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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Edwards Lifesciences Corp. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Analysis of Debt
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Economic Profit
Edwards Lifesciences 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 period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) generally increased, though with a notable decline in 2020, before recovering strongly in 2021. The cost of capital exhibited a consistent, albeit gradual, increase throughout the period. Invested capital also showed an overall upward trend, peaking in 2020 before decreasing slightly in 2021. These movements collectively influenced the resulting economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$615.07 million in 2017 to US$704.25 million in 2018, representing a growth of approximately 14.5%. A substantial increase was observed in 2019, reaching US$1,050.29 million. However, 2020 saw a decrease to US$768.46 million, likely due to external factors. NOPAT rebounded significantly in 2021, reaching US$1,468.25 million, the highest value in the observed period.
- Cost of Capital
- The cost of capital experienced a steady rise from 17.90% in 2017 to 18.37% in 2021. This incremental increase suggests a growing cost of funding the company’s operations and investments over time. The changes were relatively small year-over-year, indicating a consistent trend rather than abrupt shifts.
- Invested Capital
- Invested capital increased from US$2,855.74 million in 2017 to US$2,904.20 million in 2018, a modest increase. A more significant rise occurred between 2018 and 2019, reaching US$3,697.40 million. Further growth was seen in 2020, peaking at US$3,937.90 million, before decreasing to US$3,791.60 million in 2021. This suggests potential strategic adjustments in capital allocation during the latter period.
- Economic Profit
- Economic profit mirrored the fluctuations in NOPAT and was influenced by the rising cost of capital. It increased from US$103.79 million in 2017 to US$173.85 million in 2018. The largest increase occurred in 2019, reaching US$373.32 million. A substantial decline was observed in 2020, falling to US$46.94 million, likely attributable to the decrease in NOPAT and the increasing cost of capital. Economic profit recovered dramatically in 2021, reaching US$771.61 million, driven by the significant increase in NOPAT.
Overall, the economic profit demonstrates a strong correlation with NOPAT. While the cost of capital consistently increased, the company was able to generate substantial economic profit in 2019 and, particularly, in 2021, indicating effective capital allocation and profitability. The dip in 2020 warrants further investigation to understand the underlying causes and their potential impact on future performance.
Net Operating Profit after Taxes (NOPAT)
Edwards Lifesciences Corp., NOPAT calculation
US$ 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
= × =
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.
7 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data indicates variations and notable trends in profitability measures over the five-year period.
- Net Income
- Net income displayed an overall upward trend from 2017 through 2021. Starting at approximately 583.6 million US dollars in 2017, it increased to 722.2 million in 2018, followed by a significant rise to nearly 1.05 billion in 2019. Although there was a decline in 2020 to 823.4 million, the figure rebounded strongly in 2021, reaching a high of about 1.5 billion US dollars. This pattern suggests a robust profitability growth trajectory with a temporary setback in 2020.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also showed a general upward pattern in line with net income, beginning at approximately 615.1 million US dollars in 2017 and increasing to 704.3 million in 2018. It then rose sharply to about 1.05 billion in 2019 before declining to 768.5 million in 2020. Similar to net income, NOPAT recovered in 2021, reaching approximately 1.47 billion US dollars. The fluctuations in NOPAT largely mirror those in net income, indicating consistent operational profitability trends adjusted for taxes.
In summary, both net income and NOPAT experienced significant growth over the period, with a noticeable dip in 2020 likely influenced by external factors affecting profitability that year. The strong recovery in 2021 highlights resilience and an improved operating performance post-2020.
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).
An analysis of the financial data over the five-year period reveals distinct trends in both income tax provision and cash operating taxes.
- Income Tax Provision
- The income tax provision shows significant fluctuation during the period. Initially, it starts at a relatively high value in 2017, then declines sharply in 2018. This is followed by an increase in 2019, a slight decrease in 2020, and a considerable rise again in 2021. Overall, the income tax provision does not establish a consistent upward or downward trend but rather exhibits volatility with a strong rebound in the final year observed.
- Cash Operating Taxes
- Cash operating taxes depict a generally increasing trend throughout the period. Starting from a moderate level in 2017, there is a considerable drop in 2018. Following this, a continuous rise is observed through 2019, 2020, and a significant increase in 2021. This pattern indicates growing cash tax outflows, especially pronounced in the latter years, suggesting either higher taxable income or changes in tax payment practices.
- Comparative Observations
- When comparing the two metrics, cash operating taxes remain consistently below income tax provisions in most years except for 2018 when cash operating taxes are notably higher. This divergence indicates potential differences in timing or recognition between the tax expense reported under accounting standards and the actual cash taxes paid. The growing gap in recent years could imply deferred tax liabilities or other tax-related timing differences.
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.
- Total reported debt & leases
- The total reported debt and leases demonstrate a significant decrease from 1,103,939 thousand US dollars in 2017 to 676,404 thousand US dollars in 2018. After this sharp reduction, the values remain relatively stable with slight fluctuations, recorded as 678,800 thousand in 2019, 694,900 thousand in 2020, and a minor decrease to 690,300 thousand in 2021. This indicates a strategic reduction in debt levels followed by maintenance of a consistent debt position over the subsequent years.
- Stockholders’ equity
- Stockholders' equity exhibits a consistent upward trend throughout the observed period. Beginning at 2,956,200 thousand US dollars in 2017, equity grows moderately to 3,140,400 thousand in 2018. Thereafter, a more pronounced increase is observed with figures reaching 4,148,300 thousand in 2019, 4,574,300 thousand in 2020, and a significant rise to 5,835,900 thousand in 2021. This steady increase suggests ongoing equity strengthening, potential reinvestment of earnings, or capital raising activities enhancing the financial base of the entity.
- Invested capital
- Invested capital shows an initial slight increase from 2,855,739 thousand US dollars in 2017 to 2,904,204 thousand in 2018, followed by a notable increase to 3,697,400 thousand in 2019 and further to 3,937,900 thousand in 2020. However, a decrease is evident in 2021, with invested capital reducing to 3,791,600 thousand. This pattern indicates growing investment in assets or operations until 2020, with a partial reduction or divestment in 2021, reflecting a possible shift in investment strategy or asset base optimization.
Cost of Capital
Edwards Lifesciences 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
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
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 economic spread ratio demonstrates significant fluctuation over the observed five-year period. Initial values indicate a positive economic spread, which increased substantially before declining and then experiencing a dramatic resurgence. A detailed examination of the trends is presented below.
- Economic Spread Ratio - Overall Trend
- The economic spread ratio began at 3.63% in 2017 and rose consistently through 2019, reaching a peak of 10.10%. A substantial decrease was then observed in 2020, with the ratio falling to 1.19%. The most recent year, 2021, shows a considerable increase, with the ratio reaching 20.35%, representing the highest value within the analyzed period.
- Economic Spread Ratio - Growth (2017-2019)
- From 2017 to 2019, the economic spread ratio exhibited strong growth. This suggests an increasing ability to generate returns above the cost of capital during this timeframe. The increase from 3.63% to 10.10% indicates improved operational efficiency and/or effective capital allocation strategies.
- Economic Spread Ratio - Decline (2019-2020)
- The significant decline in the economic spread ratio from 10.10% in 2019 to 1.19% in 2020 warrants further investigation. This decrease could be attributed to a variety of factors, including increased cost of capital, reduced profitability, or a combination of both. The substantial drop suggests a period of diminished value creation.
- Economic Spread Ratio - Recovery (2020-2021)
- The substantial recovery in 2021, with the ratio increasing to 20.35%, indicates a strong rebound in value creation. This suggests that the factors contributing to the decline in 2020 were addressed, or that external conditions improved significantly. The magnitude of the increase is noteworthy and suggests a substantial improvement in the company’s ability to generate returns exceeding its cost of capital.
The observed fluctuations in the economic spread ratio are closely linked to the reported economic profit and invested capital. Further analysis, incorporating these components, would provide a more comprehensive understanding of the underlying drivers of these trends.
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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation between 2017 and 2021. Initial increases were followed by a substantial decline and then a dramatic recovery. A detailed examination of the trends is presented below.
- Economic Profit Margin Trend
- In 2017, the economic profit margin stood at 3.02%. This figure increased to 4.67% in 2018, indicating improved profitability relative to sales. The most substantial increase occurred between 2018 and 2019, with the margin reaching 8.59%. However, 2020 saw a considerable decrease to 1.07%, representing a significant drop in economic profit generated per dollar of sales. The final period analyzed, 2021, demonstrated a strong rebound, with the economic profit margin rising sharply to 14.75% – the highest value observed within the analyzed timeframe.
- Relationship to Net Sales
- Net sales generally increased over the period, moving from US$3,435.3 million in 2017 to US$5,232.5 million in 2021. The decline in economic profit margin in 2020 occurred despite a slight increase in net sales from 2019 to 2020, suggesting that factors beyond revenue volume impacted economic profitability. The substantial margin improvement in 2021 coincided with a more significant increase in net sales, indicating a potential correlation between sales growth and margin expansion.
- Economic Profit Volatility
- The economic profit itself showed considerable volatility. While generally trending upward, the decrease to US$46.943 thousand in 2020 highlights a period of reduced economic profit generation. The subsequent increase to US$771.612 thousand in 2021 suggests a strong recovery in economic profitability. This volatility is reflected in the fluctuations of the economic profit margin.
Overall, the period under review demonstrates a dynamic relationship between net sales, economic profit, and the resulting economic profit margin. The significant increase in margin during 2021 warrants further investigation to understand the underlying drivers of this improvement.