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.
Economic Profit
EQT Corp., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -1,348,798 – 12.57% × 16,527,021 = -3,426,248
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic profit, indicating that the returns on invested capital did not exceed the cost of capital throughout the analyzed period.
- Economic Profit and Value Creation
- Economic profit remained negative for all five years, reaching its lowest point in 2018 at -4,427,705 thousand US$. The consistent negative values demonstrate that the company failed to create economic value, as the net operating profit was insufficient to cover the capital charge associated with its invested capital.
- Net Operating Profit After Taxes (NOPAT) Trends
- A sharp decline in operational profitability is observed after 2017, when NOPAT shifted from a positive 408,113 thousand US$ to significant losses. Although there was a period of relative recovery between 2019 and 2020, with losses narrowing to -908,089 thousand US$, the trend reversed in 2021, with NOPAT falling back to -1,348,798 thousand US$.
- Invested Capital Dynamics
- There was a substantial reduction in invested capital from 2017 to 2020, decreasing from 26,508,072 thousand US$ to 15,621,670 thousand US$. This downward trajectory suggests a contraction in the asset base or significant write-downs. A slight increase in invested capital occurred in 2021, rising to 16,527,021 thousand US$, which coincided with a widening of the economic loss.
- Cost of Capital Volatility
- The cost of capital fluctuated throughout the period, starting at 14.98% in 2017 and dropping to a minimum of 6.45% in 2019. Despite this sharp decrease in the cost of capital in 2019, which theoretically lowers the threshold for value creation, the economic profit remained negative due to the simultaneous occurrence of negative NOPAT.
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Net Operating Profit after Taxes (NOPAT)
EQT Corp., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in provision for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to EQT Corporation.
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 52,712 × 2.90% = 1,529
5 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 310,432 × 21.00% = 65,191
6 Addition of after taxes interest expense to net income (loss) attributable to EQT Corporation.
7 Elimination of discontinued operations.
- Net Income (Loss) Attributable to EQT Corporation
- Over the five-year period from 2017 to 2021, net income exhibited a significant downward trend. In 2017, net income was positive, amounting to approximately $1.51 billion. However, from 2018 onwards, the company incurred losses each year, with the loss magnitude increasing initially in 2018 (around $2.24 billion), followed by a somewhat reduced loss of roughly $1.22 billion in 2019. The losses remained substantial in 2020 and 2021, with figures close to $967 million and $1.16 billion respectively. This pattern suggests persistent financial challenges beginning in 2018 and continuing through 2021, without a return to profitability within this timeframe.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT data reveals a similar trajectory to net income, indicating consistent operating losses from 2018 forward. Starting with a positive NOPAT of about $408 million in 2017, the company faced a steep decline to a negative $2.33 billion in 2018. Subsequent years show ongoing negative NOPAT values, though somewhat less severe than 2018, with losses of approximately $1.34 billion, $908 million, and $1.35 billion in 2019, 2020, and 2021 respectively. The continuous negative NOPAT reflects challenges in the core operations, implying difficulties in generating operating profitability post-2017.
- Overall Trend Analysis
- The data indicates a critical inflection point between 2017 and 2018, with both net income and operating profit shifting sharply from profitability to significant losses. This negative trend persists without material improvement through to 2021. Despite some fluctuations in the magnitude of losses, the absence of recovery highlights ongoing adverse conditions impacting the company's earnings and operational efficiency over this interval.
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Cash Operating Taxes
EQT Corp., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
The financial data reflects fluctuations and notable trends in the tax-related components over the five-year period ending December 31, 2021.
- Income Tax Benefit
- This item shows a consistent decrease in the magnitude of the tax benefit from 2017 through 2020, moving from approximately -1,188,416 thousand US dollars in 2017 to -298,858 thousand US dollars in 2020. The decreasing absolute value suggests a diminishing tax benefit over time. However, in 2021, there is a slight reversal with the income tax benefit increasing in magnitude to -434,175 thousand US dollars, indicating a partial rebound in the tax benefits recognized.
- Cash Operating Taxes
- Cash operating taxes exhibit significant volatility during the period. Notably, there is a sharp increase in the cash operating tax outflow in 2018, with a value of -510,482 thousand US dollars, which markedly exceeds the amounts of the surrounding years. In 2019 and 2020, these operating taxes decreased substantially to -58,336 and -85,720 thousand US dollars respectively. Contrasting with previous years, a positive figure of 64,624 thousand US dollars is observed in 2021, indicating a cash inflow or a tax refund rather than an outflow, which marks a substantial positive shift in this cash flow item.
Overall, the data reveals a general trend of decreasing income tax benefits until 2020 followed by a slight increase in 2021, alongside a volatile pattern in cash operating taxes which includes a significant outflow anomaly in 2018 and a notable positive inflow in 2021. These trends suggest shifts in the tax strategy, tax payments, or recognition of tax benefits, as well as possible changes in underlying tax positions or operational tax circumstances during the analyzed period.
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Invested Capital
EQT Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
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 equity equivalents to common shareholders’ equity.
5 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- Over the five-year period, total reported debt and leases exhibited a general downward trend from 6,193,259 thousand USD at the end of 2017 to a low of 4,975,379 thousand USD at the end of 2020. However, this was followed by an increase to 5,537,714 thousand USD at the end of 2021, indicating a partial reversal of the previous declining trend.
- Common shareholders’ equity
- The common shareholders' equity showed a consistent decline from 13,319,618 thousand USD in 2017 to a low of 9,255,240 thousand USD in 2020. Notably, in 2021 there was a recovery to 10,029,527 thousand USD, suggesting improvement in equity position after several years of decrease.
- Invested capital
- Invested capital experienced a sharp decline from 26,508,072 thousand USD in 2017 to 15,621,670 thousand USD in 2020. This represents a significant reduction in invested capital over these years. In 2021, there was a modest increase to 16,527,021 thousand USD, signaling a stabilization or slight growth after the downward trajectory.
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Cost of Capital
EQT Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,148,424) | 8,148,424) | ÷ | 14,773,742) | = | 0.55 | 0.55 | × | 19.27% | = | 10.63% | ||
| Debt3 | 6,572,606) | 6,572,606) | ÷ | 14,773,742) | = | 0.44 | 0.44 | × | 5.50% × (1 – 21.00%) | = | 1.93% | ||
| Operating lease liability4 | 52,712) | 52,712) | ÷ | 14,773,742) | = | 0.00 | 0.00 | × | 2.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 14,773,742) | 1.00 | 12.57% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,345,640) | 5,345,640) | ÷ | 10,983,612) | = | 0.49 | 0.49 | × | 19.27% | = | 9.38% | ||
| Debt3 | 5,588,059) | 5,588,059) | ÷ | 10,983,612) | = | 0.51 | 0.51 | × | 6.08% × (1 – 21.00%) | = | 2.44% | ||
| Operating lease liability4 | 49,913) | 49,913) | ÷ | 10,983,612) | = | 0.00 | 0.00 | × | 3.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 10,983,612) | 1.00 | 11.83% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,374,343) | 1,374,343) | ÷ | 6,418,757) | = | 0.21 | 0.21 | × | 19.27% | = | 4.13% | ||
| Debt3 | 4,985,429) | 4,985,429) | ÷ | 6,418,757) | = | 0.78 | 0.78 | × | 3.75% × (1 – 21.00%) | = | 2.30% | ||
| Operating lease liability4 | 58,985) | 58,985) | ÷ | 6,418,757) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 6,418,757) | 1.00 | 6.45% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,636,668) | 4,636,668) | ÷ | 9,290,850) | = | 0.50 | 0.50 | × | 19.27% | = | 9.62% | ||
| Debt3 | 4,553,427) | 4,553,427) | ÷ | 9,290,850) | = | 0.49 | 0.49 | × | 4.48% × (1 – 21.00%) | = | 1.73% | ||
| Operating lease liability4 | 100,755) | 100,755) | ÷ | 9,290,850) | = | 0.01 | 0.01 | × | 4.48% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 9,290,850) | 1.00 | 11.39% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 14,106,990) | 14,106,990) | ÷ | 19,175,750) | = | 0.74 | 0.74 | × | 19.27% | = | 14.18% | ||
| Debt3 | 4,872,831) | 4,872,831) | ÷ | 19,175,750) | = | 0.25 | 0.25 | × | 4.70% × (1 – 35.00%) | = | 0.78% | ||
| Operating lease liability4 | 195,930) | 195,930) | ÷ | 19,175,750) | = | 0.01 | 0.01 | × | 4.70% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 19,175,750) | 1.00 | 14.98% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
EQT Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (3,426,248) | (2,756,842) | (2,413,451) | (4,427,705) | (3,563,996) | |
| Invested capital2 | 16,527,021) | 15,621,670) | 16,653,426) | 18,393,800) | 26,508,072) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -20.73% | -17.65% | -14.49% | -24.07% | -13.44% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -2.42% | — | — | — | — | |
| ConocoPhillips | 4.99% | — | — | — | — | |
| Exxon Mobil Corp. | 3.21% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,426,248 ÷ 16,527,021 = -20.73%
4 Click competitor name to see calculations.
The financial performance from 2017 through 2021 is characterized by a persistent inability to generate positive economic value, as evidenced by consistently negative economic profit and economic spread ratios throughout the period. The data indicates that returns on invested capital remained below the required cost of capital for five consecutive years.
- Economic Profit Trends
- Economic profit remained negative for the entire duration of the analysis. A significant increase in losses was observed in 2018, reaching a peak deficit of -4.43 billion USD. Although there was a partial recovery in 2019, where losses narrowed to -2.41 billion USD, the trend reversed in 2020 and 2021, with the period ending at a deficit of -3.43 billion USD.
- Invested Capital Dynamics
- A marked downward trend in invested capital occurred between 2017 and 2020, with the capital base contracting from 26.51 billion USD to 15.62 billion USD. This substantial reduction suggests a period of significant divestment or asset write-downs. A slight increase in invested capital was recorded in 2021, rising to 16.53 billion USD.
- Economic Spread Ratio Analysis
- The economic spread ratio remained consistently negative, confirming that the company did not achieve a positive spread over its cost of capital. The ratio exhibited significant volatility, dropping to its lowest point of -24.07% in 2018. A temporary improvement to -14.49% was noted in 2019, followed by a steady decline in 2020 and 2021, concluding at -20.73%. This pattern suggests that the reduction in invested capital was not sufficient to offset the losses in economic profit and restore value creation.
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Economic Profit Margin
EQT Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (3,426,248) | (2,756,842) | (2,413,451) | (4,427,705) | (3,563,996) | |
| Sales of natural gas, natural gas liquids and oil | 6,804,020) | 2,650,299) | 3,791,414) | 4,695,519) | 2,651,318) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -50.36% | -104.02% | -63.66% | -94.30% | -134.42% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -3.01% | — | — | — | — | |
| ConocoPhillips | 8.31% | — | — | — | — | |
| Exxon Mobil Corp. | 3.17% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales of natural gas, natural gas liquids and oil
= 100 × -3,426,248 ÷ 6,804,020 = -50.36%
3 Click competitor name to see calculations.
A comprehensive analysis of the financial performance from 2017 to 2021 reveals a persistent failure to generate positive economic value. The company consistently reported negative economic profit throughout the period, indicating that the returns on invested capital remained below the cost of capital, resulting in a destruction of shareholder value.
- Economic Profit Trends
- Economic profit remained negative for five consecutive years, with values fluctuating between -2.41 billion and -4.43 billion US dollars. The most significant decline occurred in 2018, reaching a low of -4.43 billion US dollars, followed by a partial recovery in 2019. However, a downward trend resumed from 2020 through 2021, ending the period with an economic loss of 3.43 billion US dollars.
- Revenue Volatility
- Sales of natural gas, natural gas liquids, and oil exhibited substantial volatility. Revenues peaked in 2021 at 6.80 billion US dollars, a significant increase from the 2.65 billion US dollars recorded in 2020. This suggests that while market demand or pricing improved drastically in the final year, the scale of revenue growth was insufficient to offset the costs associated with the capital charge.
- Economic Profit Margin Analysis
- The economic profit margin remained negative throughout the observed timeframe, though it demonstrated a general trend toward moderation. The margin improved from -134.42% in 2017 to -50.36% in 2021. This improvement was most pronounced in 2019 and 2021, correlating with periods of higher sales. The sharp decline in the margin in 2020 to -104.02% highlights a strong inverse correlation between revenue contraction and economic profit efficiency.
In summary, while the economic profit margin shows an upward trajectory toward the break-even point, the absolute economic profit remains deeply negative. The substantial increase in sales during 2021 served to dilute the economic loss as a percentage of revenue, but it did not result in the creation of positive economic value.
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