase from 2020 to 2023 represents a total growth of approximately 94.7%.
- Divergence and EVA Implications
- A notable divergence between the accounting provision and actual cash tax payments is observed starting in 2021. While the provision for income taxes and cash operating taxes were closely aligned in 2019 and 2020, the gap widened significantly by 2023. In the final year of the period, cash operating taxes exceeded the tax provision by 90,391 thousand US$. From an Economic Value Added (EVA) perspective, this indicates that the actual cash tax burden is higher than the reported accounting expense, which reduces the net operating profit after tax (NOPAT) and subsequently lowers the total economic value generated.
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Invested Capital
Amphenol Corp., invested capital calculation (financing approach)
US$ in thousands
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 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 equity equivalents to stockholders’ equity attributable to Amphenol Corporation.
5 Removal of accumulated other comprehensive income.
6 Subtraction of investments.
Invested capital exhibited a consistent upward trajectory over the five-year period ending December 31, 2023. The total capital base expanded from approximately $9.03 billion in 2019 to $13.75 billion in 2023, indicating a sustained increase in the resources deployed to generate economic value.
- Invested Capital Growth
- The total amount of invested capital grew monotonically each year. The most significant absolute increase occurred between 2020 and 2021, when invested capital rose by approximately $2.01 billion, marking the sharpest acceleration in capital deployment during the analyzed period.
- Equity Expansion
- Stockholders' equity attributable to the corporation served as the primary catalyst for the growth in invested capital. Equity increased every year, rising from $4.53 billion in 2019 to $8.35 billion in 2023. This continuous growth suggests a strong accumulation of retained earnings or additional capital contributions, strengthening the company's solvency profile.
- Debt and Lease Obligations
- Total reported debt and leases followed a non-linear trend. Obligations increased from $3.81 billion in 2019 to a peak of $5.05 billion in 2021. However, a reversal occurred after 2021, with debt and leases declining for two consecutive years to reach $4.64 billion by December 31, 2023.
- Capital Structure Shift
- An analysis of the components of invested capital reveals a strategic shift in funding. While both debt and equity increased through 2021, the growth in invested capital from 2022 to 2023 was driven exclusively by the expansion of stockholders' equity, coinciding with a deliberate reduction in total debt and lease liabilities.
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Cost of Capital
Amphenol Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 62,540,867) | 62,540,867) | ÷ | 66,939,367) | = | 0.93 | 0.93 | × | 21.09% | = | 19.70% | ||
| Debt3 | 4,094,800) | 4,094,800) | ÷ | 66,939,367) | = | 0.06 | 0.06 | × | 2.66% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 303,700) | 303,700) | ÷ | 66,939,367) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 66,939,367) | 1.00 | 19.84% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,329,455) | 48,329,455) | ÷ | 52,808,155) | = | 0.92 | 0.92 | × | 21.09% | = | 19.30% | ||
| Debt3 | 4,185,000) | 4,185,000) | ÷ | 52,808,155) | = | 0.08 | 0.08 | × | 2.81% × (1 – 21.00%) | = | 0.18% | ||
| Operating lease liability4 | 293,700) | 293,700) | ÷ | 52,808,155) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 52,808,155) | 1.00 | 19.49% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 47,909,192) | 47,909,192) | ÷ | 53,169,992) | = | 0.90 | 0.90 | × | 21.09% | = | 19.00% | ||
| Debt3 | 5,009,800) | 5,009,800) | ÷ | 53,169,992) | = | 0.09 | 0.09 | × | 2.12% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 251,000) | 251,000) | ÷ | 53,169,992) | = | 0.00 | 0.00 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 53,169,992) | 1.00 | 19.17% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,340,414) | 39,340,414) | ÷ | 43,834,914) | = | 0.90 | 0.90 | × | 21.09% | = | 18.93% | ||
| Debt3 | 4,265,400) | 4,265,400) | ÷ | 43,834,914) | = | 0.10 | 0.10 | × | 2.65% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 229,100) | 229,100) | ÷ | 43,834,914) | = | 0.01 | 0.01 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,834,914) | 1.00 | 19.14% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,871,356) | 30,871,356) | ÷ | 34,853,456) | = | 0.89 | 0.89 | × | 21.09% | = | 18.68% | ||
| Debt3 | 3,782,700) | 3,782,700) | ÷ | 34,853,456) | = | 0.11 | 0.11 | × | 2.77% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 199,400) | 199,400) | ÷ | 34,853,456) | = | 0.01 | 0.01 | × | 3.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 34,853,456) | 1.00 | 18.93% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Amphenol Corp., 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 thousands) | ||||||
| Economic profit1 | (719,051) | (449,467) | (664,747) | (569,676) | (432,135) | |
| Invested capital2 | 13,752,400) | 12,775,400) | 12,048,900) | 10,035,300) | 9,029,400) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.23% | -3.52% | -5.52% | -5.68% | -4.79% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 138.73% | 200.23% | 196.59% | — | — | |
| Arista Networks Inc. | 20.64% | 16.17% | 31.22% | — | — | |
| Cisco Systems Inc. | 3.38% | 3.36% | 2.60% | — | — | |
| Dell Technologies Inc. | -0.70% | 3.17% | -1.36% | — | — | |
| Lumentum Holdings Inc. | -19.00% | -6.33% | 5.99% | — | — | |
| Super Micro Computer Inc. | -1.42% | -9.62% | -18.07% | — | — | |
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 × -719,051 ÷ 13,752,400 = -5.23%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 reflects a consistent state of economic value destruction, characterized by negative economic profit and a negative economic spread ratio throughout the five-year period. Despite a steady expansion of the capital base, the returns generated failed to exceed the cost of capital.
- Invested Capital Growth
- A continuous upward trajectory in invested capital is observed, rising from 9,029,400 thousand US dollars in 2019 to 13,752,400 thousand US dollars by the end of 2023. This represents a sustained increase in the resources deployed within the business operations over the analyzed timeframe.
- Economic Profit Trends
- Economic profit remained negative for all reported years, indicating that the company did not achieve its required rate of return. The deficit widened from -432,135 thousand US dollars in 2019 to a peak loss of -719,051 thousand US dollars in 2023. A temporary recovery occurred in 2022, where the negative profit narrowed to -449,467 thousand US dollars, before deteriorating again in the following year.
- Economic Spread Ratio Analysis
- The economic spread ratio remained consistently below zero, fluctuating between a high of -3.52% in 2022 and a low of -5.68% in 2020. The ratio demonstrates that the gap between the return on invested capital and the cost of capital has persisted. While 2022 showed a marginal improvement in the spread, the ratio declined to -5.23% in 2023, suggesting that the growth in invested capital has not been accompanied by a proportional increase in economic value creation.
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Economic Profit Margin
Amphenol Corp., 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 thousands) | ||||||
| Economic profit1 | (719,051) | (449,467) | (664,747) | (569,676) | (432,135) | |
| Net sales | 12,554,700) | 12,623,000) | 10,876,300) | 8,598,900) | 8,225,400) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -5.73% | -3.56% | -6.11% | -6.62% | -5.25% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.82% | 23.66% | 22.84% | — | — | |
| Arista Networks Inc. | 15.58% | 11.14% | 18.28% | — | — | |
| Cisco Systems Inc. | 3.37% | 3.77% | 2.90% | — | — | |
| Dell Technologies Inc. | -0.39% | 1.66% | -1.17% | — | — | |
| Lumentum Holdings Inc. | -31.18% | -9.25% | 6.75% | — | — | |
| Super Micro Computer Inc. | -0.48% | -4.09% | -6.51% | — | — | |
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 sales
= 100 × -719,051 ÷ 12,554,700 = -5.73%
3 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by persistent negative economic profit despite a significant overall increase in net sales. The inability to generate positive economic value indicates that the returns on invested capital have consistently remained below the company's cost of capital throughout the analyzed period.
- Economic Profit Trends
- Economic profit remained negative for all five years, exhibiting notable volatility. The nominal loss expanded from -432,135 thousand US$ in 2019 to a peak deficit of -719,051 thousand US$ in 2023. A temporary improvement was observed in 2022, where losses narrowed to -449,467 thousand US$, before deteriorating to the lowest point in the series the following year.
- Net Sales Trajectory
- A strong growth trend in top-line revenue is evident, with net sales rising from 8,225,400 thousand US$ in 2019 to 12,623,000 thousand US$ in 2022. This represents a substantial expansion of the revenue base. However, this growth plateaued in 2023, with a slight contraction to 12,554,700 thousand US$.
- Economic Profit Margin Analysis
- The economic profit margin fluctuated within a negative range between -3.56% and -6.62%. The margin deteriorated from -5.25% in 2019 to -6.62% in 2020, followed by a gradual recovery phase that peaked in 2022 at -3.56%. The subsequent drop to -5.73% in 2023 suggests that the increase in sales volume did not translate into improved capital efficiency or sufficient operating returns to offset the cost of capital.
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