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
Edwards Lifesciences 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
= 1,468,252 – 18.37% × 3,791,600 = 771,667
The analysis of economic value added between 2017 and 2021 reveals a period of overall growth in value creation, characterized by a sharp contraction in 2020 and a subsequent robust recovery in 2021.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory, increasing from $615.1 million in 2017 to $1.47 billion in 2021. A notable disruption occurred in 2020, where NOPAT decreased by approximately 26.8% compared to 2019. However, the 2021 results demonstrate a strong rebound, with profit increasing by nearly 91% over the 2020 trough, indicating a significantly enhanced capacity to generate operational earnings.
- Cost of Capital and Invested Capital
- The cost of capital remained remarkably stable throughout the analyzed period, maintaining a narrow range between 17.90% and 18.37%. Concurrently, invested capital grew steadily from $2.86 billion in 2017 to a peak of $3.94 billion in 2020, before experiencing a slight contraction to $3.79 billion in 2021. The consistency of the cost of capital suggests a stable risk profile, while the trend in invested capital indicates a period of expansion followed by a slight optimization of the capital base in the final year.
- Economic Profit Performance
- Economic profit remained positive across all five years, confirming that the organization consistently generated returns exceeding its cost of capital. The economic profit grew from $103.8 million in 2017 to $373.4 million in 2019, before plummeting to $47.0 million in 2020. The 2021 fiscal year marked a substantial surge, with economic profit reaching $771.7 million. This peak is the result of the combination of record-high NOPAT and a moderately reduced capital base, resulting in a significant acceleration of shareholder value creation.
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Net Operating Profit after Taxes (NOPAT)
Edwards Lifesciences Corp., NOPAT calculation
US$ 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 allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 94,600 × 2.50% = 2,365
5 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 20,765 × 21.00% = 4,361
6 Addition of after taxes interest expense to net income.
7 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8,800 × 21.00% = 1,848
8 Elimination of after taxes investment income.
The financial performance from 2017 to 2021 is characterized by a strong general upward trajectory in profitability, interrupted by a notable contraction in 2020. Both Net Income and Net Operating Profit After Taxes (NOPAT) demonstrate a high degree of correlation, reflecting the company's operational efficiency and its ability to generate significant profit from its core activities.
- NOPAT Growth and Volatility
- Net Operating Profit After Taxes increased steadily from US$ 615,066 thousand in 2017 to US$ 1,050,298 thousand in 2019. A contraction occurred in 2020, where NOPAT declined to US$ 768,464 thousand, followed by a sharp recovery in 2021, reaching a peak of US$ 1,468,252 thousand. This indicates a robust capacity for operational recovery following a period of volatility.
- Net Income Trajectory
- Net Income mirrored the movement of NOPAT, rising from US$ 583,600 thousand in 2017 to US$ 1,046,900 thousand in 2019. After a decrease to US$ 823,400 thousand in 2020, Net Income grew substantially to US$ 1,503,100 thousand in 2021, showing a total growth of approximately 157% over the five-year period.
- Relationship Between Operational and Bottom-Line Profit
- The close alignment between NOPAT and Net Income suggests that the company's overall profitability is primarily driven by its operating results rather than non-operating income or financing activities. While NOPAT exceeded Net Income in 2017 and 2019, Net Income was higher in 2018, 2020, and 2021, indicating minor fluctuations in the influence of interest expenses and tax adjustments on the final net earnings.
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Cash Operating Taxes
Edwards Lifesciences 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 tax profile exhibits significant volatility between 2017 and 2021, characterized by a sharp decline in 2018 followed by a period of sustained growth. A notable divergence between accounting provisions and actual cash outflows is evident, particularly in the latter portion of the analyzed period.
- Trend Analysis of Income Tax Provision
- The income tax provision decreased precipitously from 451.3 million USD in 2017 to 39.2 million USD in 2018. Following this contraction, the provision entered a period of recovery, increasing to 119.6 million USD in 2019, dipping slightly to 93.3 million USD in 2020, and ultimately rising to 198.9 million USD by December 31, 2021.
- Trend Analysis of Cash Operating Taxes
- Cash operating taxes followed a similar initial trajectory, falling from 426.8 million USD in 2017 to 61.2 million USD in 2018. Unlike the provision, cash taxes demonstrated a consistent and uninterrupted upward trend from 2018 through 2021, growing annually to reach 245.4 million USD.
- Provision versus Cash Outflow Divergence
- A shift in the relationship between accrued taxes and cash payments is observed. In 2017 and 2019, the income tax provision exceeded cash operating taxes. However, in 2018, 2020, and 2021, cash operating taxes were higher than the provision. This disparity peaked in 2021, where cash taxes exceeded the provision by approximately 46.5 million USD, suggesting that actual cash outflows for taxes outpaced the accounting expense recognized for that period.
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Invested Capital
Edwards Lifesciences 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 stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of marketable securities.
Between 2017 and 2021, the company experienced a significant shift in its financial structure, characterized by a transition toward equity-based financing and a reduction in overall leverage. The overall capital base expanded, providing a larger foundation for calculating economic value added.
- Total Reported Debt and Leases
- A substantial reduction in total debt and leases occurred between 2017 and 2018, with the balance decreasing from US$ 1,103,939 thousand to US$ 676,404 thousand. Following this initial decline, the debt level remained relatively stable for the remainder of the period, fluctuating within a narrow range between US$ 676,404 thousand and US$ 694,900 thousand through the end of 2021.
- Stockholders' Equity
- A consistent and strong upward trend is observed in stockholders' equity, which grew from US$ 2,956,200 thousand in 2017 to US$ 5,835,900 thousand by 2021. This sustained growth indicates a significant accumulation of retained earnings or capital contributions, resulting in a more equity-heavy capital structure and enhanced solvency.
- Invested Capital
- Invested capital exhibited a general growth trajectory from 2017 to 2020, increasing from US$ 2,855,739 thousand to a peak of US$ 3,937,900 thousand. A moderate contraction was observed in 2021, where the value declined to US$ 3,791,600 thousand. This indicates an overall expansion of the capital employed in the business, although the slight decrease in the final year suggests a possible optimization of assets or a change in investment intensity.
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Cost of Capital
Edwards Lifesciences Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 67,138,137) | 67,138,137) | ÷ | 67,908,137) | = | 0.99 | 0.99 | × | 18.55% | = | 18.34% | ||
| Debt3 | 675,400) | 675,400) | ÷ | 67,908,137) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 94,600) | 94,600) | ÷ | 67,908,137) | = | 0.00 | 0.00 | × | 2.50% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 67,908,137) | 1.00 | 18.37% | ||||||||||
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 | 54,739,079) | 54,739,079) | ÷ | 55,550,179) | = | 0.99 | 0.99 | × | 18.55% | = | 18.28% | ||
| Debt3 | 711,200) | 711,200) | ÷ | 55,550,179) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 99,900) | 99,900) | ÷ | 55,550,179) | = | 0.00 | 0.00 | × | 2.70% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 55,550,179) | 1.00 | 18.32% | ||||||||||
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 | 48,213,210) | 48,213,210) | ÷ | 48,965,210) | = | 0.98 | 0.98 | × | 18.55% | = | 18.27% | ||
| Debt3 | 667,600) | 667,600) | ÷ | 48,965,210) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 84,400) | 84,400) | ÷ | 48,965,210) | = | 0.00 | 0.00 | × | 2.80% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 48,965,210) | 1.00 | 18.31% | ||||||||||
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 | 36,936,698) | 36,936,698) | ÷ | 37,626,302) | = | 0.98 | 0.98 | × | 18.55% | = | 18.21% | ||
| Debt3 | 607,000) | 607,000) | ÷ | 37,626,302) | = | 0.02 | 0.02 | × | 3.40% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 82,604) | 82,604) | ÷ | 37,626,302) | = | 0.00 | 0.00 | × | 3.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 37,626,302) | 1.00 | 18.26% | ||||||||||
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 | 28,107,473) | 28,107,473) | ÷ | 29,217,712) | = | 0.96 | 0.96 | × | 18.55% | = | 17.85% | ||
| Debt3 | 1,042,700) | 1,042,700) | ÷ | 29,217,712) | = | 0.04 | 0.04 | × | 2.20% × (1 – 35.00%) | = | 0.05% | ||
| Operating lease liability4 | 67,539) | 67,539) | ÷ | 29,217,712) | = | 0.00 | 0.00 | × | 2.20% × (1 – 35.00%) | = | 0.00% | ||
| Total: | 29,217,712) | 1.00 | 17.90% | ||||||||||
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
Edwards Lifesciences 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 | 771,667) | 46,999) | 373,370) | 173,888) | 103,829) | |
| Invested capital2 | 3,791,600) | 3,937,900) | 3,697,400) | 2,904,204) | 2,855,739) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 20.35% | 1.19% | 10.10% | 5.99% | 3.64% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -2.02% | — | — | — | — | |
| Elevance Health Inc. | 1.33% | — | — | — | — | |
| Intuitive Surgical Inc. | 12.62% | — | — | — | — | |
| Medtronic PLC | -6.78% | — | — | — | — | |
| UnitedHealth Group Inc. | 3.74% | — | — | — | — | |
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 × 771,667 ÷ 3,791,600 = 20.35%
4 Click competitor name to see calculations.
The analysis of economic value creation from 2017 through 2021 reveals a period of volatility characterized by a significant contraction in 2020 followed by an exceptional recovery in 2021.
- Economic Profit Trends
- Economic profit exhibited a steady upward trajectory from 2017 to 2019, increasing from 103.8 million to 373.4 million US dollars. A substantial decline occurred in 2020, where profit fell to 47.0 million US dollars. However, 2021 marked a record peak, with economic profit surging to 771.7 million US dollars, representing a significant expansion in value creation over the five-year period.
- Invested Capital Dynamics
- Invested capital showed a general growth trend between 2017 and 2020, rising from 2.86 billion to 3.94 billion US dollars. A slight contraction was observed in 2021, as invested capital decreased to 3.79 billion US dollars. The fact that the highest economic profit was achieved in 2021 despite a reduction in invested capital indicates a significant improvement in capital productivity.
- Economic Spread Ratio Performance
- The economic spread ratio, which measures the return over the cost of capital, mirrors the volatility of economic profit. The ratio improved from 3.64% in 2017 to 10.10% in 2019, before dropping to a period low of 1.19% in 2020. The ratio then climbed sharply to 20.35% in 2021, indicating a high degree of capital efficiency and a strong ability to generate value exceeding the cost of capital in the final year of the analyzed period.
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Economic Profit Margin
Edwards Lifesciences 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 | 771,667) | 46,999) | 373,370) | 173,888) | 103,829) | |
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 14.75% | 1.07% | 8.59% | 4.67% | 3.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -2.92% | — | — | — | — | |
| Elevance Health Inc. | 0.62% | — | — | — | — | |
| Intuitive Surgical Inc. | 9.93% | — | — | — | — | |
| Medtronic PLC | -16.28% | — | — | — | — | |
| UnitedHealth Group Inc. | 1.83% | — | — | — | — | |
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 ÷ Net sales
= 100 × 771,667 ÷ 5,232,500 = 14.75%
3 Click competitor name to see calculations.
An analysis of the financial performance between December 31, 2017, and December 31, 2021, reveals a period of steady revenue expansion contrasted by significant volatility in economic value creation. While net sales demonstrated a consistent upward trajectory, economic profit and its associated margin experienced a substantial contraction in 2020 before reaching a five-year peak in 2021.
- Net Sales Performance
- A consistent growth pattern is observed in net sales, which increased from US$ 3,435,300 thousand in 2017 to US$ 5,232,500 thousand in 2021. The most significant growth occurred between 2018 and 2019, and again between 2020 and 2021, indicating a sustained increase in market scale and top-line revenue generation.
- Economic Profit Volatility
- Economic profit exhibited non-linear growth over the analyzed period. After rising steadily from US$ 103,829 thousand in 2017 to a peak of US$ 373,370 thousand in 2019, a sharp decline occurred in 2020, with profit falling to US$ 46,999 thousand. This downturn was followed by a rapid recovery in 2021, where economic profit surged to US$ 771,667 thousand, the highest value in the five-year sequence.
- Economic Profit Margin Trends
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin expanded from 3.02% in 2017 to 8.59% in 2019, signaling improved efficiency in generating value above the cost of capital. A significant compression occurred in 2020, where the margin dropped to 1.07%, suggesting a period of diminished economic value addition relative to sales. However, the margin recovered strongly in 2021, reaching 14.75%, which represents a substantial increase in the company's ability to generate economic surplus per dollar of sales.
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