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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Builders FirstSource Inc. pages available for free this week:
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Analysis of Revenues
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Economic Profit
Builders FirstSource Inc., economic profit calculation
US$ in thousands
| 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 an overall increasing trend from 2018 to 2022. Starting at 352,490 thousand USD in 2018, there is a moderate increase through 2019 and 2020, with values of 374,658 and 451,161 thousand USD respectively. A significant rise occurs in 2021, reaching 1,833,934 thousand USD, which further increases to 2,864,596 thousand USD in 2022. This indicates enhanced profitability in recent years.
- Cost of Capital
- The cost of capital exhibits a steady upward trend between 2018 and 2020, moving from 13.88% in 2018 to 21.01% in 2020. After 2020, the cost of capital stabilizes somewhat, with a slight decline in 2021 to 20.20%, and a marginal increase to 20.28% in 2022. This suggests an increased risk or capital pricing component until 2020, followed by stabilization.
- Invested Capital
- The invested capital shows a considerable growth trend over the period. From approximately 2,393,541 thousand USD in 2018, the value remains fairly stable in 2019 but then increases significantly to 3,091,935 thousand USD in 2020. A sharp rise occurs in 2021, reaching 8,507,614 thousand USD, with a minor increase to 8,565,898 thousand USD in 2022. This reflects a substantial expansion in the asset base or capital employed by the company.
- Economic Profit
- Economic profit displays notable fluctuations during the analyzed period. It begins positively in 2018 with 20,327 thousand USD. However, there is a downturn in 2019 and 2020, with negative values of -55,773 and -198,603 thousand USD respectively, indicating that the company was not covering its cost of capital during these years. In 2021, economic profit turns positive again at 115,164 thousand USD, followed by a dramatic increase to 1,127,011 thousand USD in 2022. This suggests a recovery and significant value creation starting in 2021.
Net Operating Profit after Taxes (NOPAT)
Builders FirstSource Inc., NOPAT calculation
US$ in thousands
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 equity equivalents to net income.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
- Net Income
- Net income showed a positive and significant upward trend over the five-year period. Starting at 205,191 thousand US dollars in 2018, the figure increased moderately to 221,809 thousand in 2019 and then experienced a more substantial rise to 313,537 thousand in 2020. A pronounced acceleration occurred in 2021, with net income exceeding 1.7 million thousand US dollars, before reaching nearly 2.75 million thousand US dollars in 2022. This trend indicates strong growth in profitability, particularly in the final two years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also demonstrated steady growth throughout the analyzed period. It began at 352,490 thousand US dollars in 2018 and increased incrementally to 374,658 thousand in 2019, followed by a more notable rise to 451,161 thousand in 2020. Similar to net income, a substantial surge was observed in 2021, with NOPAT exceeding 1.8 million thousand US dollars, and it continued to rise in 2022 to nearly 2.86 million thousand US dollars. This suggests improved operational efficiency and profitability after tax considerations.
- Overall Trends and Insights
- The financial data indicates a consistent and strong upward trajectory in key profitability metrics over the five-year period. Both net income and NOPAT reflected modest growth in the initial three years, followed by a dramatic increase in the latter two years. This pattern suggests either enhanced operational performance, favorable market conditions, or both, leading to a significant expansion in the company's earnings and operational profit after taxes. The parallel rise in both net income and NOPAT underscores an improvement not only in bottom-line profitability but also in the company’s operational effectiveness, which could be attributed to strategic initiatives or cost management improvements.
Cash Operating Taxes
Builders FirstSource Inc., cash operating taxes calculation
US$ in thousands
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).
The financial data reveals a significant upward trend in both income tax expense and cash operating taxes over the five-year period ending December 31, 2022.
- Income Tax Expense
- Income tax expense displayed a steady increase from 2018 to 2020, rising from approximately $55.6 million to about $94.6 million. A substantial escalation is observed in 2021, where the expense surged to over $526 million, almost a sixfold increase compared to the prior year. This growth continued into 2022 with the expense reaching approximately $822.5 million, indicating a strong upward trajectory and possibly reflecting higher taxable income or changes in tax rates or provisions.
- Cash Operating Taxes
- Cash operating taxes similarly showed growth over the period. Starting from about $28.8 million in 2018, the figure steadily rose to approximately $110.2 million in 2020. A marked increase occurred in 2021, with cash operating taxes nearing $594.5 million—a more than fivefold increase relative to 2020. In 2022, this figure further increased to about $962.5 million, closely aligning with the trend observed in income tax expense.
Overall, both income tax expense and cash operating taxes have experienced accelerated growth starting in 2021. This pattern may reflect changes in the company's profitability, tax policy adjustments, or other operational factors leading to higher tax liabilities. The sharp rise suggests increased taxable earnings and/or shifts in tax-related strategies or regulations impacting cash tax payments.
Invested Capital
Builders FirstSource Inc., invested capital calculation (financing approach)
US$ in thousands
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 equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
The analysis of the financial data over the five-year period reveals several notable trends in the company's financial structure and capital management.
- Total reported debt & leases
- The total reported debt and leases demonstrated fluctuations across the years. A decrease is observed from 1,834,584 thousand USD in 2018 to 1,589,874 thousand USD in 2019, followed by an increase to 1,905,104 thousand USD in 2020. A significant rise is evident in 2021, with the figure reaching 3,401,751 thousand USD, and a slight increase to 3,489,418 thousand USD in 2022. This pattern suggests a substantial increase in debt and leasing obligations, particularly in the latest two years.
- Stockholders’ equity
- Stockholders’ equity showed a consistent upward trend from 596,338 thousand USD in 2018 to 1,152,783 thousand USD in 2020. In 2021, there is a marked surge to 4,802,481 thousand USD, which continues growing modestly to 4,962,566 thousand USD in 2022. This sharp increase in equity in 2021 and 2022 indicates a significant strengthening of the company’s capital base during this period.
- Invested capital
- Invested capital figures reveal a gradual rise from 2,393,541 thousand USD in 2018 to 3,091,935 thousand USD in 2020. A dramatic escalation occurred in 2021, reaching 8,507,614 thousand USD, with a marginal increase to 8,565,898 thousand USD in 2022. The pattern mirrors the equity and debt trends, suggesting major investments or acquisitions contributing to the surge in invested capital during these years.
Overall, the data indicates that while the company maintained relatively stable levels of debt and equity in the earlier years, a pronounced increase occurred starting in 2021. This shift points to strategic financial decisions involving increased leverage and capital infusion, reflecting potential growth initiatives or restructuring efforts. The concurrent rise in invested capital underscores a period of expansion or significant asset accumulation.
Cost of Capital
Builders FirstSource Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Builders FirstSource Inc., 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 exhibited significant volatility over the analyzed period. It started with a positive value of 20,327 thousand US dollars at the end of 2018, followed by a decline into negative territory with -55,773 thousand in 2019 and a further decrease to -198,603 thousand in 2020. Subsequently, the company recovered, showing a positive economic profit of 115,164 thousand in 2021, which sharply increased to 1,127,011 thousand by the end of 2022.
- Invested Capital
- The invested capital showed a steady upward trend throughout the period, rising from 2,393,541 thousand US dollars in 2018 to 2,419,816 thousand in 2019. A more pronounced increase was observed in 2020 to 3,091,935 thousand, followed by substantial growth in 2021 reaching 8,507,614 thousand. The invested capital remained relatively stable with a slight increase to 8,565,898 thousand in 2022.
- Economic Spread Ratio
- The economic spread ratio mirrored the pattern observed in economic profit, starting positively at 0.85% in 2018, then declining sharply to -2.3% in 2019 and further down to -6.42% in 2020. A recovery occurred in 2021 with a positive spread of 1.35%, which improved substantially to 13.16% in 2022. This indicates improved efficiency in generating returns on the invested capital in the latter years.
Economic Profit Margin
Builders FirstSource Inc., 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 thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited significant volatility over the period. Starting at 20,327 thousand US dollars in 2018, it declined sharply to a negative figure of -55,773 thousand US dollars in 2019, and further deepened its loss in 2020 reaching -198,603 thousand US dollars. However, there was a notable recovery in 2021 with economic profit rising to 115,164 thousand US dollars, followed by a substantial increase in 2022 to 1,127,011 thousand US dollars. This pattern indicates a period of economic challenges in the middle years, followed by a strong rebound and considerable profitability by the end of the observed period.
- Net Sales
- Net sales demonstrated a growth trend overall, despite a slight decline in 2019. Beginning at 7,724,771 thousand US dollars in 2018, net sales decreased to 7,280,431 thousand US dollars in 2019. The figure then increased to 8,558,874 thousand US dollars in 2020. A dramatic jump occurred in 2021, nearly doubling to 19,893,856 thousand US dollars, and continued to rise to 22,726,418 thousand US dollars in 2022. This substantial escalation in sales from 2020 onwards suggests successful expansion or market penetration strategies during the latter years.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations seen in economic profit. It began marginally positive at 0.26% in 2018, then shifted to negative territory with -0.77% in 2019 and a deeper negative margin of -2.32% in 2020. It rebounded to a positive 0.58% in 2021 and increased sharply to 4.96% in 2022. The margin improvement aligns with the recovery in economic profit, indicating enhanced profitability relative to sales during the final years.