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 – 13.56% × 22,868 = -2,003
The financial trajectory from 2018 to 2022 is characterized by persistent negative economic profit, indicating that the returns generated from operations were insufficient to cover the cost of the capital employed. While there was a partial recovery in operational profitability following a significant decline in 2020, the overall trend reflects a consistent destruction of economic value over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- A period of significant volatility is evident in NOPAT. After starting at 1,711 million US$ in 2018, operational profits declined sharply, reaching a trough of 153 million US$ in 2020. A strong recovery occurred in 2021, with NOPAT rising to 1,270 million US$, followed by a slight contraction to 1,099 million US$ in 2022. This fluctuation suggests instability in operational efficiency or external market shocks during the middle of the analyzed period.
- Invested Capital and Capital Cost
- Invested capital exhibited a consistent and linear upward trend, growing from 16,047 million US$ in 2018 to 22,868 million US$ by 2022. This steady expansion of the capital base occurred despite the fluctuations in NOPAT. Meanwhile, the cost of capital remained relatively stable, fluctuating within a narrow range between 12.93% and 13.74%, which indicates a consistent required rate of return for investors.
- Economic Profit Trends
- Economic profit remained negative throughout the entire duration, signifying that the company failed to achieve its cost of capital. The deficit widened substantially from -494 million US$ in 2018 to a peak loss of -2,568 million US$ in 2020, corresponding with the collapse in NOPAT. Although the economic loss narrowed to -1,646 million US$ in 2021 due to improved operational performance, it widened again to -2,003 million US$ in 2022.
- Synthesis of Value Creation
- The divergence between the steadily increasing invested capital and the volatile, lower-than-required NOPAT is the primary driver of the negative economic profit. The growth in the asset base did not yield a proportional increase in operational returns, thereby increasing the total capital charge and deepening the economic deficit.
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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.
- 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$1,099 million in 2022. This implies that while operational profitability was significantly impacted during 2019 and 2020, there was a notable operational improvement in 2021 and 2022, albeit not reaching the levels seen in 2018.
- Comparative Insights
- The considerable divergence between net income and NOPAT in 2019, where net income peaked but NOPAT decreased, may suggest the influence of non-operating factors such as gains, losses, or tax effects that boosted net income independently from operational performance. The loss in net income in 2020 contrasted with a very low but positive NOPAT indicates operational struggles compounded by additional factors impacting overall profitability negatively. The recovery trend in both metrics in 2021 highlights an improvement phase, although 2022 figures show some erosion in profitability relative to 2021. The continued volatility points to potential underlying operational and external challenges affecting the company’s financial outcomes across the five-year period.
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Cash Operating Taxes
Boston Scientific Corp., cash operating taxes calculation
US$ 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).
- 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 $552 million in 2022. This progression indicates growing cash tax outflows, which may correlate with increasing taxable income, changes in tax strategies, or adjustments in tax payment timings.
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Invested Capital
Boston Scientific Corp., invested capital calculation (financing approach)
US$ 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.
- 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.
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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 | × | 15.16% | = | 13.25% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,155) | 1,155) | ÷ | 77,459) | = | 0.01 | 0.01 | × | 5.50% | = | 0.08% | ||
| Outstanding debt obligations3 | 8,203) | 8,203) | ÷ | 77,459) | = | 0.11 | 0.11 | × | 2.65% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 408) | 408) | ÷ | 77,459) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 77,459) | 1.00 | 13.56% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 15.16% | = | 12.74% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,154) | 1,154) | ÷ | 74,172) | = | 0.02 | 0.02 | × | 5.50% | = | 0.09% | ||
| Outstanding debt obligations3 | 10,196) | 10,196) | ÷ | 74,172) | = | 0.14 | 0.14 | × | 3.58% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 460) | 460) | ÷ | 74,172) | = | 0.01 | 0.01 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 74,172) | 1.00 | 13.23% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ 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 | × | 15.16% | = | 12.37% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | 1,103) | 1,103) | ÷ | 67,263) | = | 0.02 | 0.02 | × | 5.50% | = | 0.09% | ||
| Outstanding debt obligations3 | 10,774) | 10,774) | ÷ | 67,263) | = | 0.16 | 0.16 | × | 3.55% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 471) | 471) | ÷ | 67,263) | = | 0.01 | 0.01 | × | 2.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 67,263) | 1.00 | 12.93% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | × | 15.16% | = | 12.59% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | —) | —) | ÷ | 67,085) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Outstanding debt obligations3 | 11,020) | 11,020) | ÷ | 67,085) | = | 0.16 | 0.16 | × | 3.70% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 343) | 343) | ÷ | 67,085) | = | 0.01 | 0.01 | × | 3.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 67,085) | 1.00 | 13.08% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ 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 | × | 15.16% | = | 13.33% | ||
| 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share | —) | —) | ÷ | 62,791) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Outstanding debt obligations3 | 7,239) | 7,239) | ÷ | 62,791) | = | 0.12 | 0.12 | × | 4.25% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 308) | 308) | ÷ | 62,791) | = | 0.00 | 0.00 | × | 4.25% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 62,791) | 1.00 | 13.74% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ 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 | (2,003) | (1,646) | (2,568) | (1,839) | (494) | |
| Invested capital2 | 22,868) | 22,038) | 21,053) | 20,389) | 16,047) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -8.76% | -7.47% | -12.20% | -9.02% | -3.08% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -2.46% | -1.98% | — | — | — | |
| Elevance Health Inc. | 0.14% | 1.46% | — | — | — | |
| Intuitive Surgical Inc. | -3.34% | 12.27% | — | — | — | |
| Medtronic PLC | -5.09% | -6.73% | — | — | — | |
| 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 × -2,003 ÷ 22,868 = -8.76%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by a consistent inability to generate positive economic value. Throughout the analyzed period, economic profit remained negative, indicating that the returns on invested capital failed to exceed the cost of capital. Despite a steady increase in the total capital base, the company experienced a widening gap between its operating returns and its cost of capital, which peaked in 2020.
- Economic Profit Trend
- Economic profit exhibited significant volatility while remaining in negative territory. The deficit expanded from -494 million USD in 2018 to a peak loss of -2,568 million USD in 2020. A partial recovery was observed in 2021, with losses narrowing to -1,646 million USD, before declining again to -2,003 million USD in 2022.
- Invested Capital Growth
- A consistent upward trajectory is observed in invested capital, which rose from 16,047 million USD in 2018 to 22,868 million USD by 2022. This steady growth in the capital base suggests ongoing investment in assets or operations, though these investments have not yet yielded a positive economic spread.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the five-year period, confirming that the weighted average cost of capital consistently exceeded the return on invested capital. The ratio deteriorated from -3.08% in 2018 to a low of -12.20% in 2020. While an improvement to -7.47% was recorded in 2021, the ratio drifted back to -8.76% in 2022, highlighting a persistent deficit in value creation.
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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 | (2,003) | (1,646) | (2,568) | (1,839) | (494) | |
| 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 | -15.76% | -13.74% | -25.92% | -17.09% | -5.03% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -3.45% | -2.85% | — | — | — | |
| Elevance Health Inc. | 0.06% | 0.68% | — | — | — | |
| Intuitive Surgical Inc. | -2.89% | 9.66% | — | — | — | |
| Medtronic PLC | -11.17% | -16.16% | — | — | — | |
| 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 × -2,003 ÷ 12,707 = -15.76%
3 Click competitor name to see calculations.
Between 2018 and 2022, a persistent deficit in economic profit was observed, indicating that the returns generated were insufficient to cover the cost of capital. While adjusted net sales exhibited a general upward trajectory over the five-year period, the economic profit margin remained negative, reflecting a consistent failure to achieve economic value added.
- Economic Profit Volatility
- Economic profit showed a marked deterioration from 2018 to 2020, moving from -494 million USD to a peak deficit of -2,568 million USD. A recovery was noted in 2021, as the deficit narrowed to -1,646 million USD, though this trend reversed slightly in 2022 with economic profit falling to -2,003 million USD.
- Adjusted Net Sales Growth
- Adjusted net sales increased from 9,823 million USD in 2018 to 12,707 million USD in 2022. Despite a temporary contraction in 2020, where sales decreased to 9,908 million USD, the overall trend indicates a growth in top-line revenue, particularly with significant gains recorded in 2021 and 2022.
- Economic Profit Margin Trends
- The economic profit margin mirrored the volatility of the absolute economic profit, dropping from -5.03% in 2018 to a low of -25.92% in 2020. Although the margin improved to -13.74% in 2021, it widened again to -15.76% in 2022. This indicates that the growth in adjusted net sales has not been sufficient to reverse the negative economic profit margin or fully optimize the cost of capital.
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