Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Danaher Corp. (NYSE:DHR)

Economic Value Added (EVA)

Advanced level

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

Danaher Corp., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 2,088,700  2,614,125  2,261,143  1,869,000  2,635,899 
Cost of capital2 9.70% 10.28% 10.04% 9.68% 9.73%
Invested capital3 58,366,800  44,837,125  42,889,843  42,550,791  43,486,671 
 
Economic profit4 (3,575,753) (1,995,751) (2,043,448) (2,251,631) (1,595,486)

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,088,700 – 9.70% × 58,366,800 = -3,575,753

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Danaher Corp.’s economic profit increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Danaher Corp., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net earnings 3,008,200  2,650,900  2,492,100  2,553,700  3,357,400 
Deferred income tax expense (benefit)1 (415,200) (195,100) (426,900) (383,900) (151,300)
Increase (decrease) in allowance for doubtful accounts2 1,200  4,300  13,700  14,100  13,900 
Increase (decrease) in LIFO reserve3 —  —  —  —  — 
Increase (decrease) in deferred revenue4 69,300  28,100  138,400  99,000  69,200 
Increase (decrease) in accrued warranty liability5 5,600  (1,600) 3,200  2,000  (2,500)
Increase (decrease) in equity equivalents6 (339,100) (164,300) (271,600) (268,800) (70,700)
Interest expense 108,600  157,400  162,700  184,400  162,800 
Interest expense, operating lease liability7 24,704  13,224  14,435  15,200  20,899 
Adjusted interest expense 133,304  170,624  177,135  199,600  183,699 
Tax benefit of interest expense8 (27,994) (35,831) (61,997) (69,860) (64,295)
Adjusted interest expense, after taxes9 105,310  134,793  115,138  129,740  119,404 
(Gain) loss on marketable securities —  —  (72,800) (223,400) (12,400)
Interest income (139,000) (9,200) (7,500) (200) (5,300)
Investment income, before taxes (139,000) (9,200) (80,300) (223,600) (17,700)
Tax expense (benefit) of investment income10 29,190  1,932  28,105  78,260  6,195 
Investment income, after taxes11 (109,810) (7,268) (52,195) (145,340) (11,505)
(Income) loss from discontinued operations, net of tax12 (575,900) —  (22,300) (400,300) (758,700)
Net operating profit after taxes (NOPAT) 2,088,700  2,614,125  2,261,143  1,869,000  2,635,899 

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in LIFO reserve. See details »

4 Addition of increase (decrease) in deferred revenue.

5 Addition of increase (decrease) in accrued warranty liability.

6 Addition of increase (decrease) in equity equivalents to net earnings.

7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 796,900 × 3.10% = 24,704

8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 133,304 × 21.00% = 27,994

9 Addition of after taxes interest expense to net earnings.

10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 139,000 × 21.00% = 29,190

11 Elimination of after taxes investment income.

12 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Danaher Corp.’s NOPAT increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Cash Operating Taxes

Danaher Corp., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Income tax provision 873,000  641,900  469,000  457,900  725,300 
Less: Deferred income tax expense (benefit) (415,200) (195,100) (426,900) (383,900) (151,300)
Add: Tax savings from interest expense 27,994  35,831  61,997  69,860  64,295 
Less: Tax imposed on investment income 29,190  1,932  28,105  78,260  6,195 
Cash operating taxes 1,287,004  870,899  929,792  833,400  934,700 

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Danaher Corp.’s cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Invested Capital

Danaher Corp., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Notes payable and current portion of long-term debt 212,400  51,800  194,700  2,594,800  845,200 
Long-term debt, excluding current portion 21,516,700  9,688,500  10,327,400  9,674,200  12,025,200 
Operating lease liability1 796,900  958,225  751,843  690,891  713,271 
Total reported debt & leases 22,526,000  10,698,525  11,273,943  12,959,891  13,583,671 
Total Danaher stockholders’ equity 30,270,600  28,214,400  26,358,200  23,002,800  23,690,300 
Net deferred tax (assets) liabilities2 1,652,200  2,311,200  2,333,300  2,851,800  3,106,700 
Allowance for doubtful accounts3 103,700  120,400  116,100  102,400  134,200 
LIFO reserve4 —  —  —  —  — 
Deferred revenue5 805,900  799,000  770,900  632,500  794,100 
Accrued warranty liability6 73,300  77,400  79,000  75,800  135,100 
Equity equivalents7 2,635,100  3,308,000  3,299,300  3,662,500  4,170,100 
Accumulated other comprehensive (income) loss, net of tax8 3,068,300  2,791,100  1,994,200  3,021,700  2,311,200 
Noncontrolling interests 11,300  12,300  9,600  74,000  73,700 
Adjusted total Danaher stockholders’ equity 35,985,300  34,325,800  31,661,300  29,761,000  30,245,300 
Investments9 (144,500) (187,200) (45,400) (170,100) (342,300)
Invested capital 58,366,800  44,837,125  42,889,843  42,550,791  43,486,671 

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

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 deferred revenue.

6 Addition of accrued warranty liability.

7 Addition of equity equivalents to total Danaher stockholders’ equity.

8 Removal of accumulated other comprehensive income.

9 Subtraction of investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Danaher Corp.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Danaher Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 112,706,864  112,706,864  ÷ 137,558,480  = 0.82 0.82 × 11.56% = 9.47%
4.75% Mandatory Convertible Preferred Stock, Series A 1,945,416  1,945,416  ÷ 137,558,480  = 0.01 0.01 × 4.75% = 0.07%
Notes payable and long-term debt3 22,109,300  22,109,300  ÷ 137,558,480  = 0.16 0.16 × 1.18% × (1 – 21.00%) = 0.15%
Operating lease liability4 796,900  796,900  ÷ 137,558,480  = 0.01 0.01 × 3.10% × (1 – 21.00%) = 0.01%
Total: 137,558,480  1.00 9.70%

Based on: 10-K (filing date: 2020-02-21).

1 US$ in thousands

2 Equity. See details »

3 Notes payable and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 78,911,844  78,911,844  ÷ 89,912,470  = 0.88 0.88 × 11.56% = 10.15%
4.75% Mandatory Convertible Preferred Stock, Series A —  —  ÷ 89,912,470  = 0.00 0.00 × 0.00% = 0.00%
Notes payable and long-term debt3 10,042,400  10,042,400  ÷ 89,912,470  = 0.11 0.11 × 1.38% × (1 – 21.00%) = 0.12%
Operating lease liability4 958,225  958,225  ÷ 89,912,470  = 0.01 0.01 × 1.38% × (1 – 21.00%) = 0.01%
Total: 89,912,470  1.00 10.28%

Based on: 10-K (filing date: 2019-02-21).

1 US$ in thousands

2 Equity. See details »

3 Notes payable and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 67,908,388  67,908,388  ÷ 79,702,031  = 0.85 0.85 × 11.56% = 9.85%
4.75% Mandatory Convertible Preferred Stock, Series A —  —  ÷ 79,702,031  = 0.00 0.00 × 0.00% = 0.00%
Notes payable and long-term debt3 11,041,800  11,041,800  ÷ 79,702,031  = 0.14 0.14 × 1.92% × (1 – 35.00%) = 0.17%
Operating lease liability4 751,843  751,843  ÷ 79,702,031  = 0.01 0.01 × 1.92% × (1 – 35.00%) = 0.01%
Total: 79,702,031  1.00 10.04%

Based on: 10-K (filing date: 2018-02-21).

1 US$ in thousands

2 Equity. See details »

3 Notes payable and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 58,790,167  58,790,167  ÷ 72,170,959  = 0.81 0.81 × 11.56% = 9.42%
4.75% Mandatory Convertible Preferred Stock, Series A —  —  ÷ 72,170,959  = 0.00 0.00 × 0.00% = 0.00%
Notes payable and long-term debt3 12,689,900  12,689,900  ÷ 72,170,959  = 0.18 0.18 × 2.20% × (1 – 35.00%) = 0.25%
Operating lease liability4 690,891  690,891  ÷ 72,170,959  = 0.01 0.01 × 2.20% × (1 – 35.00%) = 0.01%
Total: 72,170,959  1.00 9.68%

Based on: 10-K (filing date: 2017-02-22).

1 US$ in thousands

2 Equity. See details »

3 Notes payable and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 59,919,874  59,919,874  ÷ 73,949,745  = 0.81 0.81 × 11.56% = 9.37%
4.75% Mandatory Convertible Preferred Stock, Series A —  —  ÷ 73,949,745  = 0.00 0.00 × 0.00% = 0.00%
Notes payable and long-term debt3 13,316,600  13,316,600  ÷ 73,949,745  = 0.18 0.18 × 2.93% × (1 – 35.00%) = 0.34%
Operating lease liability4 713,271  713,271  ÷ 73,949,745  = 0.01 0.01 × 2.93% × (1 – 35.00%) = 0.02%
Total: 73,949,745  1.00 9.73%

Based on: 10-K (filing date: 2016-02-24).

1 US$ in thousands

2 Equity. See details »

3 Notes payable and long-term debt. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Danaher Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit1 (3,575,753) (1,995,751) (2,043,448) (2,251,631) (1,595,486)
Invested capital2 58,366,800  44,837,125  42,889,843  42,550,791  43,486,671 
Performance Ratio
Economic spread ratio3 -6.13% -4.45% -4.76% -5.29% -3.67%
Benchmarks
Economic Spread Ratio, Competitors4
Becton, Dickinson & Co. -8.42% -9.38% -6.50% -7.48% -7.08%
Boston Scientific Corp. -5.49% 0.66% -5.76% -8.36% -14.59%
Edwards Lifesciences Corp. 18.66% 14.52% 12.00% 11.83% 12.11%
Intuitive Surgical Inc. 28.81% 34.02% 31.66% 23.65% 21.15%
Medtronic PLC -1.08% -4.81% -3.26% -3.02% -4.79%
Stryker Corp. 1.43% 1.41% -1.93% 1.49% 4.19%
Thermo Fisher Scientific Inc. -5.61% -6.48% -9.60% -7.26% -7.30%
UnitedHealth Group Inc. 13.08% 11.59% 9.72% 6.57% 4.06%

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,575,753 ÷ 58,366,800 = -6.13%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Danaher Corp.’s economic spread ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Economic Profit Margin

Danaher Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Economic profit1 (3,575,753) (1,995,751) (2,043,448) (2,251,631) (1,595,486)
 
Sales 17,911,100  19,893,000  18,329,700  16,882,400  20,563,100 
Add: Increase (decrease) in deferred revenue 69,300  28,100  138,400  99,000  69,200 
Adjusted sales 17,980,400  19,921,100  18,468,100  16,981,400  20,632,300 
Performance Ratio
Economic profit margin2 -19.89% -10.02% -11.06% -13.26% -7.73%
Benchmarks
Economic Profit Margin, Competitors3
Becton, Dickinson & Co. -22.00% -27.73% -18.63% -13.34% -16.16%
Boston Scientific Corp. -10.40% 1.08% -8.21% -12.10% -23.90%
Edwards Lifesciences Corp. 15.87% 11.33% 9.98% 10.38% 10.95%
Intuitive Surgical Inc. 21.34% 23.14% 17.00% 18.03% 15.41%
Medtronic PLC -2.55% -11.27% -8.70% -8.07% -18.60%
Stryker Corp. 2.24% 2.15% -2.71% 2.25% 5.15%
Thermo Fisher Scientific Inc. -11.59% -13.81% -23.73% -17.44% -16.70%
UnitedHealth Group Inc. 4.18% 3.62% 3.04% 2.03% 1.49%

Based on: 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted sales
= 100 × -3,575,753 ÷ 17,980,400 = -19.89%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Danaher Corp.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.