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:
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Price to Earnings (P/E) since 2005
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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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited an overall upward trend from 2017 to 2021. It increased from approximately 615 million USD in 2017 to a peak of around 1.05 billion USD in 2019. There was a decline in 2020 to about 768 million USD, followed by a strong recovery to nearly 1.47 billion USD in 2021, marking the highest value across the observed period.
- Cost of Capital
- The cost of capital remained relatively stable over the five-year period, with a slight gradual increase from 15.28% in 2017 to 15.68% in 2021. This incremental rise suggests a marginal increase in the required return on invested capital.
- Invested Capital
- Invested capital increased steadily from approximately 2.86 billion USD in 2017 to 3.69 billion USD in 2019, and continued to rise to about 3.94 billion USD in 2020. However, there was a decrease in 2021 to roughly 3.79 billion USD, indicating some divestment or asset reduction in the last year of the period.
- Economic Profit
- Economic profit showed a significant upward trajectory overall, increasing from about 179 million USD in 2017 to 473 million USD in 2019. However, there was a notable drop in 2020 to approximately 153 million USD, coinciding with the decline in NOPAT and increase in invested capital during that year. In 2021, economic profit surged dramatically to nearly 874 million USD, the highest in the observed period, reflecting a substantial improvement in value creation.
- Summary
- The financial performance over five years reveals growth in profitability and value creation, despite a temporary setback in 2020. The peak in economic profit and NOPAT in 2021 demonstrates improved operational efficiency or market conditions. The stable but slightly increasing cost of capital suggests consistent investor expectations. The reduction in invested capital in 2021, alongside rising profitability, may indicate enhanced capital efficiency or strategic asset management.
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.
- Economic Profit
- Economic profit exhibited a generally upward trend over the period under review, with the exception of the year 2020. Starting at 178,712 thousand US dollars in 2017, it increased to 251,598 thousand US dollars in 2018 and more than doubled to 472,604 thousand US dollars in 2019. However, in 2020, a notable decline occurred, with economic profit falling sharply to 152,769 thousand US dollars. This downturn was short-lived, as the economic profit surged dramatically in 2021, reaching 873,844 thousand US dollars, the highest value within the period.
- Invested Capital
- Invested capital showed a consistent increase from 2017 through 2020, moving from 2,855,739 thousand US dollars to 3,937,900 thousand US dollars. In 2021, a slight decrease was observed, with invested capital amounting to 3,791,600 thousand US dollars. This slight reduction follows a steady growth trend and may indicate strategic adjustments in capital allocation or asset management during the final year of the period.
- Economic Spread Ratio
- The economic spread ratio, which measures the returns generated over the cost of capital, demonstrated considerable volatility across the years. It began at 6.26% in 2017, rose to 8.66% in 2018, and peaked at 12.78% in 2019. Thereafter, the ratio dropped significantly to 3.88% in 2020, mirroring the downturn seen in economic profit. In 2021, a substantial recovery occurred, with the ratio soaring to 23.05%, indicating a remarkably enhanced return on invested capital relative to the cost, and aligning with the surge in economic profit recorded that year.
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.
- Economic Profit
- The economic profit exhibited significant fluctuations over the observed period. Starting at 178,712 thousand US dollars in 2017, the figure increased notably to 251,598 thousand US dollars in 2018 and then more than doubled to 472,604 thousand US dollars in 2019. However, in 2020 there was a sharp decline to 152,769 thousand US dollars, followed by a substantial rebound in 2021, reaching the highest level in the period at 873,844 thousand US dollars.
- Net Sales
- Net sales showed a consistent upward trend throughout the period. Beginning at 3,435,300 thousand US dollars in 2017, sales increased moderately each year, reaching 3,722,800 thousand US dollars in 2018 and 4,348,000 thousand US dollars in 2019. The year 2020 saw a slight increase to 4,386,300 thousand US dollars, followed by a more pronounced rise to 5,232,500 thousand US dollars in 2021, indicating overall growth in revenue generation.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations seen in economic profit, though with more pronounced variations. Starting at 5.2% in 2017, it improved to 6.76% in 2018 and peaked at 10.87% in 2019. In 2020, the margin dropped substantially to 3.48%, reflecting reduced profitability relative to economic profit. The margin rebounded sharply in 2021 to 16.7%, the highest margin recorded during this timeframe, indicating a strong increase in economic profit generation efficiency relative to sales.