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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Corning Inc. pages available for free this week:
- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
Corning Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
An analysis of the economic profit from 2019 to 2023 reveals a consistent failure to generate value above the cost of capital. Economic profit remained negative throughout the entire period, indicating that the returns on invested capital were insufficient to cover the required rate of return. While a period of improvement was observed between 2019 and 2021, a sharp deterioration occurred in the subsequent two years, culminating in the most significant economic loss in 2023.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, increasing from 968 million in 2019 to a peak of 2,088 million in 2021. This growth trend reversed sharply thereafter, with NOPAT falling to 1,544 million in 2022 and further declining to 817 million by the end of 2023. The substantial reduction in operating profitability in the latter years is a primary driver of the expanding economic deficit.
- Cost of Capital
- The cost of capital followed a general upward trajectory, rising from 13.26% in 2019 to a peak of 15.52% in 2022, before easing slightly to 14.95% in 2023. The increase in the cost of capital heightened the financial threshold required to achieve a positive economic profit, exacerbating the impact of declining operating returns.
- Invested Capital
- Invested capital remained relatively stable over the five-year period, fluctuating within a range of 18,872 million to 21,233 million. Because the capital base remained largely constant while NOPAT declined and the cost of capital rose, the ability to generate positive economic value diminished.
- Economic Profit Trends
- The economic profit trajectory reflects a cycle of temporary recovery followed by severe decline. The loss narrowed from -1,535 million in 2019 to -928 million in 2021, coinciding with the peak in NOPAT. However, the combination of falling operating profits and a high cost of capital led to a rapid expansion of the loss, reaching -2,235 million by December 31, 2023.
Net Operating Profit after Taxes (NOPAT)
Corning Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Corning Incorporated.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Corning Incorporated.
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net income attributable to Corning Incorporated
- The net income shows a fluctuating trend over the five-year period. It decreased notably from 960 million US dollars in 2019 to 512 million in 2020, indicating a significant reduction in profitability during that year. The following year, 2021, saw a strong recovery with net income rising sharply to 1,906 million US dollars, the highest value in the analyzed time frame. However, in 2022, net income declined again to 1,316 million US dollars, and this downward trend continued into 2023, reaching 581 million US dollars, which is the second lowest value in the data. Overall, there is considerable volatility, with a peak in 2021 and declines before and after that year.
- Net operating profit after taxes (NOPAT)
- The NOPAT figures exhibit a different pattern compared to net income. Starting at 968 million US dollars in 2019, there is a marked increase to 1,761 million in 2020, indicating improved operating efficiency or reduced tax expenses during that year. The upward movement continues into 2021, reaching 2,088 million US dollars, the highest point in the sequence, which aligns with the peak net income year. However, this positive trajectory reverses from 2021 onward, with NOPAT decreasing to 1,544 million in 2022 and further down to 817 million in 2023. While the decline is notable, NOPAT remains substantially higher in 2023 compared to 2019, reflecting an overall improvement in operating profitability despite recent reductions.
- Comparative insights
- Comparing net income and NOPAT reveals potential discrepancies, possibly due to non-operating factors or tax-related items affecting net income more significantly. In 2020, net income fell sharply, whereas NOPAT increased substantially, suggesting that operational performance improved despite a lower bottom-line profit. The peak in both metrics in 2021 signals a strong year for both operating and net profitability. Subsequent declines in 2022 and 2023 indicate challenges impacting both operating profits and net income, though NOPAT's decline is less severe than that of net income, suggesting that non-operating expenses or taxes could have adversely affected net income in the later years.
Cash Operating Taxes
Corning Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Provision for Income Taxes
- The provision for income taxes exhibited a fluctuating trend over the analyzed period. It decreased significantly from 256 million US dollars in 2019 to 111 million US dollars in 2020. Subsequently, there was a substantial increase reaching 491 million US dollars in 2021. After this peak, the provision decreased to 411 million US dollars in 2022 and further declined to 168 million US dollars in 2023. Overall, the provision showed volatility with considerable variations year over year, indicating changes in taxable income or adjustments in tax liabilities.
- Cash Operating Taxes
- Cash operating taxes followed a somewhat parallel but less volatile pattern compared to the provision for income taxes. Starting at 494 million US dollars in 2019, the amount dropped to its lowest value of 192 million in 2020. It then rose sharply to 542 million in 2021, slightly decreased to 523 million in 2022, and further declined to 313 million in 2023. This trend suggests some level of recovery in tax payments after the initial decline but a decreasing trend in the latter two years, which may reflect variations in operational profitability or cash flow management related to tax obligations.
Invested Capital
Corning Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 deferred revenue.
5 Addition of equity equivalents to total Corning Incorporated shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
The financial data reveals distinct trends in debt, equity, and invested capital over the five-year period.
- Total reported debt & leases
- The total debt and leases increased from approximately $8.25 billion in 2019 to $8.70 billion in 2020, indicating a rise in financial obligations during that year. Subsequently, it decreased to $7.83 billion in 2021 and remained relatively stable in 2022 at $7.82 billion. In 2023, the figure rose again to about $8.48 billion. This pattern suggests some fluctuations in leverage, with a general tendency to manage debt levels downward after 2020, followed by a renewed increase in 2023.
- Total shareholders’ equity
- Shareholders’ equity demonstrated a declining trend over the period. Starting at approximately $12.9 billion in 2019, equity rose slightly to $13.3 billion in 2020 but decreased thereafter, reaching $12.3 billion in 2021, $12.0 billion in 2022, and further declining to $11.6 billion in 2023. This consistent decrease from 2020 onwards indicates potential challenges in generating retained earnings or possible distributions impacting equity.
- Invested capital
- Invested capital showed an overall upward trend despite some year-to-year fluctuations. It increased from roughly $18.9 billion in 2019 to a peak of $21.2 billion in 2020. After declining to around $19.7 billion in 2021 and remaining stable in 2022, it increased again to $20.4 billion in 2023. This suggests continued investment activity with some variability, reflecting both changes in debt and equity components.
In summary, the company experienced fluctuating leverage with debt levels rising and falling over the five years. Equity showed a downward trend after 2020, which may warrant further analysis regarding profitability or capital management. Invested capital reflected active capital deployment with an overall growth trend despite intermediate declines. The interactions among these metrics suggest ongoing adjustments in the company's capital structure over the period.
Cost of Capital
Corning Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible preferred stock, Series A, par value $100 per share (book value) | ÷ | = | × | = | |||||||||
| Long-term debt and short-term borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and short-term borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible preferred stock, Series A, par value $100 per share (book value) | ÷ | = | × | = | |||||||||
| Long-term debt and short-term borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and short-term borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible preferred stock, Series A, par value $100 per share (book value) | ÷ | = | × | = | |||||||||
| Long-term debt and short-term borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and short-term borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible preferred stock, Series A, par value $100 per share (book value) | ÷ | = | × | = | |||||||||
| Long-term debt and short-term borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and short-term borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible preferred stock, Series A, par value $100 per share (book value) | ÷ | = | × | = | |||||||||
| Long-term debt and short-term borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and short-term borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Corning Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance over the five-year period indicates a persistent inability to generate positive economic value, as evidenced by consistently negative economic profit and a negative economic spread ratio. While there was a period of relative improvement leading up to 2021, the subsequent two years show a significant deterioration in value creation efficiency.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed timeframe. A narrowing of losses occurred from 2019 to 2021, with the deficit improving from -1,535 million US dollars to -928 million US dollars. However, this trend reversed sharply starting in 2022, culminating in a five-year low of -2,235 million US dollars by the end of 2023.
- Invested Capital Stability
- Invested capital exhibited moderate volatility, peaking at 21,233 million US dollars in 2020 before stabilizing around 19,666 million US dollars in 2022. A slight increase was recorded in 2023, bringing the total to 20,411 million US dollars, indicating that capital deployment remained relatively constant despite the declining economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio serves as a primary indicator of the gap between the return on capital and the cost of capital. The ratio improved from -8.13% in 2019 to a peak of -4.71% in 2021. Following this peak, the ratio declined rapidly to -7.67% in 2022 and further to -10.95% in 2023, signifying an increasing inability to cover the cost of invested capital.
Economic Profit Margin
Corning Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic value added indicates a persistent inability to generate positive economic profit over the five-year period from 2019 to 2023. Although there was a period of improvement in the first three years, the trend reversed sharply in 2022 and 2023, resulting in a significant erosion of value.
- Economic Profit Trajectory
- Economic profit remained negative throughout the entire period. A recovery trend was observed between 2019 and 2021, with losses narrowing from US$ 1,535 million to a peak of negative US$ 928 million. However, this progress was erased as losses widened to US$ 1,509 million in 2022 and reached a period low of negative US$ 2,235 million by the end of 2023.
- Adjusted Net Sales Performance
- Revenue growth was observed for three consecutive years, rising from US$ 11,503 million in 2019 to a peak of US$ 14,146 million in 2022. This growth phase ended in 2023, when adjusted net sales contracted to US$ 12,579 million, representing a notable decline in top-line performance.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit while reflecting the impact of sales fluctuations. The margin improved from -13.35% in 2019 to -6.64% in 2021. A sharp deterioration followed, with the margin falling to -10.67% in 2022 and further plummeting to -17.77% in 2023. This suggests that the cost of capital significantly exceeded the returns generated by the operating assets, with the efficiency of value creation reaching its lowest point in the final year of the analysis.
The convergence of declining sales and deepening economic losses in 2023 indicates a severe contraction in economic performance, suggesting that the operational returns are not sufficient to cover the implicit costs of the capital employed.