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
Boston Scientific Corp., economic profit 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 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
= 1,099 – 13.53% × 22,868 = -1,994
The analysis of economic profit from 2018 to 2022 reveals a consistent inability to generate returns exceeding the cost of capital. Economic profit remained negative throughout the entire five-year period, indicating that the company did not create economic value for its shareholders, but rather eroded it.
- Net Operating Profit After Taxes (NOPAT)
- A high degree of volatility is observed in NOPAT. After a peak of 1,711 million US$ in 2018, there was a precipitous decline, reaching a low of 153 million US$ in 2020. While a significant recovery occurred in 2021 with NOPAT rising to 1,270 million US$, the figure moderated to 1,099 million US$ by 2022.
- Invested Capital
- There is a clear and consistent upward trend in invested capital. The capital base grew steadily from 16,047 million US$ in 2018 to 22,868 million US$ by 2022. This represents a continuous expansion of the resource base used to generate operating profits.
- Cost of Capital
- The cost of capital remained relatively stable over the analyzed period, fluctuating within a narrow range between 12.89% and 13.70%. This stability suggests that the external and internal risk profiles affecting the required rate of return did not undergo drastic changes.
- Economic Profit Trends
- Economic profit deteriorated significantly between 2018 and 2020, moving from -488 million US$ to a peak deficit of -2,561 million US$. This decline was driven by the simultaneous collapse of NOPAT and the increase in the total invested capital base. Although the deficit narrowed to -1,638 million US$ in 2021 following the recovery in operating profit, it widened again to -1,994 million US$ in 2022. The divergence between growing invested capital and inconsistent NOPAT has resulted in a sustained negative economic value added.
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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
= 408 × 3.30% = 13
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 483 × 21.00% = 102
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
= 0 × 21.00% = 0
9 Elimination of after taxes investment income.
The financial performance between 2018 and 2022 is characterized by significant volatility in both bottom-line earnings and operational profitability. While a recovery trend was established after a sharp downturn in 2020, the results exhibit non-linear growth and substantial fluctuations in profitability metrics.
- Net Income Volatility
- Net income experienced extreme fluctuations over the five-year period. A peak of US$ 4,700 million was recorded in 2019, which was immediately followed by a collapse to a net loss of US$ 82 million in 2020. Profitability returned in 2021 at US$ 1,041 million before declining to US$ 698 million in 2022.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT followed a distinct U-shaped trajectory. Operational profitability declined steadily from US$ 1,711 million in 2018 to a low of US$ 153 million in 2020. This decline was reversed in 2021 with a recovery to US$ 1,270 million, followed by a moderate reduction to US$ 1,099 million in 2022.
- Divergence Between Operating and Net Results
- A significant divergence is observed in 2019, where net income surged to its highest point despite a contraction in NOPAT, indicating that the net result was heavily influenced by non-operating gains or one-time accounting adjustments. In contrast, 2020 showed that while NOPAT remained positive, the company incurred a net loss, suggesting that non-operating expenses or exceptional items outweighed the operating profit.
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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).
An analysis of tax-related expenditures reveals significant volatility between 2018 and 2022, characterized by a transition from substantial tax benefits to increasing cash outflows.
- Income Tax Expense (Benefit)
- Accounting tax expenses exhibited extreme fluctuations, with significant tax benefits reported in 2018 (-$249 million) and 2019 (-$4,013 million). From 2020 onward, this trend reversed, moving into positive expense territory and increasing steadily from $2 million in 2020 to $443 million by 2022.
- Cash Operating Taxes
- Cash tax payments show a general upward trajectory following a period of initial instability. After a modest benefit in 2018 (-$33 million) and a spike in 2019 ($377 million), cash taxes decreased to $165 million in 2020 before rising consistently to $252 million in 2021 and $552 million in 2022.
- Comparative Divergence and EVA Impact
- A notable divergence is observed between accrual-based tax expenses and actual cash tax payments, most prominently in 2019, where a massive accounting benefit coincided with a significant cash outflow. This suggests the influence of substantial non-cash deferred tax adjustments. Regarding Economic Value Added (EVA) considerations, the consistent rise in cash operating taxes from 2020 to 2022 indicates an increasing cash burden that reduces the after-tax operating profit available to cover the cost of capital.
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Invested Capital
Boston Scientific Corp., invested capital calculation (financing approach)
US$ 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.
Invested capital exhibited a sustained upward trajectory from 2018 to 2022, increasing from US$ 16,047 million to US$ 22,868 million. The most significant growth occurred between 2018 and 2019, representing a 27% increase in the capital base, followed by a period of moderate, steady expansion over the subsequent three years.
- Stockholders' Equity Trends
- A consistent growth pattern is observed in stockholders' equity, which rose from US$ 8,726 million in 2018 to US$ 17,573 million in 2022. This represents a total increase of approximately 101% over the five-year period. The steady climb indicates strong internal capital accumulation or equity injections, serving as the primary driver for the overall expansion of the total invested capital base.
- Debt and Lease Obligations
- Total reported debt and leases experienced a sharp increase between 2018 and 2019, rising from US$ 7,364 million to US$ 10,351 million. Subsequent years demonstrate a gradual downward trend, with debt levels receding to US$ 9,343 million by December 31, 2022. This suggests a strategic shift toward debt reduction following a period of significant leveraging in 2019.
- Capital Structure Composition
- The composition of invested capital shifted notably toward equity. In 2018, debt and equity were relatively balanced, with debt comprising approximately 46% of the invested capital. By 2022, equity grew to represent approximately 77% of the total invested capital, while the proportion of debt declined to approximately 23%. This transition indicates a reduction in financial leverage and an increased reliance on equity to support the organization's asset base.
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Cost of Capital
Boston Scientific Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 67,693) | 67,693) | ÷ | 77,459) | = | 0.87 | 0.87 | × | 15.12% | = | 13.21% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,155) | 1,155) | ÷ | 77,459) | = | 0.01 | 0.01 | × | 5.50% | = | 0.08% | ||
| Outstanding debt obligations3 | 8,203) | 8,203) | ÷ | 77,459) | = | 0.11 | 0.11 | × | 2.65% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 408) | 408) | ÷ | 77,459) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 77,459) | 1.00 | 13.53% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | 62,362) | 62,362) | ÷ | 74,172) | = | 0.84 | 0.84 | × | 15.12% | = | 12.71% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,154) | 1,154) | ÷ | 74,172) | = | 0.02 | 0.02 | × | 5.50% | = | 0.09% | ||
| Outstanding debt obligations3 | 10,196) | 10,196) | ÷ | 74,172) | = | 0.14 | 0.14 | × | 3.58% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 460) | 460) | ÷ | 74,172) | = | 0.01 | 0.01 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 74,172) | 1.00 | 13.20% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | 54,915) | 54,915) | ÷ | 67,263) | = | 0.82 | 0.82 | × | 15.12% | = | 12.34% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,103) | 1,103) | ÷ | 67,263) | = | 0.02 | 0.02 | × | 5.50% | = | 0.09% | ||
| Outstanding debt obligations3 | 10,774) | 10,774) | ÷ | 67,263) | = | 0.16 | 0.16 | × | 3.55% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 471) | 471) | ÷ | 67,263) | = | 0.01 | 0.01 | × | 2.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 67,263) | 1.00 | 12.89% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | 55,722) | 55,722) | ÷ | 67,085) | = | 0.83 | 0.83 | × | 15.12% | = | 12.55% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | —) | —) | ÷ | 67,085) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Outstanding debt obligations3 | 11,020) | 11,020) | ÷ | 67,085) | = | 0.16 | 0.16 | × | 3.70% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 343) | 343) | ÷ | 67,085) | = | 0.01 | 0.01 | × | 3.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 67,085) | 1.00 | 13.05% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ 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 | 55,244) | 55,244) | ÷ | 62,791) | = | 0.88 | 0.88 | × | 15.12% | = | 13.30% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | —) | —) | ÷ | 62,791) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Outstanding debt obligations3 | 7,239) | 7,239) | ÷ | 62,791) | = | 0.12 | 0.12 | × | 4.25% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 308) | 308) | ÷ | 62,791) | = | 0.00 | 0.00 | × | 4.25% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 62,791) | 1.00 | 13.70% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ 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 | (1,994) | (1,638) | (2,561) | (1,832) | (488) | |
| Invested capital2 | 22,868) | 22,038) | 21,053) | 20,389) | 16,047) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -8.72% | -7.43% | -12.17% | -8.99% | -3.04% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -2.43% | -1.95% | — | — | — | |
| Elevance Health Inc. | 0.14% | 1.46% | — | — | — | |
| Intuitive Surgical Inc. | -3.21% | 12.41% | — | — | — | |
| Medtronic PLC | -5.06% | -6.71% | — | — | — | |
| UnitedHealth Group Inc. | 4.06% | 3.91% | — | — | — | |
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 × -1,994 ÷ 22,868 = -8.72%
4 Click competitor name to see calculations.
Between 2018 and 2022, a consistent failure to generate positive economic value is observed, as evidenced by negative economic profit and a negative economic spread ratio throughout the period. While invested capital grew steadily, the returns generated were insufficient to cover the cost of that capital, resulting in a persistent destruction of economic value.
- Economic Profit Trends
- Economic profit remained negative for the entire five-year duration, indicating that the company did not achieve returns exceeding its weighted average cost of capital. The deficit widened significantly from -488 million USD in 2018 to a peak loss of -2,561 million USD in 2020. A partial recovery occurred in 2021 with a loss of -1,638 million USD, before the figure declined again to -1,994 million USD by the end of 2022.
- Invested Capital Expansion
- A continuous upward trend in invested capital is evident, rising from 16,047 million USD in 2018 to 22,868 million USD in 2022. This represents a steady increase in the capital base, although this expansion occurred concurrently with negative economic profits, suggesting that additional capital investments did not immediately translate into value creation.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, remained negative throughout the period. The ratio deteriorated from -3.04% in 2018 to a low of -12.17% in 2020, marking the point of maximum inefficiency in capital utilization. Although the ratio improved to -7.43% in 2021, it weakened again to -8.72% in 2022, confirming a sustained inability to generate a positive spread over the cost of capital.
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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 | (1,994) | (1,638) | (2,561) | (1,832) | (488) | |
| Net sales | 12,682) | 11,888) | 9,913) | 10,735) | 9,823) | |
| Add: Increase (decrease) in deferred revenue | 25) | 89) | (5) | 27) | —) | |
| Adjusted net sales | 12,707) | 11,977) | 9,908) | 10,762) | 9,823) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -15.70% | -13.68% | -25.85% | -17.02% | -4.97% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -3.41% | -2.81% | — | — | — | |
| Elevance Health Inc. | 0.06% | 0.68% | — | — | — | |
| Intuitive Surgical Inc. | -2.77% | 9.76% | — | — | — | |
| Medtronic PLC | -11.11% | -16.09% | — | — | — | |
| UnitedHealth Group Inc. | 2.08% | 1.92% | — | — | — | |
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 × -1,994 ÷ 12,707 = -15.70%
3 Click competitor name to see calculations.
Analysis of the economic value added (EVA) metrics reveals a sustained period of negative economic profit from 2018 through 2022, indicating that the company's net operating profit after tax was insufficient to cover its cost of capital during this timeframe.
- Economic Profit Trends
- Economic profit remained negative across the five-year period. A significant deterioration occurred between 2018 and 2020, with the deficit expanding from -488 million to a peak of -2,561 million. A partial recovery was observed in 2021, where losses narrowed to -1,638 million, before increasing again to -1,994 million in 2022.
- Adjusted Net Sales Performance
- Adjusted net sales exhibited a general growth trend, rising from 9,823 million in 2018 to 12,707 million in 2022. Despite a slight contraction in 2020 to 9,908 million, the subsequent years showed strong recovery and expansion, with the most significant year-over-year increase occurring between 2020 and 2021.
- Economic Profit Margin Volatility
- The economic profit margin remained consistently negative, reflecting the inability to generate value above the cost of capital relative to sales. The margin declined sharply from -4.97% in 2018 to its lowest point of -25.85% in 2020. Although the margin improved to -13.68% in 2021, it deteriorated slightly to -15.70% in 2022, indicating that the increase in adjusted net sales has not yet translated into positive economic value creation.
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