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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Devon Energy Corp. pages available for free this week:
- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
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Economic Profit
Devon Energy Corp., 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibited substantial fluctuations over the analyzed periods. It started at a positive value of 1250 million US dollars in 2018, sharply declined to 57 million in 2019, and then turned negative at -2522 million in 2020. This was followed by a strong recovery to 3160 million in 2021, with further pronounced growth to 7447 million in 2022.
- Cost of Capital
- The cost of capital showed an increasing trend throughout the years. It rose from 21.26% in 2018 to 25.68% in 2022, with incremental increases each year. The steady rise indicates an increasing required return by investors or higher risk perception over time.
- Invested Capital
- The level of invested capital experienced a downward trend initially, decreasing from 15,392 million US dollars in 2018 to 7,866 million in 2020. Subsequently, it increased sharply to 16,727 million in 2021 and further to 19,717 million in 2022, surpassing the initial 2018 amount. This pattern suggests divestment or reduction of assets followed by significant reinvestment or acquisition activity.
- Economic Profit
- The economic profit remained negative from 2018 through 2021, with the largest loss recorded in 2020 at -4291 million US dollars. However, there was a marked improvement in 2021, reducing the negative economic profit to -997 million, and a substantial positive turnaround in 2022, reaching 2384 million. This indicates the company moved from value destruction toward value creation by the end of the period.
- Overall Analysis
- The company faced significant challenges around 2019 and 2020, as evidenced by the sharp decline in NOPAT and economic profit, alongside a reduction in invested capital. The rising cost of capital suggests elevated market or business risks during this period. From 2021 onwards, there is a clear recovery and growth phase, with strong improvements in profitability and invested capital, as well as turning economic profit positive. This shift reflects improved operational efficiency, better capital allocation, or favorable market conditions leading to enhanced shareholder value.
Net Operating Profit after Taxes (NOPAT)
Devon Energy Corp., 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.
3 Addition of increase (decrease) in restructuring liabilities.
4 Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to Devon.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2022 Calculation
Tax benefit of interest based on debt outstanding = Adjusted interest based on debt outstanding × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net earnings (loss) attributable to Devon.
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
The financial performance over the observed periods demonstrates significant volatility in net earnings attributable to Devon. Starting with a robust net earnings figure of $3,064 million at the end of 2018, the company experienced a notable decline into negative territory in 2019 and 2020, with losses reaching $355 million and $2,680 million, respectively. This indicates a period of financial distress or unfavorable operational conditions during these years. However, there is a strong recovery commencing in 2021, with net earnings rebounding to $2,813 million, and further strengthening in 2022 to $6,015 million, which surpasses the pre-decline level.
Net operating profit after taxes (NOPAT) follows a similar pattern, confirming trends in operational efficiency and profitability. In 2018, NOPAT was $1,250 million, followed by a sharp decline in 2019 to $57 million, and a substantial loss of $2,522 million in 2020. The turnaround is evident in 2021, with NOPAT increasing to $3,160 million and continuing growth in 2022 to $7,447 million, indicating improved operational management and a return to profitability with even greater margins than initially observed.
- Trend Summary
- The period from 2018 to 2020 is characterized by a significant downturn in both net earnings and NOPAT, reflecting operational or market challenges.
- The years 2021 and 2022 mark a strong recovery, culminating in the highest profitability levels within the dataset.
- The recovery phase shows not only a restoration to prior earnings levels but also an enhancement, suggesting enhanced operational performance and/or favorable market conditions.
Cash Operating Taxes
Devon Energy Corp., cash operating taxes calculation
US$ 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 analysis of the data over the period from 2018 to 2022 reveals notable volatility in both income tax expense (benefit) and cash operating taxes.
- Income Tax Expense (Benefit)
- There is a significant fluctuation observed across the years. Starting at an expense of $156 million in 2018, the figure turned to a tax benefit of $30 million in 2019, and this benefit further increased substantially to $547 million in 2020. However, in 2021, the amount reverted to a tax expense of $65 million, followed by a sharp rise to $1738 million in 2022. The pattern indicates a high degree of variability with a strong upward spike in the latest year, suggesting considerable changes in taxable income, tax planning, or adjustments in tax legislation or assessments.
- Cash Operating Taxes
- Cash operating taxes also exhibit considerable variability. Beginning with a negative value of $4 million in 2018, which can indicate a tax refund or credit, the amount increased to $43 million in 2019. Then, a substantial negative amount of $167 million is reported in 2020, again implying a possible tax benefit or refund. The figure shifted to a positive $97 million in 2021 and rose sharply to $629 million in 2022. This variability and the marked increase in 2022 align with the trend in income tax expense, pointing towards a considerable increase in tax payments in the latest year after periods of tax benefits in prior years.
Overall, both measures demonstrate considerable instability, with the most notable changes occurring in 2020, when large tax benefits were recorded, and in 2022, when there was a substantial increase in tax expenses and cash taxes paid. These fluctuations may reflect changing profitability, tax strategies, or external factors affecting taxation.
Invested Capital
Devon Energy Corp., invested capital calculation (financing approach)
US$ 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 restructuring liabilities.
5 Addition of equity equivalents to stockholders’ equity attributable to Devon.
6 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases decreased significantly from 6,285 million USD at the end of 2018 to 4,555 million USD in 2019, remaining relatively stable into 2020 at 4,553 million USD. However, in 2021, this figure rose markedly to 6,760 million USD and then showed a slight decrease to 6,718 million USD in 2022. This indicates a period of debt reduction followed by an increase, suggesting a possible strategic increase in leverage or financing activities starting in 2021.
- Stockholders’ Equity Attributable to Devon
- Stockholders’ equity attributable to the company exhibited a downward trend from 9,186 million USD at the end of 2018 to a low of 2,885 million USD in 2020. This was followed by a strong recovery in the subsequent years, with equity rising to 9,262 million USD in 2021 and further increasing to 11,167 million USD by the end of 2022. This pattern reflects significant fluctuations in the company’s net worth over the period, with a notable rebound post-2020.
- Invested Capital
- Invested capital decreased from 15,392 million USD at the end of 2018 down to 7,866 million USD in 2020, mirroring the declines seen in debt and equity during this period. From 2021 onwards, invested capital experienced substantial growth, rising sharply to 16,727 million USD and then continuing upward to 19,717 million USD in 2022. This trend suggests an expansion in the company’s asset base and funding sources during the last two years examined.
Cost of Capital
Devon Energy Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Devon Energy Corp., 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 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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.
The financial data reveals notable fluctuations over the five-year period from 2018 to 2022. Economic profit experienced a persistent decline from 2018 through 2020, reaching a low point in 2020 with a significant negative value. This was followed by a marked improvement in 2021, moving closer to breakeven, and finally achieving a positive economic profit in 2022.
Invested capital showed a downward trend from 2018 to 2020, decreasing by nearly half during this period. This trend reversed sharply in 2021, with invested capital more than doubling relative to the previous year, and the increase continued into 2022, reaching the highest value in the given timeframe.
The economic spread ratio mirrored the pattern of economic profit, starting with negative values that worsened through 2020 before improving substantially in 2021 and turning positive in 2022. The negative spread ratios from 2018 to 2020 indicate returns below the cost of capital, while the positive ratio in 2022 suggests the company achieved returns exceeding its cost of capital.
- Economic Profit
- Consistently negative from 2018 to 2020, indicating economic losses during these years.
- Strong recovery observed in 2021, approaching breakeven, and positive economic profit recorded in 2022.
- Invested Capital
- Decline from 15,392 million USD in 2018 to 7,866 million USD in 2020, reflecting potential divestitures or asset reductions.
- Substantial growth in 2021 and 2022, reaching 19,717 million USD, possibly indicating reinvestment or asset expansion.
- Economic Spread Ratio
- Negative and worsening spread from -13.14% in 2018 to -54.55% in 2020, signaling diminishing returns relative to capital costs.
- Improvement followed by positive spread of 12.09% in 2022, suggesting enhanced efficiency in capital utilization and profitability.
Economic Profit Margin
Devon Energy Corp., 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 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 ÷ Revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated substantial fluctuations over the analyzed period. Beginning with a negative value of -2023 million USD in 2018, the loss deepened slightly to -2095 million USD in 2019 and significantly worsened to -4291 million USD in 2020. However, a notable recovery occurred in 2021, with the economic loss substantially reduced to -997 million USD. By 2022, the company achieved a positive economic profit of 2384 million USD, marking a significant turnaround from previous years.
- Revenues
- Revenues exhibited considerable variability throughout the period. They started at 10,734 million USD in 2018 but declined sharply in the next two years, reaching a low of 4,828 million USD by 2020. This decline was followed by a strong recovery phase, with revenues rising to 12,206 million USD in 2021 and further increasing to 19,169 million USD in 2022. The trend suggests a significant rebound in the company's sales or pricing power after a challenging period.
- Economic Profit Margin
- The economic profit margin mirrored the trends seen in the raw economic profit figures but expressed as a percentage of revenues. It was negative throughout the first four years, starting at -18.84% in 2018, declining steeply to -33.69% in 2019, and reaching an extreme negative margin of -88.87% in 2020. This indicates that the company was not only generating losses but that these losses were disproportionately large relative to revenues in 2020. In 2021, a significant improvement occurred with the margin improving to -8.17%, and in 2022 the margin turned positive, reaching 12.44%, reflecting improved profitability and operational efficiency relative to sales.
- Overall Trends and Insights
- The data portrays a company that faced severe economic challenges between 2018 and 2020, as evidenced by increasing losses and declining revenues. This period likely involved significant operational, market, or external headwinds. The sharp decline in economic profit margin in 2020, combined with the lowest revenue point, suggests a particularly difficult year. Starting in 2021, the company experienced a robust recovery in both revenues and profitability, culminating in positive economic profit and margin in 2022. This indicates successful strategic adjustments or favorable market conditions that enabled the company to reverse prior losses and improve financial health substantially. The positive economic profit margin in 2022 signals sustainable profitability relative to revenues moving forward.