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
Amphenol Corp., economic profit calculation
US$ in thousands
| 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 analysis of economic value added over the five-year period from 2019 to 2023 reveals a persistent failure to generate positive economic profit despite growth in operating earnings. While operating profitability increased for much of the period, it remained insufficient to cover the charges associated with the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a strong upward trend between 2019 and 2022, rising from 1,277,245 thousand US$ to a peak of 2,040,201 thousand US$. However, a slight contraction occurred in 2023, with NOPAT decreasing to 2,010,042 thousand US$, suggesting a stabilization or marginal decline in operating efficiency toward the end of the period.
- Invested Capital and Cost of Capital
- Invested capital grew consistently each year, expanding from 9,029,400 thousand US$ in 2019 to 13,752,400 thousand US$ in 2023. Simultaneously, the cost of capital experienced a steady incremental increase, rising from 19.02% to 19.93%. The combination of a growing capital base and a rising cost of capital significantly increased the financial hurdle required to achieve economic value creation.
- Economic Profit Performance
- Economic profit remained negative throughout the entire duration of the analysis, indicating that the return on invested capital did not exceed the cost of capital. The deficit widened from 439,830 thousand US$ in 2019 to a period low of 731,414 thousand US$ in 2023. Although a partial recovery was observed in 2022, where the deficit narrowed to 460,717 thousand US$, the subsequent decline in 2023 confirms that the expansion of the capital base and the rising cost of funding are outpacing the growth in operating profits.
Net Operating Profit after Taxes (NOPAT)
Amphenol Corp., NOPAT calculation
US$ 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
= × =
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Amphenol Corporation.
7 Elimination of discontinued operations.
The financial data reveals a generally positive trend in profitability over the five-year period from 2019 to 2023, with some fluctuations in specific measures.
- Net Income Attributable to Amphenol Corporation
- This metric shows a consistent increase from 2019 to 2023, starting at 1,155,000 thousand US dollars in 2019 and rising to 1,928,000 thousand US dollars in 2023. The most significant jump occurred between 2020 and 2021, where net income increased by approximately 32.2%, from 1,203,400 to 1,590,800 thousand US dollars. Growth continued through 2022, reaching 1,902,300 thousand US dollars, before showing a more modest increase of about 1.3% into 2023.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a similar upward trend, rising from 1,277,245 thousand US dollars in 2019 to a peak of 2,040,201 thousand US dollars in 2022. This represents an overall increase of nearly 60%. There is a steady year-over-year improvement, with the largest increase again visible from 2021 to 2022. However, in 2023, there is a slight decline of approximately 1.5%, decreasing to 2,010,042 thousand US dollars. Despite this small reduction, the 2023 figure remains significantly higher than in the early years.
Overall, the data indicates strong growth in profitability, with both net income and NOPAT more than doubling during the examined timeframe. The minor dip in NOPAT in 2023 suggests a potential plateau or emerging challenges affecting operating profit, though net income continues to rise slightly. This pattern suggests effective operational performance and profitability growth over the longer term, with a need to monitor recent subtle downturns in operating profit closely.
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 provision for income taxes and cash operating taxes for the analyzed periods reveal notable trends in tax-related expenses.
- Provision for income taxes
- There was a decrease from 331,900 thousand USD in 2019 to 313,300 thousand USD in 2020, indicating a reduction in estimated tax liabilities. In 2021, this figure sharply increased to 409,100 thousand USD, followed by a further rise to 550,600 thousand USD in 2022. However, in 2023, a slight decline to 509,300 thousand USD was observed, suggesting some relief in tax provisions compared to the previous year but still significantly higher than pre-pandemic levels.
- Cash operating taxes
- Cash operating taxes also decreased from 342,736 thousand USD in 2019 to 307,985 thousand USD in 2020, mirroring the provision trend and likely reflecting the impact of external economic factors. Beginning in 2021, cash taxes increased substantially to 464,115 thousand USD and continued to increase through 2022 and 2023, reaching 583,929 thousand USD and 599,691 thousand USD respectively. This steady increase indicates an upward pressure on actual tax payments despite the slight reduction in provisions in 2023.
Overall, the data shows a downward shift in both tax provisions and cash taxes during 2020, possibly due to extraordinary circumstances affecting taxable income. However, from 2021 onwards, both measures display a pronounced upward trend, highlighting a recovery or growth phase characterized by higher taxable earnings and increased cash tax outflows. The divergence in 2023, where cash taxes slightly rise while provisions fall, may suggest adjustments in expected future tax liabilities or timing differences in tax payments.
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.
- Total reported debt & leases
- The total reported debt and leases exhibited an overall upward trend from 2019 through 2021, increasing from approximately $3.81 billion to $5.05 billion. This was followed by a decline in the subsequent two years, lowering the figure to about $4.64 billion by 2023. The initial rise may indicate increased leverage or financing activities, while the subsequent decrease suggests debt reduction or repayment strategies.
- Stockholders’ equity attributable to Amphenol Corporation
- Stockholders' equity showed consistent growth throughout the examined period, rising from roughly $4.53 billion in 2019 to $8.35 billion in 2023. This steady increase points to strengthening financial stability, possibly driven by retained earnings, profitable operations, or issuance of equity, thereby enhancing the company's net worth.
- Invested capital
- Invested capital demonstrated a continuous increase over the five years, expanding from approximately $9.03 billion to $13.75 billion. The upward trend reflects ongoing investments in assets, acquisitions, or capital expenditures supporting the company’s growth and operational capacity. The growth rate in invested capital generally outpaced that of debt, indicating a rising equity contribution.
Cost of Capital
Amphenol Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer 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.
An analysis of the economic value added metrics from 2019 to 2023 reveals a consistent failure to generate positive economic profit, indicating that the returns on invested capital remained below the company's cost of capital throughout the period.
- Invested Capital Growth
- A steady and significant upward trend in invested capital is observed, increasing from 9,029,400 thousand US$ in 2019 to 13,752,400 thousand US$ by 2023. This represents a continuous expansion of the capital base over the five-year period.
- Economic Profit Performance
- Economic profit remained negative for all reported years, signaling that the entity did not create economic value. The loss widened from 439,830 thousand US$ in 2019 to a peak deficit of 731,414 thousand US$ in 2023, despite a temporary improvement in 2022 where the loss narrowed to 460,717 thousand US$.
- Economic Spread Ratio Trends
- The economic spread ratio remained consistently negative, fluctuating between -3.61% and -5.76%. The most favorable spread occurred in 2022 at -3.61%, while the least favorable was recorded in 2020 at -5.76%. The persistence of a negative spread confirms that the internal rate of return on invested capital failed to exceed the weighted average cost of capital across the entire timeframe.
The combination of increasing invested capital and persistently negative economic profit suggests that the growth in the capital base has not been accompanied by a proportional increase in returns. This resulted in an overall erosion of economic value, with the magnitude of the economic loss reaching its highest point in 2023.
Economic Profit Margin
Amphenol Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer 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 sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic value added over the five-year period from 2019 to 2023 reveals a consistent inability to generate positive economic profit, despite significant growth in top-line revenue. The company operated with a negative economic profit throughout the entire duration, indicating that the returns generated were insufficient to cover the company's cost of capital.
- Net Sales Performance
- A strong upward trajectory in net sales was observed between 2019 and 2022, with revenue increasing from 8.23 billion US$ to a peak of 12.62 billion US$. This growth represents a substantial expansion in market reach or pricing power during that window. However, this trend plateaued in 2023, with net sales experiencing a slight contraction to 12.55 billion US$.
- Economic Profit Trends
- Economic profit remained negative across all reported years, with losses fluctuating between 439.83 million US$ in 2019 and a peak deficit of 731.41 million US$ in 2023. While there was a notable recovery in 2022, where the economic loss narrowed to 460.72 million US$, this improvement was short-lived, as 2023 marked the lowest absolute economic profit in the analyzed period.
- Economic Profit Margin Volatility
- The economic profit margin exhibited significant volatility while remaining in negative territory. The margin deteriorated from -5.35% in 2019 to -6.73% in 2020. A corrective trend occurred between 2021 and 2022, with the margin improving to its highest point of -3.65% in 2022. This improvement coincided with the peak in net sales, suggesting an increase in capital efficiency during that year. However, the margin declined again to -5.83% in 2023, reflecting a decrease in the efficiency of capital utilization relative to sales.
In summary, the correlation between increasing net sales and economic profit is decoupled. The expansion in revenue did not translate into the creation of economic value, and the deterioration of both the economic profit and the economic profit margin in 2023 suggests a decline in value creation efficiency at the end of the period.