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.
Paying user area
Try for free
Colgate-Palmolive Co. pages available for free this week:
- Cash Flow Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Colgate-Palmolive Co. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Colgate-Palmolive Co., economic profit calculation
US$ 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
= – × =
The financial data over the five-year period reveals several notable trends in profitability, capital investments, and economic profit.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT experienced fluctuations throughout the period. It started at $2711 million in 2018 and slightly decreased to $2572 million in 2019. In 2020, there was a recovery with an increase to $2814 million, the highest in this span. However, the following years saw a decline, with the metric decreasing to $2361 million in 2021 and further down to $2048 million in 2022. This pattern suggests challenges in maintaining operating profitability in recent years.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating narrowly between 8.94% and 9.11%. It started at 9.11% in 2018, slightly declined and stabilized around 8.94% to 9% in the subsequent years. This stability indicates consistent capital cost conditions across the timeline.
- Invested Capital
- Invested capital exhibited a general upward trend. Starting from $11,791 million in 2018, it increased to $13,859 million by 2019 and further marginally rose to $13,943 million in 2020. There was a slight dip in 2021 to $13,505 million, followed by an increase to $14,460 million in 2022, marking the highest capital investment in the reviewed period. This upward movement denotes increased allocation of capital resources over time despite short-term decreases.
- Economic Profit
- The economic profit showed a declining trend. Beginning at $1,637 million in 2018, it decreased to $1,330 million in 2019. There was some improvement in 2020, climbing to $1,567 million, but it fell again in the subsequent years to $1,145 million in 2021 and declined further to $753 million in 2022. The decreasing economic profit, particularly in the last two years, signals reduced value creation above the cost of capital.
Overall, the data points to a scenario of diminishing profitability and economic profit coupled with steady increases in invested capital and a stable cost of capital. These trends imply potential pressure on returns despite growing investments, highlighting areas for further strategic assessment.
Net Operating Profit after Taxes (NOPAT)
Colgate-Palmolive Co., NOPAT calculation
US$ 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 doubtful accounts and estimated returns.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring accrual.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Colgate-Palmolive Company.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to Colgate-Palmolive Company.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
The analysis of financial data over the five-year period reveals several noteworthy trends concerning profitability metrics.
- Net Income Attributable to Colgate-Palmolive Company
- This metric experienced a slight decline from 2018 to 2019, decreasing from 2400 million USD to 2367 million USD. In 2020, there was a significant increase to 2695 million USD, indicating a strong performance during that year. However, the subsequent years showed a downward trend, with net income falling to 2166 million USD in 2021 and further to 1785 million USD in 2022. This decline over the last two years suggests challenges affecting profitability.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures followed a somewhat similar pattern. Initially, NOPAT decreased from 2711 million USD in 2018 to 2572 million USD in 2019. It then rose to 2814 million USD in 2020, reaching its peak in the observed period. Afterward, there was a decline to 2361 million USD in 2021, followed by a further decrease to 2048 million USD in 2022. While the drop in NOPAT is less steep compared to net income, the downward trajectory indicates a reduction in operating profitability post-2020.
Overall, the data suggests that both net income and net operating profit after taxes peaked in 2020 but have since faced a decline, with 2022 figures lower than those in 2018. The trends could imply external or internal factors negatively impacting earnings and operating efficiency in the latter years.
Cash Operating Taxes
Colgate-Palmolive Co., 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).
The financial data indicates a declining trend in the provision for income taxes over the five-year period. Starting at 906 million US dollars in 2018, there is a consistent decrease each year, reaching 693 million US dollars by the end of 2022. This suggests an overall reduction in the income tax obligations recorded, which could be indicative of changes in profitability, tax planning strategies, or tax rates applicable to the company.
Conversely, cash operating taxes show a more fluctuating pattern. From 887 million US dollars in 2018, the figure increases to a peak of 970 million US dollars in 2020, followed by a decline to 812 million US dollars in 2021. In 2022, cash operating taxes rise again to 892 million US dollars. The variation in cash operating tax payments as compared to the steady decline in provision for income taxes suggests differences in timing, tax payments, or adjustments in deferred tax accounts.
- Provision for Income Taxes:
- Decreased steadily from 906 million in 2018 to 693 million in 2022, indicating a potential decline in taxable income or changes in tax strategy.
- Cash Operating Taxes:
- Show volatility with a peak in 2020 (970 million), followed by a decline and a subsequent increase in 2022 (892 million), reflecting variability in actual cash tax payments.
- Comparison and Implications:
- The contrasting trends between provision and cash operating taxes may suggest the presence of timing differences, deferred tax assets or liabilities adjustments, or shifts in tax planning measures affecting reported versus paid taxes.
Invested Capital
Colgate-Palmolive Co., 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 LIFO reserve. See details »
5 Addition of restructuring accrual.
6 Addition of equity equivalents to total Colgate-Palmolive Company shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
An analysis of the financial data over the five-year period reveals several notable trends in the company's debt, equity, and invested capital.
- Total Reported Debt & Leases
- This metric exhibited an overall increasing trend from 2018 to 2022. The reported debt rose from $6,986 million in 2018 to $9,271 million in 2022. Although there was a slight dip in 2020 and 2021, the general direction is upward, suggesting a growing reliance on debt financing over the period.
- Total Shareholders’ Equity
- This item showed significant volatility with a generally low base and fluctuating values. Starting at a negative value of -$102 million in 2018, equity improved considerably to reach $743 million in 2020, followed by a decline in the subsequent years, falling to $401 million by the end of 2022. This indicates volatility in the company's net assets and potentially some financial or operational challenges affecting retained earnings or other equity components.
- Invested Capital
- The invested capital demonstrated a steady increase from $11,791 million in 2018 to $14,460 million in 2022. Although minor fluctuations occurred between 2020 and 2021, the trend reflects continued growth in the capital invested in the company's operations, which could be related to expansions, acquisitions, or reinvestment into company assets.
Overall, the company appears to have increased its financial leverage, as evidenced by rising debt levels coupled with relatively stagnant or decreasing equity values. The growth in invested capital suggests ongoing investment in operations despite the fluctuating equity position.
Cost of Capital
Colgate-Palmolive Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 »
| 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: 2019-12-31).
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: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Colgate-Palmolive Co., 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 | ||||||
| Procter & Gamble Co. | ||||||
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 demonstrates a fluctuating downward trend over the five-year period. Starting at 1,637 million US dollars in 2018, it initially decreases to 1,330 million in 2019, followed by a recovery to 1,567 million in 2020. Subsequently, the figure drops again in 2021 to 1,145 million and further declines sharply to 753 million in 2022. This pattern indicates challenges in maintaining profitability over the examined timeframe.
- Invested Capital
- Invested capital shows a general increase from 2018 through 2022. Beginning at 11,791 million US dollars in 2018, it rises notably to 13,859 million in 2019 and remains relatively stable through 2020 and 2021 at around 13,943 million and 13,505 million, respectively. In 2022, there is a marked increase to 14,460 million. This overall growth suggests ongoing capital investment despite the decreasing economic profit.
- Economic Spread Ratio
- The economic spread ratio reveals a declining trend, reflecting diminishing returns on invested capital. Initially 13.88% in 2018, it drops sharply to 9.6% in 2019, recovers slightly to 11.24% in 2020, but then decreases again to 8.48% in 2021 and further falls to 5.2% in 2022. This consistent reduction implies a contracting differential between the return on capital and the cost of capital during the period.
Economic Profit Margin
Colgate-Palmolive Co., 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 | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | ||||||
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.
The annual financial data reveals several notable trends over the five-year period from 2018 to 2022. Net sales demonstrated a consistent upward trajectory, increasing steadily each year from $15.544 billion in 2018 to $17.967 billion in 2022. This indicates a positive sales growth trend despite potential market fluctuations or economic conditions.
Conversely, economic profit exhibited a generally declining trend over the same time frame. Starting at $1.637 billion in 2018, economic profit decreased to $753 million by 2022. While there was a slight recovery in 2020 after a dip in 2019, the overall direction remains downward, suggesting reduced profitability in economic terms.
The economic profit margin percentage further supports this observation. It declined each year, from a high of 10.53% in 2018 down to 4.19% in 2022. This decreasing margin implies that despite growing sales, the company’s efficiency or the value created relative to sales is diminishing.
- Net Sales
- Consistently increased from $15.544 billion in 2018 to $17.967 billion in 2022, indicating steady revenue growth.
- Economic Profit
- Displayed a downward trend from $1.637 billion in 2018 to $753 million in 2022, with a minor improvement in 2020 before continuing to decline.
- Economic Profit Margin
- Decreased consecutively from 10.53% in 2018 to 4.19% in 2022, highlighting reduced profitability relative to sales revenue.
Overall, the data reflects a scenario where sales growth is not fully translating into proportional profitability, which could merit further investigation into cost control, pricing strategies, or operational efficiencies.