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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Boston Scientific Corp. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Reportable Segments
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a notable fluctuation over the five-year period. It starts at a relatively high value of 1711 million US dollars in 2018, then experiences a sharp decline to 829 million in 2019 and further drops substantially to 153 million in 2020. Following this trough, there is a recovery observed in 2021, with NOPAT rising to 1270 million, before decreasing again to 1099 million in 2022. Overall, the pattern reflects significant volatility, with a prominent dip during 2019–2020 and partial recovery thereafter.
- Cost of Capital
- The cost of capital exhibits a slightly downward trend from 11.69% in 2018 to 11.03% in 2020, suggesting a marginal reduction in capital costs during that timeframe. However, this trend reverses in the subsequent years, with the cost increasing to 11.28% in 2021 and further to 11.53% in 2022. The changes, though relatively moderate, indicate some variability in the company's funding costs across the period.
- Invested Capital
- Invested capital displays a consistent upward trajectory over the five years. Beginning at 16,047 million US dollars in 2018, it increases steadily each year, reaching 22,868 million by the end of 2022. This progression suggests ongoing investment and expansion of the capital base, with an approximate 42% increase over the period.
- Economic Profit
- Economic profit remains negative throughout the period, indicating that returns fail to exceed the cost of capital consistently. It starts at -166 million US dollars in 2018, then worsens significantly to -1,445 million in 2019 and further to -2,169 million in 2020. Although there is some improvement in 2021, with economic profit rising to -1,215 million, it declines again to -1,538 million in 2022. These figures reflect persistent value destruction relative to invested capital costs.
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 | ||||||
| CVS Health Corp. | ||||||
| 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.
- Economic Profit
- The economic profit displayed a negative value throughout all the reported years, indicating consistent economic losses. It worsened significantly from -166 million US dollars in 2018 to -2,169 million US dollars in 2020. Subsequently, it improved somewhat in 2021 to -1,215 million US dollars, though it increased again to -1,538 million US dollars in 2022.
- Invested Capital
- The invested capital exhibited a steady upward trend over the period analyzed. Starting at 16,047 million US dollars in 2018, it grew each year, reaching 22,868 million US dollars in 2022. This increase suggests a continuous expansion in the company’s capital base over the five years.
- Economic Spread Ratio
- The economic spread ratio was negative in all years, reflecting a consistent cost of capital exceeding the return on invested capital. The ratio declined sharply from -1.03% in 2018 to a low of -10.3% in 2020. Although there was an improvement to -5.51% in 2021, the ratio worsened again to -6.73% in 2022, signaling ongoing challenges in achieving positive economic returns.
- Overall Analysis
- The data reveals a pattern where increased invested capital was not accompanied by positive economic profitability. Despite the capital base growth, the company struggled to generate adequate returns, as evidenced by persistent negative economic profit and economic spread ratios. The particularly poor performance in 2020 suggests an adverse impact during that year, with partial recovery afterward but no return to positive economic value creation.
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 | ||||||
| CVS Health Corp. | ||||||
| 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.
- Adjusted Net Sales
- Adjusted net sales exhibited an overall upward trend from 2018 to 2022. Starting at $9,823 million in 2018, the sales increased to $10,762 million in 2019, before declining slightly to $9,908 million in 2020. Following this decline, sales recovered significantly to $11,977 million in 2021 and further increased to $12,707 million in 2022. This pattern indicates resilience and growth in sales despite a temporary dip in 2020.
- Economic Profit
- The economic profit remained negative throughout the observed period, indicating that the company did not generate returns exceeding its cost of capital in any year. The economic profit worsened significantly from -$166 million in 2018 to -$1,445 million in 2019. This negative trend continued, reaching its lowest point at -$2,169 million in 2020. Subsequently, there was a partial recovery with economic profit improving to -$1,215 million in 2021, before deteriorating again to -$1,538 million in 2022. The fluctuations suggest volatility in profitability, with especially large economic losses in 2019 and 2020.
- Economic Profit Margin
- The economic profit margin followed a similar negative trajectory over the period. It declined sharply from -1.69% in 2018 to -13.43% in 2019, and further to -21.89% in 2020, reflecting a significant decrease in profitability relative to sales. The margin improved to -10.15% in 2021, correlating with the partial recovery in economic profit, but then worsened again to -12.1% in 2022. This pattern highlights ongoing challenges in generating economic value despite an increase in sales revenue.
- Overall Analysis
- Despite the consistent growth in adjusted net sales over the five-year horizon, the company struggled to translate revenue increases into positive economic profit, as evidenced by persistent negative economic profit and economic profit margin figures. The most challenging years were 2019 and 2020, with steep declines in economic profitability. Although there was some improvement in 2021, the subsequent deterioration in 2022 suggests continuing difficulties in achieving sustainable economic profit. This indicates potential issues with cost management, capital efficiency, or other underlying economic factors affecting profitability despite robust sales figures.