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
AutoZone Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
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
= 2,804,292 – 11.91% × 6,986,333 = 1,972,344
The financial trajectory from 2018 to 2023 demonstrates a sustained ability to generate economic profit, indicating that the company consistently earned returns in excess of its cost of capital. While a contraction occurred in 2023, the overall trend reflects significant value creation over the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trajectory was maintained from 2018 through 2022, with NOPAT increasing from US$ 1,350,649 thousand to a peak of US$ 3,175,174 thousand. A moderate decline occurred in 2023, where the figure adjusted to US$ 2,804,292 thousand, though it remained substantially higher than the 2018 baseline.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 10.89% and 12.17%. The highest cost was recorded in 2022 at 12.17%, followed by a slight decrease to 11.91% in 2023.
- Invested Capital
- Invested capital exhibited volatility, peaking in 2020 at US$ 7,636,912 thousand before declining for two consecutive years to reach US$ 6,383,299 thousand in 2022. A subsequent increase was observed in 2023, with invested capital rising to US$ 6,986,333 thousand.
- Economic Profit
- Economic profit grew substantially from US$ 775,870 thousand in 2018 to a peak of US$ 2,398,556 thousand in 2022. The expansion in economic profit between 2021 and 2022 was particularly pronounced, resulting from the simultaneous increase in NOPAT and a reduction in the invested capital base. In 2023, economic profit decreased to US$ 1,972,344 thousand, corresponding with the decline in NOPAT and the increase in invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
AutoZone Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in accrued sales and warranty returns.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,174,302 × 3.90% = 123,798
7 2023 Calculation
Tax benefit of interest expense, less capitalized interest = Adjusted interest expense, less capitalized interest × Statutory income tax rate
= 442,224 × 21.00% = 92,867
8 Addition of after taxes interest expense to net income.
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 12,206 × 21.00% = 2,563
10 Elimination of after taxes investment income.
The financial performance of AutoZone Inc. from 2018 to 2023 is characterized by a general upward trajectory in both bottom-line profitability and operational earnings, although the growth patterns for these two metrics diverged in the final year of the period.
- Net Income Growth Trend
- Net income exhibited consistent year-over-year growth throughout the six-year period. Starting at 1,337,536 thousand US dollars in 2018, the figure rose steadily to 2,528,426 thousand US dollars by 2023. This represents a sustained increase in total profitability, with the most significant growth spike occurring between 2020 and 2021.
- NOPAT Performance and Volatility
- Net operating profit after taxes (NOPAT) followed a more aggressive growth path than net income between 2018 and 2022, increasing from 1,350,649 thousand US dollars to a peak of 3,175,174 thousand US dollars. However, a reversal occurred in 2023, where NOPAT declined to 2,804,292 thousand US dollars, marking the only contraction in the analyzed period.
- Operational vs. Net Profitability Analysis
- NOPAT remained consistently higher than net income for every year analyzed, suggesting that the company's core operating performance is stronger than its final net earnings. The disparity between these two figures peaked in 2022, indicating a period where operational efficiency significantly outpaced net profitability. The convergence observed in 2023, where net income continued to grow while NOPAT declined, suggests a shift in the relationship between operating results and non-operating items such as interest expenses or tax adjustments.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
AutoZone Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
The financial trajectory of tax obligations between 2018 and 2023 indicates a general expansion of tax liabilities, though a notable divergence exists between recognized accounting expenses and actual cash disbursements.
- Income Tax Expense Trends
- A sustained upward trend is observed in the income tax expense, which grew from 298,793 thousand US dollars in 2018 to 639,188 thousand US dollars by 2023. The most consistent growth occurred between 2018 and 2022, with the expense more than doubling during this period before experiencing a marginal decline in the final year analyzed.
- Cash Operating Tax Volatility
- Cash operating taxes exhibit significantly higher volatility compared to the accrued tax expense. After an initial decrease in 2019 to 420,862 thousand US dollars, cash outflows rose sharply to 675,083 thousand US dollars in 2021, dropped to 527,238 thousand US dollars in 2022, and reached a period high of 755,199 thousand US dollars in 2023.
- Accrual versus Cash Divergence
- There is a recurring lack of synchronization between reported income tax expenses and cash operating taxes. In 2018, 2021, and 2023, cash taxes exceeded the recorded expense, which may suggest the settlement of prior period liabilities or the impact of non-deductible items. Conversely, in 2019 and 2022, the cash outflows were lower than the recognized expense, indicating a temporary deferral of tax payments or the utilization of tax credits.
- Implications for Economic Value Added (EVA)
- The fluctuation in cash operating taxes introduces variability into the calculation of Net Operating Profit After Tax (NOPAT). The substantial increase in cash taxes in 2023, occurring simultaneously with a decrease in reported income tax expense, suggests a reduction in cash-based NOPAT, which would exert downward pressure on the resulting EVA for that fiscal year.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
AutoZone Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
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 LIFO reserve. See details »
5 Addition of accrued sales and warranty returns.
6 Addition of equity equivalents to stockholders’ deficit.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable debt securities.
The financial trajectory from August 2018 to August 2023 reveals a capital structure characterized by increasing leverage and a deepening stockholders' deficit, which collectively influence the fluctuations in invested capital.
- Total Reported Debt and Leases
- A consistent upward trend is observed in total reported debt and leases, which rose from US$ 7,012,848 thousand in 2018 to US$ 11,130,469 thousand by 2023. This represents a steady increase in the company's liabilities over the six-year period, with the most significant acceleration occurring between 2022 and 2023.
- Stockholders' Deficit
- The stockholders' deficit expanded significantly over the analyzed period. While the deficit stood at US$ -1,520,355 thousand in 2018, it grew to US$ -4,349,894 thousand by 2023. A temporary reduction in the deficit occurred in 2020, but the subsequent years show a rapid acceleration in negative equity, suggesting an aggressive capital return strategy or the utilization of debt to fund share repurchases.
- Invested Capital Dynamics
- Invested capital exhibited a non-linear progression, starting at US$ 5,277,396 thousand in 2018 and ending at US$ 6,986,333 thousand in 2023. A peak was reached in 2020 at US$ 7,636,912 thousand, followed by a decline through 2022. The movement in invested capital is a direct result of the interplay between rising total debt and the expanding stockholders' deficit; the growth in debt serves to increase invested capital, while the deepening deficit acts as a counterbalance that reduces the net capital base.
The overall analysis indicates a strategic reliance on debt financing to maintain operations and potentially fund shareholder distributions, resulting in a negative equity position that offsets a substantial portion of the reported liabilities when calculating total invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
AutoZone Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,732,687) | 42,732,687) | ÷ | 53,456,507) | = | 0.80 | 0.80 | × | 14.08% | = | 11.26% | ||
| Long-term debt and finance lease liabilities3 | 7,549,518) | 7,549,518) | ÷ | 53,456,507) | = | 0.14 | 0.14 | × | 4.21% × (1 – 21.00%) | = | 0.47% | ||
| Operating lease liability4 | 3,174,302) | 3,174,302) | ÷ | 53,456,507) | = | 0.06 | 0.06 | × | 3.90% × (1 – 21.00%) | = | 0.18% | ||
| Total: | 53,456,507) | 1.00 | 11.91% | ||||||||||
Based on: 10-K (reporting date: 2023-08-26).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,698,163) | 45,698,163) | ÷ | 55,029,148) | = | 0.83 | 0.83 | × | 14.08% | = | 11.69% | ||
| Long-term debt and finance lease liabilities3 | 6,249,605) | 6,249,605) | ÷ | 55,029,148) | = | 0.11 | 0.11 | × | 3.52% × (1 – 21.00%) | = | 0.32% | ||
| Operating lease liability4 | 3,081,380) | 3,081,380) | ÷ | 55,029,148) | = | 0.06 | 0.06 | × | 3.57% × (1 – 21.00%) | = | 0.16% | ||
| Total: | 55,029,148) | 1.00 | 12.17% | ||||||||||
Based on: 10-K (reporting date: 2022-08-27).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 38,184,546) | 38,184,546) | ÷ | 47,012,910) | = | 0.81 | 0.81 | × | 14.08% | = | 11.44% | ||
| Long-term debt and finance lease liabilities3 | 5,958,954) | 5,958,954) | ÷ | 47,012,910) | = | 0.13 | 0.13 | × | 3.50% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 2,869,410) | 2,869,410) | ÷ | 47,012,910) | = | 0.06 | 0.06 | × | 3.44% × (1 – 21.00%) | = | 0.17% | ||
| Total: | 47,012,910) | 1.00 | 11.95% | ||||||||||
Based on: 10-K (reporting date: 2021-08-28).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 26,698,238) | 26,698,238) | ÷ | 35,727,897) | = | 0.75 | 0.75 | × | 14.08% | = | 10.52% | ||
| Long-term debt and finance lease liabilities3 | 6,304,253) | 6,304,253) | ÷ | 35,727,897) | = | 0.18 | 0.18 | × | 3.45% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 2,725,406) | 2,725,406) | ÷ | 35,727,897) | = | 0.08 | 0.08 | × | 3.46% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 35,727,897) | 1.00 | 11.21% | ||||||||||
Based on: 10-K (reporting date: 2020-08-29).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,396,140) | 27,396,140) | ÷ | 35,126,857) | = | 0.78 | 0.78 | × | 14.08% | = | 10.98% | ||
| Long-term debt and finance lease liabilities3 | 5,598,905) | 5,598,905) | ÷ | 35,126,857) | = | 0.16 | 0.16 | × | 3.24% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 2,131,812) | 2,131,812) | ÷ | 35,126,857) | = | 0.06 | 0.06 | × | 0.67% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 35,126,857) | 1.00 | 11.42% | ||||||||||
Based on: 10-K (reporting date: 2019-08-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,612,832) | 18,612,832) | ÷ | 25,568,150) | = | 0.73 | 0.73 | × | 14.08% | = | 10.25% | ||
| Long-term debt and finance lease liabilities3 | 5,102,703) | 5,102,703) | ÷ | 25,568,150) | = | 0.20 | 0.20 | × | 3.15% × (1 – 25.90%) | = | 0.47% | ||
| Operating lease liability4 | 1,852,615) | 1,852,615) | ÷ | 25,568,150) | = | 0.07 | 0.07 | × | 3.27% × (1 – 25.90%) | = | 0.18% | ||
| Total: | 25,568,150) | 1.00 | 10.89% | ||||||||||
Based on: 10-K (reporting date: 2018-08-25).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
AutoZone Inc., economic spread ratio calculation, comparison to benchmarks
| Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 1,972,344) | 2,398,556) | 1,602,608) | 1,208,841) | 1,219,169) | 775,870) | |
| Invested capital2 | 6,986,333) | 6,383,299) | 6,599,731) | 7,636,912) | 5,730,767) | 5,277,396) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 28.23% | 37.58% | 24.28% | 15.83% | 21.27% | 14.70% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -10.78% | -21.72% | -1.96% | — | — | — | |
| Home Depot Inc. | 16.92% | 21.37% | 12.21% | — | — | — | |
| Lowe’s Cos. Inc. | 13.66% | 21.63% | 9.18% | — | — | — | |
| TJX Cos. Inc. | 4.23% | 4.25% | -12.60% | — | — | — | |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,972,344 ÷ 6,986,333 = 28.23%
4 Click competitor name to see calculations.
The financial performance from August 2018 to August 2023 indicates a significant overall increase in value creation, characterized by a substantial rise in economic profit and a generally improving economic spread ratio, despite some volatility in the latter stages of the period.
- Economic Profit Trends
- A consistent upward trajectory was observed in economic profit between 2018 and 2022, rising from US$ 775,870 thousand to a peak of US$ 2,398,556 thousand. Although a decline occurred in 2023, with profit falling to US$ 1,972,344 thousand, the level remained substantially higher than the 2018 baseline, suggesting a long-term expansion in the company's ability to generate returns exceeding its cost of capital.
- Invested Capital Dynamics
- Invested capital exhibited a non-linear trend, peaking in August 2020 at US$ 7,636,912 thousand. This was followed by a period of contraction, reaching a low of US$ 6,383,299 thousand in 2022, before increasing again to US$ 6,986,333 thousand by August 2023. This suggests a strategic fluctuation in capital allocation or a reduction in the capital base required to sustain operations during the 2021-2022 period.
- Economic Spread Ratio Analysis
- The economic spread ratio showed marked volatility, starting at 14.70% in 2018 and reaching a high of 37.58% in 2022. The sharp increase between 2021 and 2022 suggests a period of highly efficient capital utilization where returns significantly outpaced the cost of capital. The subsequent decline to 28.23% in 2023 aligns with the decrease in economic profit and the increase in invested capital, indicating a normalization of the spread after the 2022 peak.
In summary, the data reveals that the company successfully expanded its economic value added over the five-year horizon. The most notable period of efficiency occurred in 2022, where the combination of decreasing invested capital and peak economic profit resulted in the highest observed economic spread ratio.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Economic Profit Margin
AutoZone Inc., economic profit margin calculation, comparison to benchmarks
| Aug 26, 2023 | Aug 27, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | Aug 25, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 1,972,344) | 2,398,556) | 1,602,608) | 1,208,841) | 1,219,169) | 775,870) | |
| Net sales | 17,457,209) | 16,252,230) | 14,629,585) | 12,631,967) | 11,863,743) | 11,221,077) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 11.30% | 14.76% | 10.95% | 9.57% | 10.28% | 6.91% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -6.07% | -11.34% | -0.84% | — | — | — | |
| Home Depot Inc. | 5.95% | 6.79% | 4.60% | — | — | — | |
| Lowe’s Cos. Inc. | 3.49% | 5.88% | 2.91% | — | — | — | |
| TJX Cos. Inc. | 1.73% | 1.73% | -8.77% | — | — | — | |
Based on: 10-K (reporting date: 2023-08-26), 10-K (reporting date: 2022-08-27), 10-K (reporting date: 2021-08-28), 10-K (reporting date: 2020-08-29), 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-25).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,972,344 ÷ 17,457,209 = 11.30%
3 Click competitor name to see calculations.
An analysis of the financial performance between August 2018 and August 2023 reveals a general upward trajectory in both revenue and value creation, characterized by a significant peak in efficiency in 2022 followed by a contraction in the most recent period.
- Net Sales Growth
- A consistent year-over-year increase in net sales is observed, with figures rising from US$ 11.22 billion in 2018 to US$ 17.46 billion in 2023. This steady growth indicates a sustained expansion in the company's top-line revenue throughout the six-year period.
- Economic Profit Trends
- Economic profit demonstrated substantial growth for the majority of the analyzed period, increasing from US$ 775.87 million in 2018 to a peak of US$ 2.40 billion in 2022. However, a reversal occurred in 2023, where economic profit declined to US$ 1.97 billion, despite the continued growth in net sales.
- Economic Profit Margin Volatility
- The economic profit margin shifted from 6.91% in 2018 to a high of 14.76% in 2022. While the margin remained above 2018 levels, a notable compression occurred in 2023, falling to 11.30%. This divergence between increasing sales and decreasing economic profit in the final year suggests a reduction in the efficiency of value generation relative to the cost of capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?