Economic Value Added (EVA)
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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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CVS Health Corp. pages available for free this week:
- Statement of Comprehensive Income
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Analysis of Debt
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Economic Profit
CVS Health Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibits fluctuations over the analyzed periods. It increased marginally from 9,067 million US dollars in 2020 to 9,170 million in 2021, followed by a significant decline to 3,871 million in 2022. In 2023, the figure rebounded to 9,523 million but declined again to 5,319 million in 2024. This pattern indicates volatility in operating profitability across the years.
- Cost of Capital
- The cost of capital shows a gradual increase from 6.89% in 2020 to a peak of 8.01% in 2022. Afterward, it decreased slightly to 7.5% in 2023 and further to 7.25% in 2024. The overall trend suggests a rising cost of capital in the earlier years, followed by a modest reduction in the latter part of the period.
- Invested Capital
- Invested capital demonstrates a downward trend from 136,669 million US dollars in 2020 to 123,703 million in 2022. Subsequently, it increased to 134,694 million in 2023 before slightly decreasing to 131,642 million in 2024. The general pattern reflects an initial reduction in invested capital followed by a partial recovery.
- Economic Profit
- Economic profit remains negative throughout the examined timeframe, indicating that returns did not exceed the cost of capital in any given year. The deficit widened sharply from -353 million in 2020 to -1,167 million in 2021, and further to -6,039 million in 2022. It improved to -585 million in 2023 but deteriorated again to -4,228 million in 2024. This volatility highlights ongoing challenges in value creation relative to the invested capital and associated costs.
- Overall Summary
- The financial data reveals significant variability in operating performance and economic profitability. While NOPAT shows inconsistent trends, the cost of capital has generally increased with a slight recent easing. Invested capital decreased notably before partially recovering. Despite periods of improved operating profit, economic profit remained negative, underscoring difficulties in generating returns above the cost of capital. This suggests the need for strategic focus on enhancing operational efficiency and optimizing capital structure to improve value creation.
Net Operating Profit after Taxes (NOPAT)
CVS Health Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 attributable to CVS Health.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to CVS Health.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
- Net income attributable to CVS Health
- The net income exhibited fluctuations over the five-year period. Starting at $7,179 million in 2020, there was an increase to $7,910 million in 2021, indicating growth. However, in 2022, net income notably declined to $4,149 million, reflecting a significant drop. This was followed by a rebound in 2023, reaching $8,344 million, which represents the highest point in the period. In 2024, net income once again decreased to $4,614 million, showing volatility and an overall irregular pattern in earnings.
- Net operating profit after taxes (NOPAT)
- NOPAT followed a pattern broadly similar to net income but with less pronounced volatility. It began at $9,067 million in 2020 and slightly increased to $9,170 million in 2021. In 2022, there was a sharp decline to $3,871 million, mirroring the net income decline of that year. The subsequent year, 2023, saw a recovery to $9,523 million, the highest level observed in this timeframe. By 2024, NOPAT decreased again to $5,319 million. This trend suggests that while operating profitability is subject to cyclical pressures, it remains relatively strong when it rebounds.
- Insights
- The data reveals substantial volatility in both net income and NOPAT with synchronous fluctuations particularly pronounced in 2022 and 2024. These troughs could indicate periods of operational or market challenges impacting profitability. Despite these downturns, the company demonstrated resilience with robust recoveries in 2023, suggesting effective management responses or favorable market conditions during that year. The gap between net income and NOPAT levels also suggests that non-operating factors or tax impacts may play a role in overall profitability fluctuations. The irregular pattern underscores the importance of closely monitoring operational efficiency and external factors influencing financial performance.
Cash Operating Taxes
CVS Health Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Income Tax Provision
- The income tax provision exhibited a fluctuating trend over the years observed. It decreased from $2,569 million in 2020 to $2,522 million in 2021, indicating a slight reduction. This was followed by a more significant decline to $1,463 million in 2022. However, in 2023, the provision increased sharply to $2,805 million, before decreasing again to $1,562 million in 2024. Overall, the income tax provision shows variability with notable peaks and troughs during the five-year period.
- Cash Operating Taxes
- Cash operating taxes showed a moderate decline from $3,769 million in 2020 to $3,407 million in 2021. In 2022, there was an increase to $4,013 million, marking the highest point in the period reviewed. Subsequently, the amount slightly decreased to $3,965 million in 2023, followed by a significant drop to $2,464 million in 2024. This pattern indicates some volatility with an overall downward movement towards the end of the period.
- Comparative Insights
- Both income tax provision and cash operating taxes demonstrate considerable year-to-year fluctuations. Cash operating taxes consistently remained higher than the income tax provision across all years. The disparity between the two measures also varied, with the smallest gap occurring in 2024. This suggests possible changes in tax planning, timing differences, or cash tax payments relative to accounting tax expense over the evaluated periods.
Invested Capital
CVS Health Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 total CVS Health shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of investments.
- Total reported debt & leases
- The total reported debt and leases decreased from 85,042 million US dollars at the end of 2020 to 70,732 million US dollars by the end of 2022. This decline indicates a reduction in leverage during this period. However, starting from 2023, there is a notable increase, rising to 79,385 million US dollars and further to 82,920 million US dollars by the end of 2024, suggesting renewed borrowing or leasing commitments.
- Total CVS Health shareholders’ equity
- Shareholders’ equity showed a rising trend from 69,389 million US dollars in 2020, peaking at 75,075 million in 2021. Following this peak, equity experienced a slight pullback to 71,015 million in 2022 but recovered to 76,461 million in 2023. By 2024, it marginally declined again to 75,560 million US dollars. Overall, equity levels remained relatively stable with moderate fluctuations around the mid-70 billion range in the most recent years.
- Invested capital
- Invested capital declined steadily from 136,669 million US dollars in 2020 to 123,703 million in 2022, reflecting overall reductions in capital employed. This trend reversed in 2023 with an increase to 134,694 million followed by a slight decrease to 131,642 million in 2024. The pattern suggests a cycle of divestments or asset optimization up to 2022 and subsequent reinvestment or capital expansion over the following years, indicating adjustments in capital structure or operational focus.
Cost of Capital
CVS Health Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
CVS Health Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited substantial fluctuations during the observed period. Starting from a negative value of -353 million US dollars at the end of 2020, the loss deepened significantly in 2021 to -1,167 million. The year 2022 saw a pronounced deterioration, with economic profit plummeting further to -6,039 million. However, a recovery trend appears in 2023, where the economic loss narrowed considerably to -585 million, before deteriorating again in 2024 to -4,228 million. These variations indicate considerable volatility and challenges in generating economic returns above the cost of capital.
- Invested Capital
- Invested capital displayed a relatively stable but slightly declining trend over the years. Beginning at 136,669 million US dollars in 2020, the value decreased to 130,882 million in 2021 and continued to fall to 123,703 million in 2022. There was a rebound in 2023, with invested capital rising to 134,694 million, followed by a modest decrease to 131,642 million in 2024. Overall, invested capital shows limited variation, suggesting consistent but cautious investment levels during the period.
- Economic Spread Ratio
- The economic spread ratio consistently remained negative throughout the period, reflecting returns below the cost of capital. Beginning at -0.26% in 2020, the ratio worsened to -0.89% in 2021 and dramatically fell to -4.88% in 2022, indicating a sharp decline in value creation. A marked improvement occurred in 2023 as the spread narrowed to -0.43%, suggesting some recovery in operational efficiency or profitability. The spread widened again in 2024 to -3.21%, indicating renewed challenges in maintaining adequate returns relative to capital costs.
Economic Profit Margin
CVS Health Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues from customers | ||||||
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues from customers
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenues from customers
- Revenues showed a consistent upward trend over the five-year period, increasing from $267,908 million in 2020 to $370,656 million in 2024. This represents a steady growth in the company's topline, suggesting an expansion in sales or services delivered.
- Economic profit
- Economic profit exhibited significant fluctuations, with negative values throughout the entire period. The largest loss occurred in 2022, at -$6,039 million, indicating a substantial decline that year. Other years also showed negative economic profit, with values such as -$353 million in 2020 and -$4,228 million in 2024. Notably, the economic profit improved in 2023 to -$585 million from the steep loss in 2022, but declined again in 2024.
- Economic profit margin
- The economic profit margin reflected a similar pattern to economic profit, remaining negative across all years. It worsened significantly to -1.88% in 2022, coinciding with the year of the largest economic loss, before improving markedly to -0.16% in 2023. However, the margin deteriorated again to -1.14% in 2024. This indicates volatile profitability relative to revenues over the observed period.
- Overall insights
- While revenue growth has been relatively strong and consistent, these gains have not translated into positive economic profit or economic profit margins in any of the years analyzed. The volatility and significant losses in economic profit suggest challenges in cost management, capital efficiency, or other factors impacting profitability. The temporary improvement in 2023, followed by deterioration in 2024, points to potential fluctuations in operational performance or external conditions affecting the company’s economic value creation.