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
Becton, Dickinson & Co., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,155 – 11.44% × 45,278 = -3,026
Analysis of the economic value added (EVA) reveals a persistent trend of negative economic profit from 2016 through 2021. Despite fluctuations and an overall increase in net operating profit after taxes (NOPAT), the organization has consistently failed to generate returns that exceed the cost of its invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility over the observed period. Following an initial increase in 2017, a sharp contraction occurred in 2018, where NOPAT fell to 570 million USD. A recovery trend followed, resulting in a peak of 2,155 million USD by September 30, 2021, which represents the highest operational profit within the analyzed timeframe.
- Invested Capital and Cost of Capital
- A substantial expansion in invested capital occurred between 2016 and 2018, with the balance increasing from 22,258 million USD to 47,282 million USD. From 2019 onward, the capital base stabilized, fluctuating between approximately 45,000 million USD and 46,000 million USD. Throughout this period, the cost of capital remained remarkably stable, maintaining a narrow range between 10.67% and 11.44%.
- Economic Profit Trends
- Economic profit remained consistently negative, indicating that the return on invested capital was insufficient to cover the cost of financing. The most significant value destruction occurred in 2018, with economic profit dropping to negative 4,636 million USD, driven by the combination of peak invested capital and a trough in NOPAT. While a recovery is observed by 2021, with the deficit narrowing to negative 3,026 million USD, the company has not yet reached a break-even point in terms of economic value creation.
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Net Operating Profit after Taxes (NOPAT)
Becton, Dickinson & Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in restructuring liability.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 470 × 2.20% = 10
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 479 × 21.00% = 101
7 Addition of after taxes interest expense to net income.
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9 × 21.00% = 2
9 Elimination of after taxes investment income.
The financial performance between September 30, 2016, and September 30, 2021, is characterized by significant volatility followed by a substantial growth phase. Both Net Income and Net Operating Profit After Taxes (NOPAT) exhibit synchronized fluctuations, with a notable contraction in 2018 and a peak in 2021.
- Net Income Trends
- Net income demonstrated an unstable trajectory, experiencing a sharp decline in 2018 to 311 million USD from 1,100 million USD in the previous year. A recovery was observed in 2019, reaching 1,233 million USD, followed by a slight decrease in 2020 to 874 million USD, before surging to a period high of 2,092 million USD in 2021.
- NOPAT Performance
- Net Operating Profit After Taxes mirrored the volatility of net income, falling to 570 million USD in 2018. However, NOPAT showed a strong upward trend in the latter part of the period, climbing from 991 million USD in 2020 to 2,155 million USD in 2021, indicating a significant expansion in operational profitability.
- Comparative Analysis of Operating Profit and Net Earnings
- A recurring pattern is observed where NOPAT exceeds Net Income in four of the six reported years (2017, 2018, 2020, and 2021). This indicates that the core operating performance, when adjusted for capital structure and financing costs, was generally stronger than the bottom-line net profit. The most pronounced gap occurred in 2018, where NOPAT remained substantially higher than net income despite the overall downturn in both metrics.
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Cash Operating Taxes
Becton, Dickinson & Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
An analysis of tax-related outflows reveals significant volatility and a persistent divergence between accrual-based tax provisions and actual cash operating tax payments between 2016 and 2021.
- Cash Operating Tax Trends
- Cash operating taxes exhibited substantial fluctuations, peaking in September 2018 at 1,285 million US dollars. A sharp decline was observed in September 2017, where payments dropped to 109 million US dollars, before returning to a higher range. From 2019 through 2021, cash tax payments reached a state of relative stabilization, fluctuating between 508 million and 711 million US dollars.
- Income Tax Provision Volatility
- The income tax provision showed extreme variability, alternating between positive expenses and negative benefits. Tax benefits were recorded in September 2017 and September 2019, while the highest provision was noted in September 2018 at 862 million US dollars. Toward the end of the period, in 2020 and 2021, the provision normalized to a lower range of 111 million to 150 million US dollars.
- Accrual vs. Cash Tax Divergence
- A notable disparity exists between the reported tax provision and actual cash operating taxes. In periods where tax benefits were recorded, such as 2017 and 2019, the company continued to make positive cash tax payments. This indicates that accounting-based tax expenses did not align with actual liquidity outflows, suggesting the influence of significant deferred tax adjustments or timing differences that would impact the determination of economic value added.
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Invested Capital
Becton, Dickinson & Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
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 restructuring liability.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of short-term investments.
The trajectory of invested capital exhibits a period of rapid expansion between 2016 and 2018, followed by a phase of relative stability through 2021. Total invested capital increased from US$ 22,258 million in 2016 to a peak of US$ 47,282 million in 2018, representing a growth of approximately 112% over two years. From 2019 onward, invested capital remained consolidated within a narrow range, fluctuating between US$ 45,181 million and US$ 46,312 million.
- Debt and Lease Obligations
- Total reported debt and leases showed a sharp upward trend initially, rising from US$ 11,801 million in 2016 to a maximum of US$ 21,951 million in 2018. Following this peak, a consistent downward trend is observed, with debt levels receding to US$ 18,080 million by September 30, 2021, indicating a systematic deleveraging process in the latter half of the period.
- Shareholders' Equity Growth
- Shareholders' equity experienced sustained growth throughout the analyzed timeframe. The value climbed from US$ 7,633 million in 2016 to US$ 23,677 million in 2021. The most significant acceleration occurred between 2016 and 2018, during which equity nearly tripled, contributing substantially to the overall increase in invested capital.
- Capital Composition Dynamics
- A shift in the composition of invested capital is evident. In 2016, debt constituted the larger portion of the invested capital base. By 2021, however, shareholders' equity became the dominant component. This transition indicates a strategic shift toward a more equity-heavy capital structure, reducing reliance on borrowed funds and leases relative to equity financing.
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Cost of Capital
Becton, Dickinson & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 69,432) | 69,432) | ÷ | 90,561) | = | 0.77 | 0.77 | × | 14.21% | = | 10.89% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 90,561) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | 1,619) | 1,619) | ÷ | 90,561) | = | 0.02 | 0.02 | × | 5.56% | = | 0.10% | ||
| Debt3 | 19,040) | 19,040) | ÷ | 90,561) | = | 0.21 | 0.21 | × | 2.65% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 470) | 470) | ÷ | 90,561) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 90,561) | 1.00 | 11.44% | ||||||||||
Based on: 10-K (reporting date: 2021-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 65,973) | 65,973) | ÷ | 87,672) | = | 0.75 | 0.75 | × | 14.21% | = | 10.69% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 87,672) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | 1,580) | 1,580) | ÷ | 87,672) | = | 0.02 | 0.02 | × | 5.70% | = | 0.10% | ||
| Debt3 | 19,677) | 19,677) | ÷ | 87,672) | = | 0.22 | 0.22 | × | 3.19% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 442) | 442) | ÷ | 87,672) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 87,672) | 1.00 | 11.37% | ||||||||||
Based on: 10-K (reporting date: 2020-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 70,428) | 70,428) | ÷ | 94,492) | = | 0.75 | 0.75 | × | 14.21% | = | 10.59% | ||
| 6.125% Cumulative Preferred Stock, Series A | 3,065) | 3,065) | ÷ | 94,492) | = | 0.03 | 0.03 | × | 4.96% | = | 0.16% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 94,492) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 20,509) | 20,509) | ÷ | 94,492) | = | 0.22 | 0.22 | × | 3.17% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 490) | 490) | ÷ | 94,492) | = | 0.01 | 0.01 | × | 3.17% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 94,492) | 1.00 | 11.31% | ||||||||||
Based on: 10-K (reporting date: 2019-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 64,929) | 64,929) | ÷ | 90,033) | = | 0.72 | 0.72 | × | 14.21% | = | 10.25% | ||
| 6.125% Cumulative Preferred Stock, Series A | 3,235) | 3,235) | ÷ | 90,033) | = | 0.04 | 0.04 | × | 4.69% | = | 0.17% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 90,033) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 21,413) | 21,413) | ÷ | 90,033) | = | 0.24 | 0.24 | × | 3.25% × (1 – 24.50%) | = | 0.58% | ||
| Operating lease liability4 | 456) | 456) | ÷ | 90,033) | = | 0.01 | 0.01 | × | 3.25% × (1 – 24.50%) | = | 0.01% | ||
| Total: | 90,033) | 1.00 | 11.01% | ||||||||||
Based on: 10-K (reporting date: 2018-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 51,120) | 51,120) | ÷ | 73,514) | = | 0.70 | 0.70 | × | 14.21% | = | 9.88% | ||
| 6.125% Cumulative Preferred Stock, Series A | 2,735) | 2,735) | ÷ | 73,514) | = | 0.04 | 0.04 | × | 5.54% | = | 0.21% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 73,514) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 19,409) | 19,409) | ÷ | 73,514) | = | 0.26 | 0.26 | × | 3.34% × (1 – 35.00%) | = | 0.57% | ||
| Operating lease liability4 | 250) | 250) | ÷ | 73,514) | = | 0.00 | 0.00 | × | 3.34% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 73,514) | 1.00 | 10.67% | ||||||||||
Based on: 10-K (reporting date: 2017-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,772) | 35,772) | ÷ | 48,321) | = | 0.74 | 0.74 | × | 14.21% | = | 10.52% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 48,321) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 48,321) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 12,299) | 12,299) | ÷ | 48,321) | = | 0.25 | 0.25 | × | 3.68% × (1 – 35.00%) | = | 0.61% | ||
| Operating lease liability4 | 250) | 250) | ÷ | 48,321) | = | 0.01 | 0.01 | × | 3.68% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 48,321) | 1.00 | 11.14% | ||||||||||
Based on: 10-K (reporting date: 2016-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Becton, Dickinson & Co., economic spread ratio calculation, comparison to benchmarks
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,026) | (4,273) | (4,004) | (4,636) | (2,397) | (1,763) | |
| Invested capital2 | 45,278) | 46,312) | 45,181) | 47,282) | 34,655) | 22,258) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -6.68% | -9.23% | -8.86% | -9.80% | -6.92% | -7.92% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Abbott Laboratories | -1.95% | — | — | — | — | — | |
| Elevance Health Inc. | 1.46% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 12.41% | — | — | — | — | — | |
| Medtronic PLC | -6.71% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 3.91% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,026 ÷ 45,278 = -6.68%
4 Click competitor name to see calculations.
Analysis of the economic value added metrics reveals a persistent negative economic profit and a negative economic spread ratio across the six-year period from 2016 to 2021. The data indicates a period of aggressive capital expansion followed by a relative stabilization of the capital base and a gradual improvement in value creation metrics toward the end of the observation window.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed timeframe, indicating that the returns generated were insufficient to cover the cost of invested capital. A significant decline was observed between 2016 and 2018, with losses widening from -1,763 million to a peak of -4,636 million. Following 2018, the losses showed a fluctuating but general trend of recovery, narrowing to -3,026 million by September 30, 2021.
- Invested Capital Expansion
- A substantial increase in invested capital occurred between 2016 and 2018, rising from 22,258 million to 47,282 million. This rapid expansion of the capital base corresponds with the period of the most significant decline in economic profit. From 2019 onward, the invested capital remained relatively stable, fluctuating within a narrow range between 45,181 million and 46,312 million.
- Economic Spread Ratio Performance
- The economic spread ratio, measuring the difference between the return on invested capital and the cost of capital, remained consistently negative, signaling continuous value destruction. The ratio reached its lowest point in 2018 at -9.80%, coinciding with the peak of invested capital and the maximum economic loss. However, a recovery phase is evident from 2019 to 2021, with the ratio improving to -6.68%, the most favorable level recorded during the period.
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Economic Profit Margin
Becton, Dickinson & Co., economic profit margin calculation, comparison to benchmarks
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,026) | (4,273) | (4,004) | (4,636) | (2,397) | (1,763) | |
| Revenues | 20,248) | 17,117) | 17,290) | 15,983) | 12,093) | 12,483) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -14.94% | -24.97% | -23.16% | -29.00% | -19.82% | -14.12% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Abbott Laboratories | -2.81% | — | — | — | — | — | |
| Elevance Health Inc. | 0.68% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 9.76% | — | — | — | — | — | |
| Medtronic PLC | -16.09% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 1.92% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -3,026 ÷ 20,248 = -14.94%
3 Click competitor name to see calculations.
The financial performance over the six-year period from 2016 to 2021 is characterized by consistent negative economic profit despite a strong upward trajectory in total revenues. While the company successfully expanded its top-line growth, the cost of capital consistently exceeded the net operating profit after taxes, resulting in a sustained erosion of economic value.
- Economic Profit Trends
- Economic profit remained negative throughout the entire analyzed period, indicating that the company did not generate returns above its cost of capital. A significant deterioration occurred between 2016 and 2018, with the deficit widening from -1,763 million USD to a peak loss of -4,636 million USD. Following this low point, the figures exhibited volatility, fluctuating between -4,004 million USD and -4,273 million USD in 2019 and 2020, before improving to -3,026 million USD by September 30, 2021.
- Revenue Growth Patterns
- A robust growth trend in revenues is evident, moving from 12,483 million USD in 2016 to 20,248 million USD in 2021. Notable accelerations in revenue occurred in 2018 and 2021. This growth suggests an expansion in market reach or pricing power, although these gains were insufficient to shift the economic profit into positive territory.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit, reaching its lowest point of -29.00% in 2018. This indicates that the growth in revenues during that specific year was accompanied by a disproportionate increase in the capital charge or a decrease in operational efficiency. However, a recovery phase is observed from 2019 onward, with the margin improving to -14.94% by 2021, nearly returning to the 2016 level of -14.12%. This trend suggests an increasing efficiency in utilizing capital relative to revenue generation toward the end of the period.
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