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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Economic Profit
EQT Corp., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The analysis of economic value added from 2017 to 2021 reveals a persistent failure to generate positive economic profit, indicating that returns on invested capital remained consistently below the cost of capital. This trend signifies a continuous destruction of shareholder value throughout the observed five-year period.
- Net Operating Profit After Taxes (NOPAT)
- Operational profitability experienced significant instability. After a positive NOPAT of US$408.1 million in 2017, the company entered a period of sustained operating losses. The most substantial deficit occurred in 2018 at US$2.33 billion. While losses narrowed progressively through 2020, reaching US$908.1 million, this recovery reversed in 2021 with losses widening again to US$1.35 billion.
- Invested Capital
- A clear contraction in the capital base is observed between 2017 and 2020, as invested capital declined from US$26.51 billion to US$15.62 billion. This reduction suggests a period of asset divestment or a strategic scaling back of operations. This downward trend was interrupted in 2021, when invested capital rose slightly to US$16.53 billion.
- Cost of Capital
- The cost of capital exhibited notable volatility, starting at 14.89% in 2017 and dropping to a period low of 6.42% in 2019. This sharp decline in the hurdle rate in 2019 acted as a mitigating factor for economic losses. However, the cost of capital rose again in the following two years, ending the period at 12.50% in 2021.
- Economic Profit Dynamics
- Economic profit remained negative across all reported years, with the deepest loss of US$4.42 billion recorded in 2018. The most favorable result occurred in 2019, where losses were limited to US$2.41 billion, a result of the combined effect of a lower cost of capital and a reduced investment base. Despite these fluctuations, the economic profit deteriorated toward the end of the period, reaching a loss of US$3.41 billion in 2021.
Net Operating Profit after Taxes (NOPAT)
EQT Corp., NOPAT calculation
US$ 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
= × =
5 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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 $1.35 billion in 2019, 2020, and 2021 respectively. The continuous negative NOPAT reflects challenges in the core operations, implying difficulties in generating operating profitability post-2017.
- Overall Trend Analysis
- The data indicates a critical inflection point between 2017 and 2018, with both net income and operating profit shifting sharply from profitability to significant losses. This negative trend persists without material improvement through to 2021. Despite some fluctuations in the magnitude of losses, the absence of recovery highlights ongoing adverse conditions impacting the company's earnings and operational efficiency over this interval.
Cash Operating Taxes
EQT Corp., cash operating taxes calculation
US$ 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.
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.
Cost of Capital
EQT Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic value, as evidenced by consistently negative economic profit and a negative economic spread ratio throughout the five-year period. This indicates that the returns on invested capital remained below the company's cost of capital, resulting in continuous value destruction for shareholders.
- Economic Profit
- Economic profit remained negative for the entire duration of the analyzed period. The deepest deficit occurred in 2018, reaching negative 4.42 billion USD. While a partial recovery was observed in 2019, with the deficit narrowing to approximately 2.41 billion USD, this improvement was not sustained. Economic profit declined again in 2020 and 2021, ending the period at negative 3.41 billion USD.
- Invested Capital
- A significant contraction in the capital base is observed between 2017 and 2020. Invested capital decreased from 26.51 billion USD in 2017 to a low of 15.62 billion USD in 2020. A slight reversal of this trend occurred in 2021, with invested capital increasing to 16.53 billion USD. The overall reduction in invested capital suggests a period of divestment or asset depreciation that did not correlate with a transition to positive economic profit.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, mirroring the volatility of the economic profit. The ratio deteriorated sharply from -13.35% in 2017 to its lowest point of -24.00% in 2018. Following a correction to -14.46% in 2019, the ratio trended downward again, reaching -20.66% by the end of 2021. The persistent negative spread confirms that the company operated with a negative return over its cost of capital across all reported years.
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 | ||||||
| Sales of natural gas, natural gas liquids and oil | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 Click competitor name to see calculations.
Between 2017 and 2021, the organization consistently reported negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital. Despite significant fluctuations in annual revenue, the entity failed to achieve a positive economic value added throughout the analyzed period.
- Economic Profit Trends
- The absolute economic profit remained negative throughout the five-year span. The most significant deficit occurred in 2018, reaching -4,415,369 thousand USD. While a partial recovery was observed in 2019, the figures regressed again through 2021, ending the period at -3,413,999 thousand USD. This persistent negative trajectory suggests a consistent inability to generate surplus value over the required return on investment.
- Revenue Volatility
- Sales of natural gas, natural gas liquids, and oil exhibited substantial volatility. Revenues increased from 2,651,318 thousand USD in 2017 to a peak of 6,804,020 thousand USD in 2021. A notable contraction occurred in 2020, where sales fell to 2,650,299 thousand USD, representing a return to 2017 levels before the significant surge in the following year.
- Economic Profit Margin Analysis
- The economic profit margin remained negative but demonstrated a trend toward relative improvement. The margin reached its lowest point in 2017 at -133.44% and improved to -50.18% by 2021. A clear correlation is observed between increased sales and the narrowing of the negative margin; specifically, the highest recorded revenue in 2021 coincided with the least negative economic profit margin, although the absolute economic profit remained deeply negative.