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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

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	1,468,252)	768,464)	1,050,298)	704,251)	615,066)
Cost of capital²	18.51%	18.46%	18.45%	18.40%	18.04%
Invested capital³	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)

Economic profit⁴	766,449)	41,598)	368,303)	169,920)	100,006)

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 – 18.51% × 3,791,600 = 766,449

Economic profit remained positive throughout the analyzed period from 2017 to 2021, indicating that the company consistently generated returns in excess of its cost of capital. Although the overall trend is positive, the results were characterized by significant volatility in 2020 followed by a robust recovery in 2021.

Net Operating Profit After Taxes (NOPAT): A strong growth trajectory is observed in NOPAT, which rose from 615,066 thousand dollars in 2017 to 1,468,252 thousand dollars by 2021. This growth was interrupted in 2020, when NOPAT declined to 768,464 thousand dollars, before rebounding sharply in the final year of the period.
Cost of Capital and Invested Capital: The cost of capital remained highly stable, experiencing only a slight upward trend from 18.04% in 2017 to 18.51% in 2021. Invested capital grew steadily from 2,855,739 thousand dollars in 2017 to a peak of 3,937,900 thousand dollars in 2020, with a minor reduction to 3,791,600 thousand dollars occurring in 2021.
Economic Profit Performance: Economic profit exhibited substantial fluctuations, increasing from 100,006 thousand dollars in 2017 to a high of 368,303 thousand dollars in 2019. A sharp contraction is noted in 2020, where economic profit fell to 41,598 thousand dollars, correlating with the decrease in NOPAT. The period concluded with a significant surge to 766,449 thousand dollars in 2021, marking the highest level of value creation across the five-year span.

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Edwards Lifesciences Corp., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income	1,503,100)	823,400)	1,046,900)	722,200)	583,600)
Deferred income tax expense (benefit)¹	(44,000)	(52,200)	10,500)	(21,200)	27,100)
Increase (decrease) in allowance for doubtful accounts²	(300)	900)	(200)	400)	(500)
Increase (decrease) in equity equivalents³	(44,300)	(51,300)	10,300)	(20,800)	26,600)
Interest expense	18,400)	15,800)	20,700)	29,900)	23,200)
Interest expense, operating lease liability⁴	2,365)	2,697)	2,363)	2,809)	1,486)
Adjusted interest expense	20,765)	18,497)	23,063)	32,709)	24,686)
Tax benefit of interest expense⁵	(4,361)	(3,884)	(4,843)	(6,869)	(8,640)
Adjusted interest expense, after taxes⁶	16,404)	14,613)	18,220)	25,840)	16,046)
(Gain) loss on marketable securities	8,600)	300)	400)	2,900)	3,100)
Interest income	(17,400)	(23,400)	(32,200)	(32,000)	(20,300)
Investment income, before taxes	(8,800)	(23,100)	(31,800)	(29,100)	(17,200)
Tax expense (benefit) of investment income⁷	1,848)	4,851)	6,678)	6,111)	6,020)
Investment income, after taxes⁸	(6,952)	(18,249)	(25,122)	(22,989)	(11,180)
Net operating profit after taxes (NOPAT)	1,468,252)	768,464)	1,050,298)	704,251)	615,066)

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 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.

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Edwards Lifesciences Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income tax provision	198,900)	93,300)	119,600)	39,200)	451,300)
Less: Deferred income tax expense (benefit)	(44,000)	(52,200)	10,500)	(21,200)	27,100)
Add: Tax savings from interest expense	4,361)	3,884)	4,843)	6,869)	8,640)
Less: Tax imposed on investment income	1,848)	4,851)	6,678)	6,111)	6,020)
Cash operating taxes	245,413)	144,533)	107,265)	61,158)	426,820)

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.

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Edwards Lifesciences Corp., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Short-term debt	—)	—)	—)	—)	598,000)
Long-term debt	595,700)	595,000)	594,400)	593,800)	438,400)
Operating lease liability¹	94,600)	99,900)	84,400)	82,604)	67,539)
Total reported debt & leases	690,300)	694,900)	678,800)	676,404)	1,103,939)
Stockholders’ equity	5,835,900)	4,574,300)	4,148,300)	3,140,400)	2,956,200)
Net deferred tax (assets) liabilities²	(222,100)	(202,800)	(135,400)	(165,000)	(186,000)
Allowance for doubtful accounts³	9,300)	9,600)	8,700)	8,900)	8,500)
Equity equivalents⁴	(212,800)	(193,200)	(126,700)	(156,100)	(177,500)
Accumulated other comprehensive (income) loss, net of tax⁵	157,700)	161,100)	156,000)	138,500)	132,700)
Adjusted stockholders’ equity	5,780,800)	4,542,200)	4,177,600)	3,122,800)	2,911,400)
Construction in progress⁶	(333,800)	(313,300)	(265,000)	(168,800)	(88,200)
Marketable securities⁷	(2,345,700)	(985,900)	(894,000)	(726,200)	(1,071,400)
Invested capital	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)

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.

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Edwards Lifesciences Corp., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	67,138,137)	67,138,137)	÷	67,908,137)	=	0.99	0.99	×	18.69%	=	18.48%
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					18.51%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	54,739,079)	54,739,079)	÷	55,550,179)	=	0.99	0.99	×	18.69%	=	18.42%
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					18.46%

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 »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	48,213,210)	48,213,210)	÷	48,965,210)	=	0.98	0.98	×	18.69%	=	18.40%
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					18.45%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	36,936,698)	36,936,698)	÷	37,626,302)	=	0.98	0.98	×	18.69%	=	18.35%
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					18.40%

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 »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,107,473)	28,107,473)	÷	29,217,712)	=	0.96	0.96	×	18.69%	=	17.98%
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					18.04%

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 »

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	766,449)	41,598)	368,303)	169,920)	100,006)
Invested capital²	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)
Performance Ratio
Economic spread ratio³	20.21%	1.06%	9.96%	5.85%	3.50%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	-1.89%	—	—	—	—
Elevance Health Inc.	1.60%	—	—	—	—
Intuitive Surgical Inc.	12.03%	—	—	—	—
Medtronic PLC	-6.65%	—	—	—	—
UnitedHealth Group Inc.	4.10%	—	—	—	—

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 × 766,449 ÷ 3,791,600 = 20.21%

⁴ Click competitor name to see calculations.

The financial performance between 2017 and 2021 is characterized by a general expansion in value creation, punctuated by a sharp contraction in 2020 followed by a substantial recovery in 2021. This period shows a transition from moderate capital efficiency to a highly optimized value generation model.

Economic Profit Trends: Economic profit exhibited a consistent upward trajectory from 2017 through 2019, increasing from 100,006 thousand to 368,303 thousand. A significant decline occurred in 2020, where profit fell to 41,598 thousand, representing the lowest point in the observed period. However, 2021 saw a massive surge to 766,449 thousand, indicating a strong rebound in the company's ability to generate wealth above its cost of capital.
Invested Capital Evolution: Invested capital grew steadily from 2,855,739 thousand in 2017 to a peak of 3,937,900 thousand in 2020. In 2021, a slight contraction to 3,791,600 thousand was observed. The divergence between the declining invested capital and the surging economic profit in 2021 suggests a marked improvement in asset productivity and capital deployment efficiency.
Economic Spread Ratio Analysis: The economic spread ratio highlights significant volatility in the margin between the return on invested capital and the cost of capital. The ratio rose from 3.50% in 2017 to 9.96% in 2019, before collapsing to 1.06% in 2020. The period concluded with a dramatic increase to 20.21% in 2021, the highest recorded value, reflecting an exceptional increase in the efficiency of value creation relative to the capital employed.

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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	766,449)	41,598)	368,303)	169,920)	100,006)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Performance Ratio
Economic profit margin²	14.65%	0.95%	8.47%	4.56%	2.91%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	-2.73%	—	—	—	—
Elevance Health Inc.	0.75%	—	—	—	—
Intuitive Surgical Inc.	9.47%	—	—	—	—
Medtronic PLC	-15.95%	—	—	—	—
UnitedHealth Group Inc.	2.01%	—	—	—	—

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 × 766,449 ÷ 5,232,500 = 14.65%

³ Click competitor name to see calculations.

The analysis of economic value creation from 2017 to 2021 reveals a general upward trajectory in value generation, characterized by a significant contraction in 2020 followed by a robust recovery in 2021.

Net Sales Trends: Revenue demonstrated consistent growth over the five-year period, increasing from 3.44 billion in 2017 to 5.23 billion by 2021. Growth was steady through 2019, experienced a period of relative stagnation in 2020, and accelerated again in 2021.
Economic Profit Performance: Economic profit exhibited high volatility. An initial growth phase occurred between 2017 and 2019, with profits rising from 100 million to 368.3 million. This was followed by a sharp decline in 2020 to 41.6 million, representing a substantial decrease in value created above the cost of capital. However, 2021 saw a peak performance, with economic profit surging to 766.4 million.
Economic Profit Margin Analysis: The economic profit margin, which measures the efficiency of value creation relative to sales, trended upward from 2.91% in 2017 to 8.47% in 2019. The margin collapsed to 0.95% in 2020, indicating that the company's returns were nearly equal to its cost of capital during that fiscal year. The recovery in 2021 was marked by a significant expansion of the margin to 14.65%, suggesting a substantial improvement in operational efficiency and capital utilization.

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Edwards Lifesciences Corp. (NYSE:EW)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin