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
CVS Health Corp., economic profit 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 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
= 5,319 – 8.25% × 131,642 = -5,548
Analysis of the financial performance from 2020 to 2024 reveals a consistent inability to generate positive economic profit. The organization has experienced continuous value destruction throughout this period, as the net operating profit after taxes consistently failed to cover the associated cost of capital for the invested assets.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility over the five-year period. After remaining relatively stable between 2020 and 2021, a sharp decline occurred in 2022, with profits falling to 3,871 million USD. A strong recovery was noted in 2023, peaking at 9,523 million USD, before retreating to 5,319 million USD in 2024.
- Capital Cost and Investment Base
- Invested capital remained relatively stable, fluctuating within a range of 123,703 million USD to 136,669 million USD. Simultaneously, the cost of capital trended upward from 7.86% in 2020 to a peak of 9.26% in 2022, followed by a gradual decline to 8.25% by the end of 2024.
- Economic Profit and Value Creation
- Economic profit remained negative for all reported years, indicating that the return on invested capital was lower than the weighted average cost of capital. The most severe value destruction occurred in 2022, reaching -7,588 million USD, which coincided with the lowest NOPAT and the highest cost of capital. Although a partial recovery was observed in 2023 (-2,066 million USD), the economic profit declined again in 2024 to -5,548 million USD, underscoring a persistent trend of economic loss.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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
= 16,650 × 4.60% = 766
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 3,724 × 21.00% = 782
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
= 2,153 × 21.00% = 452
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
Financial performance between 2020 and 2024 is characterized by significant volatility in both operational profitability and bottom-line earnings. A cyclical pattern of sharp contractions and subsequent recoveries is evident throughout the observed period.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibits high variance, reaching a peak of US$ 9,523 million in 2023. A substantial contraction occurred in 2022, with values falling to US$ 3,871 million, marking a significant operational downturn. While a strong recovery was recorded in 2023, the momentum reversed in 2024, with NOPAT declining to US$ 5,319 million.
- Net Income Correlation
- Net income attributable to CVS Health closely tracks the trajectory of NOPAT. Earnings rose from US$ 7,179 million in 2020 to US$ 7,910 million in 2021, before dropping to US$ 4,149 million in 2022. A sharp rebound to US$ 8,344 million in 2023 was followed by a decrease to US$ 4,614 million in 2024, mirroring the operational volatility seen in the NOPAT figures.
- Operational Profitability Analysis
- The correlation between NOPAT and net income suggests that fluctuations in the bottom line are primarily driven by operating performance rather than non-operating financial items. The recurring volatility, specifically the sharp declines in 2022 and 2024, indicates susceptibility to significant periodic shocks or adjustments in operating costs and revenues.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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).
An analysis of the tax expenditures from 2020 through 2024 reveals a consistent divergence between the accounting income tax provision and the actual cash operating taxes paid. While the income tax provision exhibited significant volatility, cash operating taxes remained relatively elevated until a substantial reduction occurred in the final year of the period.
- Cash Operating Tax Trends
- Cash operating taxes remained within a range of $3,407 million to $4,013 million between 2020 and 2023, peaking in 2022. However, a sharp contraction is observed in 2024, where cash operating taxes fell to $2,464 million, representing a decrease of approximately 37.8% from the 2023 level.
- Income Tax Provision Volatility
- The income tax provision demonstrated a non-linear trajectory, characterized by a significant dip in 2022 to $1,463 million, followed by a sharp recovery to a period high of $2,805 million in 2023, before declining again to $1,562 million in 2024.
- Cash-to-Provision Variance
- Throughout the entire five-year period, cash operating taxes consistently exceeded the income tax provision. This disparity was most pronounced in 2022, when cash payments were nearly 2.7 times the amount of the reported tax provision. Such a persistent gap indicates that actual cash outflows for taxes significantly outweigh the accounting expense recognized in the income statement, a critical factor when calculating the Net Operating Profit After Tax (NOPAT) for Economic Value Added (EVA) purposes.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Invested Capital
CVS Health Corp., invested capital calculation (financing approach)
US$ 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.
The invested capital of CVS Health Corp. exhibited a fluctuating trajectory between 2020 and 2024, characterized by a distinct contraction in the mid-period followed by a partial recovery. The overall capital base reached its lowest point in 2022 before returning to levels closer to the initial 2020 baseline.
- Total Reported Debt and Leases
- A significant deleveraging trend occurred between 2020 and 2022, during which debt and leases decreased from 85,042 million to 70,732 million. This downward trend reversed in 2023, with liabilities increasing to 79,385 million and continuing upward to 82,920 million by the end of 2024, indicating a strategic shift back toward increased leverage.
- Total Shareholders' Equity
- Equity remained relatively stable over the five-year period with moderate volatility. After increasing from 69,389 million in 2020 to 75,075 million in 2021, the figure fluctuated, reaching a peak of 76,461 million in 2023 before slightly declining to 75,560 million in 2024. The stability of the equity component suggests that fluctuations in total invested capital were primarily driven by debt obligations rather than equity shifts.
- Invested Capital Synthesis
- The total invested capital closely mirrored the movements of the debt component. A decline from 136,669 million in 2020 to 123,703 million in 2022 reflects the period of debt reduction. The subsequent rise to 134,694 million in 2023 and the slight correction to 131,642 million in 2024 indicate that the organization's capital intensity has largely returned to its 2020-2021 levels.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
CVS Health Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 79,707) | 79,707) | ÷ | 157,200) | = | 0.51 | 0.51 | × | 12.72% | = | 6.45% | ||
| Debt3 | 60,843) | 60,843) | ÷ | 157,200) | = | 0.39 | 0.39 | × | 4.64% × (1 – 21.00%) | = | 1.42% | ||
| Operating lease liability4 | 16,650) | 16,650) | ÷ | 157,200) | = | 0.11 | 0.11 | × | 4.60% × (1 – 21.00%) | = | 0.38% | ||
| Total: | 157,200) | 1.00 | 8.25% | ||||||||||
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 | 95,705) | 95,705) | ÷ | 172,131) | = | 0.56 | 0.56 | × | 12.72% | = | 7.07% | ||
| Debt3 | 58,651) | 58,651) | ÷ | 172,131) | = | 0.34 | 0.34 | × | 4.32% × (1 – 21.00%) | = | 1.16% | ||
| Operating lease liability4 | 17,775) | 17,775) | ÷ | 172,131) | = | 0.10 | 0.10 | × | 4.50% × (1 – 21.00%) | = | 0.37% | ||
| Total: | 172,131) | 1.00 | 8.60% | ||||||||||
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 | 114,235) | 114,235) | ÷ | 180,366) | = | 0.63 | 0.63 | × | 12.72% | = | 8.06% | ||
| Debt3 | 47,653) | 47,653) | ÷ | 180,366) | = | 0.26 | 0.26 | × | 4.07% × (1 – 21.00%) | = | 0.85% | ||
| Operating lease liability4 | 18,478) | 18,478) | ÷ | 180,366) | = | 0.10 | 0.10 | × | 4.40% × (1 – 21.00%) | = | 0.36% | ||
| Total: | 180,366) | 1.00 | 9.26% | ||||||||||
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 | 137,538) | 137,538) | ÷ | 221,518) | = | 0.62 | 0.62 | × | 12.72% | = | 7.90% | ||
| Debt3 | 64,157) | 64,157) | ÷ | 221,518) | = | 0.29 | 0.29 | × | 4.00% × (1 – 21.00%) | = | 0.92% | ||
| Operating lease liability4 | 19,823) | 19,823) | ÷ | 221,518) | = | 0.09 | 0.09 | × | 4.40% × (1 – 21.00%) | = | 0.31% | ||
| Total: | 221,518) | 1.00 | 9.13% | ||||||||||
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 | 92,490) | 92,490) | ÷ | 188,825) | = | 0.49 | 0.49 | × | 12.72% | = | 6.23% | ||
| Debt3 | 75,940) | 75,940) | ÷ | 188,825) | = | 0.40 | 0.40 | × | 3.92% × (1 – 21.00%) | = | 1.25% | ||
| Operating lease liability4 | 20,395) | 20,395) | ÷ | 188,825) | = | 0.11 | 0.11 | × | 4.50% × (1 – 21.00%) | = | 0.38% | ||
| Total: | 188,825) | 1.00 | 7.86% | ||||||||||
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 | (5,548) | (2,066) | (7,588) | (2,774) | (1,677) | |
| Invested capital2 | 131,642) | 134,694) | 123,703) | 130,882) | 136,669) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.21% | -1.53% | -6.13% | -2.12% | -1.23% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -4.57% | -4.75% | -2.51% | -2.02% | — | |
| Elevance Health Inc. | -0.68% | -1.03% | 0.01% | 1.33% | — | |
| Intuitive Surgical Inc. | 3.74% | -2.71% | -2.99% | 12.62% | — | |
| Medtronic PLC | -6.60% | -6.38% | -5.14% | -6.78% | — | |
| UnitedHealth Group Inc. | -0.04% | 4.85% | 3.88% | 3.74% | — | |
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 × -5,548 ÷ 131,642 = -4.21%
4 Click competitor name to see calculations.
The analysis of economic value added from 2020 to 2024 reveals a consistent failure to generate positive economic profit, indicating that the returns on invested capital have remained below the required cost of capital throughout the period.
- Economic Profit Trends
- A volatile trend is observed in economic profit, characterized by persistent negative values. From a loss of 1,677 million USD in 2020, the deficit widened significantly to 7,588 million USD by 2022. Although a partial recovery occurred in 2023, where losses narrowed to 2,066 million USD, the trend reversed in 2024 with economic profit falling again to negative 5,548 million USD.
- Invested Capital Stability
- Invested capital remained relatively range-bound, fluctuating between a high of 136,669 million USD in 2020 and a low of 123,703 million USD in 2022. A moderate increase was noted in 2023 to 134,694 million USD, followed by a slight contraction to 131,642 million USD in 2024.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative for the entire five-year duration, confirming continuous economic value destruction. The ratio reached its most critical point in 2022 at -6.13%, representing the widest gap between the return on capital and the cost of capital. A significant improvement was recorded in 2023 at -1.53%, but this was subsequently offset by a deterioration to -4.21% in 2024.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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 | (5,548) | (2,066) | (7,588) | (2,774) | (1,677) | |
| Revenues from customers | 370,656) | 356,623) | 321,629) | 290,912) | 267,908) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.50% | -0.58% | -2.36% | -0.95% | -0.63% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -6.55% | -7.06% | -3.52% | -2.92% | — | |
| Elevance Health Inc. | -0.30% | -0.42% | 0.00% | 0.62% | — | |
| Intuitive Surgical Inc. | 3.48% | -2.70% | -2.58% | 9.93% | — | |
| Medtronic PLC | -13.98% | -14.41% | -11.28% | -16.28% | — | |
| UnitedHealth Group Inc. | -0.02% | 2.41% | 1.99% | 1.83% | — | |
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 × -5,548 ÷ 370,656 = -1.50%
3 Click competitor name to see calculations.
An analysis of the financial performance between December 31, 2020, and December 31, 2024, reveals a persistent inability to generate positive economic value despite consistent top-line growth. While revenues have expanded steadily throughout the period, economic profit has remained negative, indicating that the returns on capital have consistently failed to exceed the company's cost of capital.
- Revenue Trajectory
- A consistent upward trend in revenues from customers is observed, growing from 267,908 million USD in 2020 to 370,656 million USD by 2024. This represents a steady expansion of the scale of operations over the five-year period.
- Economic Profit Volatility
- Economic profit remained negative for all reported years, exhibiting significant volatility. A marked deterioration occurred between 2020 and 2022, with losses widening from -1,677 million USD to a peak deficit of -7,588 million USD. Although a substantial recovery was noted in 2023, where the deficit narrowed to -2,066 million USD, this trend reversed in 2024 as economic profit fell again to -5,548 million USD.
- Economic Profit Margin Trends
- The economic profit margin reflects the underlying instability in value creation. The margin deteriorated from -0.63% in 2020 to a low of -2.36% in 2022. A brief improvement was recorded in 2023, reaching the period's high of -0.58%, before declining to -1.50% in 2024. The fluctuation in this margin suggests that revenue growth has not been accompanied by a sustainable improvement in capital efficiency or operating returns relative to the cost of funding.
The divergence between increasing revenues and fluctuating negative economic profit indicates that the expansion of the business has not translated into economic value added. The volatility observed in 2023 and 2024 suggests an inconsistent relationship between operational growth and the cost of the capital employed to achieve that growth.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?