CVS Health Corp. (NYSE:CVS)

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates considerable fluctuations across the evaluated periods. It initially increased marginally from 9067 million USD in 2020 to 9170 million USD in 2021, followed by a significant decline to 3871 million USD in 2022. This was succeeded by a recovery to 9523 million USD in 2023, before dropping again to 5319 million USD in 2024. These variations suggest inconsistent profitability performance over the periods.

Cost of Capital

The cost of capital shows a gradual upward trend from 6.97% in 2020 to a peak of 8.12% in 2022. Subsequently, it decreased to 7.60% in 2023 and further to 7.34% in 2024. This pattern indicates an initial increase in the company's required rate of return, followed by a reduction in the more recent years.

Invested Capital

Invested capital started at 136,669 million USD in 2020 and decreased to a low of 123,703 million USD in 2022. There was a rebound to 134,694 million USD in 2023, with a slight decline again to 131,642 million USD in 2024. Overall, invested capital exhibits a downward trend with some recovery periods, reflecting changes in the asset base and investment levels.

Economic Profit

The economic profit reflects negative values throughout the five years, indicating that the company failed to generate returns above its cost of capital in all periods. The loss deepened from -463 million USD in 2020 to a significant -6,168 million USD in 2022. There was improvement in 2023 to -708 million USD, but it worsened again to -4,337 million USD in 2024. These figures reveal persistent value destruction despite fluctuations.

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.

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.

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.

The analysis of the financial metrics over the five-year period reveals significant fluctuations and challenges in economic profitability and capital efficiency.

Economic Profit

The economic profit values demonstrate a highly volatile pattern with consistently negative outcomes across all observed years. Starting at -463 million USD in 2020, the metric deteriorated sharply to -1300 million USD in 2021 and reached a low point of -6168 million USD in 2022. Although there was a partial recovery in 2023, with economic profit improving to -708 million USD, it again declined to -4337 million USD in 2024. This indicates persistent economic losses, with some years showing extreme declines and minor recovery phases.

Invested Capital

Invested capital shows relative stability with minor fluctuations. The amount decreased from 136,669 million USD in 2020 to 130,882 million USD in 2021, and further to a low of 123,703 million USD in 2022. However, this was followed by an increase to 134,694 million USD in 2023 and a slight decline to 131,642 million USD in 2024. Overall, the invested capital remained within a narrow range and did not exhibit drastic volatility.

Economic Spread Ratio

The economic spread ratio consistently stayed negative throughout the time frame, indicating that the returns on invested capital did not exceed the cost of capital. The ratio started at -0.34% in 2020, sharply declined to -0.99% in 2021, and plummeted further to -4.99% in 2022, mirroring the economic profit trend. A recovery occurred in 2023 to -0.53%, but this was followed by another decline to -3.29% in 2024. These data highlight ongoing challenges in generating adequate returns relative to capital costs.

In summary, the financial data depict a company struggling with persistent negative economic profit and poor returns on invested capital over the last five years. While invested capital levels remained relatively stable, economic profitability trends suggest operational or market difficulties impacting value creation. Intermittent improvements in economic spread and profit in 2023 indicate potential corrective actions, but subsequent declines in 2024 suggest that challenges remain unresolved. Ongoing monitoring and strategic adjustments may be necessary to reverse these adverse trends.

Revenues from Customers

The revenues exhibited a continuous upward trend over the five-year period, increasing from approximately $267.9 billion in 2020 to about $370.7 billion in 2024. This steady growth reflects a consistent expansion in the company’s top line, indicating potentially increasing demand or successful market penetration strategies.

Economic Profit

The economic profit values fluctuated markedly and remained negative throughout the period. Starting at negative $463 million in 2020, it worsened significantly to negative $6,168 million in 2022. Although some recovery was observed in 2023 with economic profit improving to negative $708 million, the figure deteriorated again to negative $4,337 million in 2024. This volatility and persistent negative economic profit suggest challenges in achieving returns above the cost of capital despite increasing revenues.

Economic Profit Margin

The economic profit margin remained in negative territory for all years analyzed. It declined from -0.17% in 2020 to a low of -1.92% in 2022 before partially recovering to -0.20% in 2023. However, it again declined to -1.17% in 2024. The margin’s pattern illustrates that despite revenue growth, profitability relative to revenue has been under pressure, with margins fluctuating and indicating underlying inefficiencies or cost issues impacting overall economic profitability.