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
Boston Scientific Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of economic profit from 2018 to 2022 reveals a sustained period of negative value creation. Throughout the observed timeframe, the company failed to generate a net operating profit after taxes (NOPAT) sufficient to cover the cost of its invested capital, resulting in persistent negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, beginning at 1,711 million in 2018 and declining sharply to a minimum of 153 million in 2020. While a recovery occurred in 2021, reaching 1,270 million, the figure moderated to 1,099 million by 2022, remaining below the 2018 baseline.
- Invested Capital
- A consistent upward trend is observed in invested capital, which grew from 16,047 million in 2018 to 22,868 million in 2022. This steady expansion of the capital base increased the total capital charge required to achieve a positive economic profit.
- Cost of Capital
- The cost of capital remained relatively stable over the five-year period, fluctuating within a narrow range between 12.77% and 13.57%. This stability indicates that the fluctuations in economic profit were primarily driven by operational performance and capital accumulation rather than changes in the cost of financing.
- Economic Profit Trends
- Economic profit remained negative for all five years, with the deficit widening from -466 million in 2018 to a peak loss of -2,535 million in 2020. Despite the partial recovery of NOPAT in 2021, the economic profit ended the period at -1,963 million in 2022, illustrating a persistent inability to generate returns above the weighted average cost of capital.
Net Operating Profit after Taxes (NOPAT)
Boston Scientific Corp., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income (loss).
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income (loss).
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net Income (Loss)
- The net income demonstrates significant volatility over the analyzed periods. It increased markedly from US$1,671 million in 2018 to a peak of US$4,700 million in 2019. However, the year 2020 saw a sharp reversal, with net income turning into a loss of US$82 million. Following this dip, net income recovered to US$1,041 million in 2021 but declined again to US$698 million in 2022. Overall, the trend indicates substantial fluctuations, with the highest profitability recorded in 2019 and a noticeable setback in 2020, followed by a partial recovery and a subsequent decline.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures display a different pattern compared to net income. Beginning at US$1,711 million in 2018, NOPAT fell steadily to US$829 million in 2019 and then to a low of US$153 million in 2020. However, it experienced a strong recovery in the subsequent two years, rising to US$1,270 million in 2021 and slightly decreasing to US$1,099 million in 2022. This implies that while operational profitability was significantly impacted during 2019 and 2020, there was a notable operational improvement in 2021 and 2022, albeit not reaching the levels seen in 2018.
- Comparative Insights
- The considerable divergence between net income and NOPAT in 2019, where net income peaked but NOPAT decreased, may suggest the influence of non-operating factors such as gains, losses, or tax effects that boosted net income independently from operational performance. The loss in net income in 2020 contrasted with a very low but positive NOPAT indicates operational struggles compounded by additional factors impacting overall profitability negatively. The recovery trend in both metrics in 2021 highlights an improvement phase, although 2022 figures show some erosion in profitability relative to 2021. The continued volatility points to potential underlying operational and external challenges affecting the company’s financial outcomes across the five-year period.
Cash Operating Taxes
Boston Scientific Corp., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
- Income Tax Expense (Benefit)
- The income tax expense exhibited significant fluctuations over the five-year period. In 2018 and 2019, the company recorded substantial tax benefits of -$249 million and -$4,013 million, respectively. However, the trend reversed in 2020, with a slight positive tax expense of $2 million, followed by a gradual increase to $36 million in 2021 and $443 million in 2022. This shift from large tax benefits to increasing tax expenses suggests a considerable change in tax-related factors affecting the company, possibly reflecting changes in profitability, tax regulations, or deferred tax assets and liabilities.
- Cash Operating Taxes
- Cash operating taxes showed a consistent upward trend throughout the period analyzed. Starting with a negative value of -$33 million in 2018, cash taxes rose to $377 million in 2019, before experiencing a slight decrease to $165 million in 2020. From 2020 onwards, cash taxes increased steadily to $252 million in 2021 and further to $552 million in 2022. This progression indicates growing cash tax outflows, which may correlate with increasing taxable income, changes in tax strategies, or adjustments in tax payment timings.
Invested Capital
Boston Scientific Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
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 deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of capital in progress.
- Total reported debt & leases
- The total reported debt and leases experienced a significant increase from 7,364 million USD in 2018 to 10,351 million USD in 2019. Following this peak, the figure showed a gradual decline over the next three years, decreasing to 9,614 million USD in 2020, 9,525 million USD in 2021, and further to 9,343 million USD by the end of 2022. This pattern indicates a notable rise in leverage in 2019 followed by a steady reduction in debt levels thereafter.
- Stockholders’ equity
- Stockholders’ equity demonstrated a consistent and substantial upward trend throughout the period. Starting at 8,726 million USD in 2018, equity rose sharply to 13,877 million USD in 2019, and continued to grow annually, reaching 15,326 million USD in 2020, 16,622 million USD in 2021, and 17,573 million USD in 2022. This steady increase reflects a strengthening equity base over the five-year span.
- Invested capital
- Invested capital showed a pattern of continuous growth, rising from 16,047 million USD in 2018 to 20,389 million USD in 2019. Growth continued but at a slower pace in subsequent years, reaching 21,053 million USD in 2020, 22,038 million USD in 2021, and 22,868 million USD in 2022. The data suggests a deliberate increase in capital investment over time, with the most notable expansion occurring between 2018 and 2019.
Cost of Capital
Boston Scientific Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | ÷ | = | × | = | |||||||||
| Outstanding debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | ÷ | = | × | = | |||||||||
| Outstanding debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | ÷ | = | × | = | |||||||||
| Outstanding debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | ÷ | = | × | = | |||||||||
| Outstanding debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | ÷ | = | × | = | |||||||||
| Outstanding debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Boston Scientific Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of Economic Value Added (EVA) metrics reveals a consistent failure to generate returns exceeding the cost of capital over the period from 2018 to 2022. Despite a steady increase in the capital base, economic profit remained negative, resulting in a persistent negative economic spread ratio.
- Invested Capital Trends
- A continuous upward trajectory in invested capital is observed, growing from 16,047 million USD in 2018 to 22,868 million USD by 2022. This indicates a sustained increase in the total capital deployed into the business operations over the five-year duration.
- Economic Profit Performance
- Economic profit remained in negative territory throughout the entire period, signaling that the company did not create economic value. The deficit widened sharply from 466 million USD in 2018 to a peak loss of 2,535 million USD in 2020. While a partial recovery was noted in 2021, with the loss narrowing to 1,609 million USD, the figure declined again to 1,963 million USD by the end of 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibits a pattern of deterioration followed by volatility. The ratio moved from -2.91% in 2018 to its lowest point of -12.04% in 2020, coinciding with the peak in economic loss. A moderate improvement to -7.30% was achieved in 2021, but this trend reversed in 2022, with the ratio sliding to -8.59%. This suggests that the return on invested capital has consistently remained below the required cost of capital.
Economic Profit Margin
Boston Scientific Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
Analysis of the period from 2018 to 2022 reveals a consistent inability to generate positive economic value, as economic profit remained negative throughout the entire duration. While adjusted net sales demonstrated a general upward trajectory over the five-year span, this growth did not translate into positive economic profit, indicating that the returns on invested capital failed to exceed the company's cost of capital.
- Economic Profit Trends
- Economic profit experienced significant volatility and overall deterioration. From an initial deficit of 466 million USD in 2018, the loss widened sharply to a peak deficit of 2,535 million USD in 2020. A partial recovery occurred in 2021, with the deficit narrowing to 1,609 million USD, before expanding again to 1,963 million USD by the end of 2022.
- Adjusted Net Sales Performance
- Sales grew from 9,823 million USD in 2018 to 12,707 million USD in 2022. A notable temporary contraction was observed in 2020, where sales declined to 9,908 million USD, before rebounding strongly in 2021 and continuing to rise through 2022.
- Economic Profit Margin Analysis
- The economic profit margin tracked the combined impact of the expanding economic deficit and fluctuating sales. The margin deteriorated from -4.75% in 2018 to its lowest point of -25.58% in 2020. A relative improvement was recorded in 2021 at -13.44%, followed by a slight decline to -15.45% in 2022, confirming that the company remained unable to achieve economic profitability despite the increase in sales volume.