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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DuPont de Nemours Inc. pages available for free this week:
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Dividend Discount Model (DDM)
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Economic Profit
DuPont de Nemours Inc., economic profit calculation
US$ in millions
| 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 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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
= – × =
The period under review demonstrates significant fluctuations in financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) experienced considerable volatility, beginning at US$8,206 million in 2015, declining to US$3,846 million in 2016, and continuing to fall to US$2,498 million in 2017. A partial recovery was observed in 2018 with NOPAT reaching US$4,932 million, before a substantial loss of US$-572 million was recorded in 2019.
The cost of capital also exhibited variability throughout the period. It increased from 17.37% in 2015 to 19.31% in 2016 and peaked at 22.24% in 2017. A decrease to 18.70% was noted in 2018, followed by a significant rise to 25.09% in 2019.
Invested capital showed a different pattern. It increased from US$46,288 million in 2015 to US$50,610 million in 2016, then experienced a dramatic increase to US$149,192 million in 2017. While remaining high at US$153,164 million in 2018, it decreased substantially to US$62,770 million in 2019.
- Economic Profit Trend
- Economic profit began at US$168 million in 2015, indicating a modest creation of value. However, it quickly turned negative, reaching US$-5,926 million in 2016. The negative trend intensified in subsequent years, with economic profit declining to US$-30,681 million in 2017 and US$-23,708 million in 2018. The largest negative economic profit was recorded in 2019, at US$-16,320 million. This consistent negative economic profit suggests that the company’s returns on invested capital were consistently below its cost of capital during this period.
- Relationship between NOPAT and Economic Profit
- The decline in NOPAT from 2015 to 2019 directly contributed to the worsening economic profit. While the cost of capital also played a role, the substantial decrease in NOPAT, particularly the loss in 2019, had a significant negative impact on value creation.
- Impact of Invested Capital
- The large increase in invested capital in 2017, coupled with declining NOPAT, exacerbated the negative economic profit. Although invested capital decreased in 2019, the negative NOPAT continued to drive a substantial economic loss. The fluctuations in invested capital suggest potential significant capital allocation decisions or restructuring activities during the period.
Overall, the period was characterized by a consistent failure to generate returns exceeding the cost of capital, as evidenced by the sustained negative economic profit. The interplay between NOPAT, cost of capital, and invested capital reveals a complex financial picture requiring further investigation to understand the underlying drivers of performance.
Net Operating Profit after Taxes (NOPAT)
DuPont de Nemours Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful receivables.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in deferred revenue.
5 Addition of increase (decrease) in restructuring reserve.
6 Addition of increase (decrease) in equity equivalents to net income attributable to DuPont.
7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to DuPont.
10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
The financial data reveals significant fluctuations in profitability metrics over the five-year period. Both net income attributable to DuPont and net operating profit after taxes (NOPAT) demonstrate notable volatility and an overall downward trend from 2015 to 2019.
- Net Income Attributable to DuPont
-
The net income experienced a steep decline from a peak of 7,685 million US dollars in 2015 to 1,460 million US dollars in 2017. Although there was a partial recovery in 2018 where net income increased to 3,844 million US dollars, the figure sharply contracted again to only 498 million US dollars in 2019. This pattern highlights increasing challenges in maintaining consistent profitability.
- Net Operating Profit After Taxes (NOPAT)
-
The NOPAT metric follows a similar variable trend but shows even greater volatility throughout the period. It begins at 8,206 million US dollars in 2015 and falls sharply to 2,498 million US dollars by 2017. Despite a rebound in 2018 to 4,932 million US dollars, the NOPAT turns negative in 2019, indicating an operational loss of 572 million US dollars. This negative result in 2019 suggests operational difficulties or increased costs impacting the company's core profitability that year.
Overall, the data suggests a period of significant financial distress and operational challenges, especially towards the end of the timeline. Both net income and NOPAT show a loss of momentum post-2015 with a critical downturn in 2019. The negative NOPAT position in 2019 might call for a closer examination of the company’s operational efficiency and expense management during this period.
Cash Operating Taxes
DuPont de Nemours Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
- Provision for (benefit from) income taxes on continuing operations
- The provision for income taxes on continuing operations demonstrates significant volatility over the analyzed period. In 2015, the provision was high at 2147 million US dollars, but it drastically decreased to 9 million US dollars in 2016, indicating a sharp reduction in tax expenses or changes in tax benefits. The following year, 2017, reported a negative value of -476 million US dollars, suggesting a tax benefit or credit rather than an expense. However, the provision increased again in 2018 to 1489 million US dollars before declining sharply to 140 million US dollars in 2019. Overall, the data reveals a highly fluctuating trend without a clear upward or downward consistency.
- Cash operating taxes
- Cash operating taxes exhibit a generally increasing trend from 2015 to 2018, starting at 2158 million US dollars in 2015 and peaking at 2222 million US dollars in 2018. This upward movement suggests rising actual cash outflows related to tax payments during the initial years. However, in 2019, a marked decrease to 751 million US dollars occurs, indicating a substantial drop in cash taxes paid. This shift may be reflective of tax strategy changes, timing differences, or altered profitability affecting cash tax obligations.
Invested Capital
DuPont de Nemours Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 deferred revenue.
6 Addition of restructuring reserve.
7 Addition of equity equivalents to total DuPont stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of marketable securities.
The financial data indicates significant fluctuations in the company's capital structure and invested capital over the five-year period.
- Total reported debt & leases
- This metric exhibits a rising trend from 2015 to 2018, increasing from 19,250 million US dollars to a peak of 43,241 million US dollars in 2018. However, this upward trajectory reverses sharply in 2019, with total debt decreasing to 18,001 million US dollars, indicating a substantial reduction in leverage or paydown of debt obligations during that year.
- Total DuPont stockholders’ equity
- Stockholders’ equity remains relatively stable between 2015 and 2016 but undergoes a dramatic increase in 2017, reaching 100,330 million US dollars, which is nearly quadruple the 2016 figure. This elevated level slightly declines in 2018 to 94,571 million but experiences a steep decrease in 2019 down to 40,987 million US dollars. The pronounced spikes and drops suggest significant equity transactions, asset revaluations, or changes in retained earnings during these years.
- Invested capital
- Invested capital follows a similar pattern to equity, growing moderately from 46,288 million US dollars in 2015 to 50,610 million in 2016, then experiencing a sharp increase to 149,192 million in 2017 and remaining close in 2018 at 153,164 million. In 2019, invested capital declines significantly to 62,770 million. This trajectory aligns with the movements seen in both equity and reported debt, indicating substantial changes in the company’s total capital invested in operating assets.
Overall, the data reflects periods of major capital structure changes, including a notable increase in both equity and debt leading up to 2017 and 2018, followed by a significant reduction in debt and equity in 2019. These shifts may be attributable to corporate restructuring, acquisitions, divestitures, or refinancing activities during these years. The volatility in invested capital further corroborates these possibilities, suggesting the company underwent important strategic financial decisions impacting its balance sheet composition and capital deployment.
Cost of Capital
DuPont de Nemours Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
DuPont de Nemours Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates a significant decline in economic performance, as indicated by the economic profit and economic spread ratio. Initial profitability, as measured by economic profit, transitioned to substantial losses, while the economic spread ratio exhibited a consistently worsening trend.
- Economic Profit
- Economic profit began at US$168 million in 2015. However, it experienced a dramatic shift to a loss of US$5,926 million in 2016. This loss intensified in subsequent years, reaching a peak loss of US$30,681 million in 2017, before decreasing to US$23,708 million in 2018 and US$16,320 million in 2019. The overall trend is a substantial and sustained decline in value creation.
- Invested Capital
- Invested capital increased from US$46,288 million in 2015 to US$50,610 million in 2016. A considerable increase occurred in 2017, reaching US$149,192 million, followed by a slight increase to US$153,164 million in 2018. In 2019, invested capital decreased significantly to US$62,770 million. The fluctuations in invested capital do not appear to correlate directly with the decline in economic profit, suggesting factors beyond capital allocation are driving the negative performance.
- Economic Spread Ratio
- The economic spread ratio started at 0.36% in 2015. It then deteriorated rapidly, becoming -11.71% in 2016. The ratio continued to worsen, reaching -20.56% in 2017 and -15.48% in 2018. The most substantial decline occurred in 2019, with the ratio reaching -26.00%. This consistent negative trend indicates a growing disparity between the return generated on invested capital and the cost of that capital, signifying diminishing economic value creation.
The combined analysis of these metrics suggests a period of increasing financial strain. While invested capital experienced fluctuations, the consistent decline in economic profit and the worsening economic spread ratio point to fundamental issues in profitability and efficient capital utilization.
Economic Profit Margin
DuPont de Nemours Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The period under review demonstrates a significant decline in economic profit and a corresponding deterioration in the economic profit margin. Initial profitability transitioned to substantial losses, culminating in a markedly negative margin by the final year.
- Economic Profit
- Economic profit began at US$168 million in 2015. However, it experienced a dramatic shift to a loss of US$5,926 million in 2016. This negative trend continued, reaching a peak loss of US$30,681 million in 2017, before moderating slightly to a loss of US$23,708 million in 2018 and further to a loss of US$16,320 million in 2019. The overall trend is overwhelmingly negative.
- Adjusted Net Sales
- Adjusted net sales exhibited volatility throughout the period. From US$48,778 million in 2015, sales decreased to US$48,158 million in 2016. A substantial increase was observed in 2017, reaching US$64,816 million, followed by a further increase to US$85,936 million in 2018. However, sales experienced a significant decline in 2019, falling to US$21,512 million. This suggests considerable fluctuations in revenue generation.
- Economic Profit Margin
- The economic profit margin mirrored the trend in economic profit. Starting at 0.34% in 2015, it plummeted to -12.30% in 2016. The margin continued to worsen, reaching -47.34% in 2017 and -27.59% in 2018. By 2019, the economic profit margin had deteriorated substantially to -75.86%. The increasing negativity of this metric indicates a growing disparity between returns generated and the cost of capital employed.
The substantial decline in the economic profit margin, despite periods of increasing adjusted net sales, suggests that the cost of capital is increasing, or that operational efficiency is declining, or a combination of both. The sharp decrease in adjusted net sales in the final year, coupled with the already negative economic profit, further exacerbated the margin decline.