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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Arista Networks Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Net Profit Margin since 2014
- Total Asset Turnover since 2014
- Price to Earnings (P/E) since 2014
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
Arista Networks Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals several key trends over the analyzed periods. Net operating profit after taxes (NOPAT) shows a consistent upward trajectory, increasing each year from approximately $676 million in 2020 to nearly $3.4 billion in 2024. This demonstrates significant growth in the company's profitability over the five-year span.
The cost of capital remains relatively stable throughout the years, fluctuating marginally between 15.73% and 15.76%. This indicates a consistent rate at which the company finances its capital or the expected return rate by investors without significant variation.
Invested capital exhibits a marked increase, nearly tripling from approximately $1.87 billion in 2020 to nearly $5.87 billion in 2024. This substantial rise suggests that the company has been expanding its asset base or operational investment significantly over the period, potentially to support growth initiatives or scale operations.
Economic profit, which represents the value created above the cost of capital, also shows strong growth, increasing from around $383 million in 2020 to approximately $2.47 billion in 2024. Though there is a slight dip between 2021 and 2022, the overall trend is positive, indicating improving efficiency in utilizing invested capital to generate returns above the cost threshold.
- Net Operating Profit After Taxes (NOPAT)
- Consistently increased every year, indicating expanding profitability and operational efficiency.
- Cost of Capital
- Remained stable around 15.75%, showing steady financing costs or investor expectations.
- Invested Capital
- Substantial growth suggests increased investments in assets or business expansion.
- Economic Profit
- Strong upward trend reflecting enhanced value creation over and above the cost of capital, with minor fluctuations.
Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 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.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
- Net Income Trend
- The net income of the company has demonstrated a consistent upward trajectory over the five-year period. Starting at $634.6 million in 2020, it increased by approximately 32.5% to $840.9 million in 2021. The growth accelerated further in 2022 with net income reaching $1.35 billion, representing a notable increase of around 60.7% year over year. This positive momentum sustained into 2023 and 2024, with net income rising to $2.09 billion and $2.85 billion respectively, indicating continued strong profitability expansion.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT exhibited a similarly positive trend, reflecting improving operational efficiency and profitability. The initial value of approximately $676.2 million in 2020 increased to $1.02 billion in 2021, a growth rate of about 50.6%. Although the growth rate slightly moderated in 2022 with NOPAT at $1.20 billion, the figure surged significantly to $2.07 billion in 2023 and further to $3.40 billion in 2024. These figures indicate a robust enhancement in the company's operational profit generation after tax consideration.
- Comparative Analysis Between Net Income and NOPAT
- Both net income and NOPAT demonstrate strong and consistent growth patterns, with NOPAT generally exceeding net income in absolute terms throughout the period, which may suggest an increasingly efficient core business operation after taxes. The gap between NOPAT and net income widened notably towards the end of the period, highlighting enhanced operational earnings relative to net income, potentially due to improvements in non-operating factors or tax effects over time.
- Overall Financial Performance Insights
- The data reflects significant and accelerating growth in profitability metrics, indicating a successful expansion and improved operational performance. The company’s ability to nearly triple its net income within four years, alongside a more than fivefold increase in NOPAT, points to strong financial health and effective management strategies. This upward trend suggests solid prospects for continued business success if the current growth drivers are sustained.
Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 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).
- Provision for Income Taxes
- Over the five-year period, the provision for income taxes demonstrates a substantial upward trend. Starting at $104,306 thousand in 2020, it slightly decreased to $90,025 thousand in 2021, marking a minor decline in the second year. However, from 2021 onward, there is a notable acceleration in growth, with the provision increasing significantly to $229,350 thousand in 2022, then further rising to $334,705 thousand in 2023, and reaching $412,980 thousand by 2024. This pattern suggests a rising tax expense potentially linked to increased profitability or changes in tax legislation or accounting practices.
- Cash Operating Taxes
- Cash operating taxes exhibit a strong and consistent upward trajectory throughout the observed period. Starting at $106,136 thousand in 2020, cash operating taxes almost doubled by 2021, reaching $188,364 thousand. This growth momentum continued sharply in subsequent years, with values increasing to $468,759 thousand in 2022, $675,037 thousand in 2023, and ultimately $840,462 thousand in 2024. The sharp escalation in cash operating taxes compared to the provision for income taxes may reflect timing differences in tax payments or increased effective tax rates, or a combination of operational scale expansion and higher taxable income.
- Comparative Insights
- Both provision for income taxes and cash operating taxes have risen notably over the five years, with cash operating taxes growing at an even faster rate than the provision. The disparity between these two tax-related figures suggests potential differences in deferred tax accounting or changes in the company’s tax payment schedule. The steady increase across both metrics implies growing taxable income levels or evolving tax obligations. This consistent increase in tax-related expenses may impact the company’s net earnings and cash flows, indicating the necessity for careful tax planning going forward.
Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction-in-process.
7 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate a declining trend over the five-year period. Starting at $90,170 thousand in 2020, the figure decreases each year, reaching $59,642 thousand by 2024. This consistent reduction indicates a deliberate effort to lower debt levels and manage lease obligations effectively, improving the company’s leverage position.
- Stockholders’ Equity
- Stockholders’ equity shows a strong upward trend, more than tripling from $3,320,291 thousand in 2020 to $9,994,807 thousand in 2024. This significant increase suggests robust retained earnings, possibly combined with equity financing activities, contributing to a solid expansion of the company’s net asset base over the period.
- Invested Capital
- Invested capital rises steadily from $1,866,365 thousand in 2020 to $5,869,309 thousand in 2024. The growth accelerates particularly after 2021, indicating increased investment in operating assets or growth initiatives. The expansion of invested capital alongside rising equity suggests an aggressive strategy focused on scaling operations or asset acquisition.
- Overall Financial Trends
- The combined trends reflect a company that is strengthening its financial foundation by reducing debt, significantly increasing equity, and expanding invested capital. The reduction in total debt coupled with substantial equity growth suggests an improved capital structure and financial stability. The growth in invested capital points to reinvestment and expansion efforts, which may support future growth and operational capacity.
Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
Economic Spread Ratio
Arista Networks Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data exhibits notable trends in economic profit, invested capital, and economic spread ratio over the five-year period from 2020 to 2024.
- Economic Profit
- The economic profit demonstrates a strong upward trajectory, starting at 382,707 thousand US dollars in 2020 and nearly doubling to 720,006 thousand US dollars in 2021. It remains relatively stable in 2022 at 713,621 thousand US dollars, followed by a significant increase to 1,314,327 thousand US dollars in 2023 and a further substantial rise to 2,473,552 thousand US dollars in 2024. This pattern indicates improving profitability and value creation over the period.
- Invested Capital
- Invested capital shows consistent and considerable growth, beginning at 1,866,365 thousand US dollars in 2020 and increasing slightly to 1,889,936 thousand US dollars in 2021. From 2022 onwards, the increase accelerates markedly, reaching 3,095,800 thousand US dollars in 2022, 4,774,714 thousand US dollars in 2023, and 5,869,309 thousand US dollars in 2024. This reflects significant expansion and investment in the company's assets over the period.
- Economic Spread Ratio
- The economic spread ratio fluctuates during the period but shows an overall positive trend. It begins at 20.51% in 2020, rises sharply to 38.1% in 2021, then decreases to 23.05% in 2022. It recovers to 27.53% in 2023 and reaches a peak of 42.14% in 2024. The increase in the latter years suggests improved efficiency in generating returns over the invested capital.
In summary, the data reflects a company with increasing economic profit and invested capital, accompanied by a generally improving economic spread ratio. The prominent growth in both profit and investment, together with enhanced efficiency indicated by the economic spread ratio, suggests a strong operational and financial performance trajectory during the analyzed period.
Economic Profit Margin
Arista Networks Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
Over the analyzed period, the economic profit in absolute terms demonstrated significant growth. From 2020 to 2024, economic profit increased steadily, starting at approximately $383 million and reaching over $2.47 billion by the end of 2024. Notably, there was a slight dip in economic profit between 2021 and 2022, followed by a strong resurgence in subsequent years.
Adjusted revenue exhibited a consistent upward trajectory throughout the entire period. Beginning at around $2.39 billion in 2020, adjusted revenue more than tripled by 2024, ending at approximately $8.29 billion. The growth rate accelerated particularly between 2021 and 2024, reflecting expanding operational scale or increased market demand.
The economic profit margin showed some variability but an overall positive trend. It started near 16% in 2020, peaked above 22% in 2021, then declined to approximately 15.9% in 2022. Subsequently, the margin improved again, reaching nearly 30% in 2024. This pattern suggests fluctuations in profitability efficiency relative to adjusted revenue, with an encouraging enhancement in later years.
- Economic Profit
- Displayed substantial growth from 2020 to 2024, with a temporary decrease in 2022 but a strong recovery afterward.
- Adjusted Revenue
- Consistently increased annually, showing accelerated growth from 2021 onward, indicating expansion of business operations.
- Economic Profit Margin
- Varied over the years, initially rising, then falling in 2022, and finally improving significantly toward 2024, suggesting improved profitability relative to revenue in the later period.