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 – 18.40% × 3,791,600 = 770,479
The analysis of economic value added reveals a general upward trajectory in value creation, characterized by significant volatility between 2019 and 2021. While the organization consistently generated positive economic profit throughout the period, the magnitude of this value creation varied substantially in response to shifts in operating profit and capital deployment.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a strong growth trend from 2017 to 2019, rising from 615,066 thousand to 1,050,298 thousand. A notable contraction occurred in 2020, where profit fell to 768,464 thousand, before experiencing a sharp recovery in 2021 to reach a period peak of 1,468,252 thousand.
- Cost of Capital
- The cost of capital remained remarkably stable over the five-year period, maintaining a narrow range between 17.93% and 18.40%. This minimal variance suggests a consistent risk profile and a stable weighted average cost of capital despite changes in the operating environment.
- Invested Capital
- Invested capital showed a steady increase from 2,855,739 thousand in 2017 to a peak of 3,937,900 thousand in 2020. A slight reduction to 3,791,600 thousand was observed in 2021, indicating a potential shift toward capital optimization or a reduction in asset intensity during the final year of the analysis.
- Economic Profit Performance
- Economic profit demonstrated high sensitivity to NOPAT fluctuations. Value creation increased steadily from 102,959 thousand in 2017 to 372,217 thousand in 2019. A significant decline occurred in 2020, dropping to 45,770 thousand, a result of the simultaneous decrease in NOPAT and increase in the capital charge. However, 2021 marked a substantial turnaround, with economic profit surging to 770,479 thousand, driven by the combination of record-high NOPAT and a reduction in invested capital.
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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 | × | 18.58% | = | 18.37% | ||
| 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 | 18.40% | ||||||||||
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 | × | 18.58% | = | 18.31% | ||
| 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 | 18.35% | ||||||||||
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 | × | 18.58% | = | 18.30% | ||
| 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 | 18.34% | ||||||||||
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 | × | 18.58% | = | 18.24% | ||
| 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 | 18.29% | ||||||||||
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 | × | 18.58% | = | 17.88% | ||
| 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 | 17.93% | ||||||||||
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 | 770,479) | 45,770) | 372,217) | 172,984) | 102,959) | |
| Invested capital2 | 3,791,600) | 3,937,900) | 3,697,400) | 2,904,204) | 2,855,739) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 20.32% | 1.16% | 10.07% | 5.96% | 3.61% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -1.95% | — | — | — | — | |
| Elevance Health Inc. | 1.46% | — | — | — | — | |
| Intuitive Surgical Inc. | 12.41% | — | — | — | — | |
| Medtronic PLC | -6.71% | — | — | — | — | |
| UnitedHealth Group Inc. | 3.91% | — | — | — | — | |
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 × 770,479 ÷ 3,791,600 = 20.32%
4 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by significant volatility in value creation, punctuated by a severe contraction in 2020 followed by an exceptional recovery in 2021. While the capital base expanded steadily for the majority of the period, the ability to generate returns above the cost of capital fluctuated considerably.
- Economic Spread Ratio
- A progressive increase in the economic spread ratio is observed from 2017 to 2019, rising from 3.61% to 10.07%, indicating improving efficiency in generating excess returns. This trend reversed sharply in 2020, with the ratio falling to a period low of 1.16%, suggesting that the return on invested capital nearly converged with the cost of capital. However, 2021 saw a substantial surge to 20.32%, the highest level in the analyzed timeframe, reflecting a dramatic expansion in the margin of economic value creation.
- Economic Profit
- Economic profit followed a trajectory closely aligned with the spread ratio. Growth was consistent from 2017 through 2019, peaking at US$ 372.2 million. A precipitous decline occurred in 2020, where economic profit dropped to US$ 45.8 million. This downturn was followed by a robust recovery in 2021, with economic profit reaching US$ 770.5 million, representing more than double the 2019 peak.
- Invested Capital
- Invested capital exhibited a general upward trend from 2017 to 2020, growing from US$ 2.86 billion to a peak of US$ 3.94 billion. A slight contraction was noted in 2021, with capital decreasing to US$ 3.79 billion. The divergence between the decreasing invested capital and the surging economic profit in 2021 underscores a significant increase in capital productivity and operational efficiency during that fiscal year.
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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 | 770,479) | 45,770) | 372,217) | 172,984) | 102,959) | |
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 14.72% | 1.04% | 8.56% | 4.65% | 3.00% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -2.81% | — | — | — | — | |
| Elevance Health Inc. | 0.68% | — | — | — | — | |
| Intuitive Surgical Inc. | 9.76% | — | — | — | — | |
| Medtronic PLC | -16.09% | — | — | — | — | |
| UnitedHealth Group Inc. | 1.92% | — | — | — | — | |
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 × 770,479 ÷ 5,232,500 = 14.72%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by a consistent growth in top-line revenue contrasted with significant volatility in economic value creation. While net sales followed a steady upward trajectory, the economic profit and the resulting margin experienced a sharp contraction in 2020 before reaching a five-year peak in 2021.
- Net Sales Growth
- Revenue demonstrated a sustained increase over the analyzed period, rising from 3,435,300 thousand US dollars in 2017 to 5,232,500 thousand US dollars by 2021. This trend indicates a consistent expansion of the company's market presence and revenue-generating capacity.
- Economic Profit Volatility
- Economic profit showed a positive trend through 2019, increasing from 102,959 thousand US dollars in 2017 to 372,217 thousand US dollars. A substantial decline occurred in 2020, where profit dropped to 45,770 thousand US dollars, representing a significant reduction in value created above the cost of capital. This was followed by a rapid recovery in 2021, with economic profit surging to 770,479 thousand US dollars.
- Economic Profit Margin Trends
- The economic profit margin mirrored the fluctuations in absolute economic profit. The margin improved from 3.00% in 2017 to a peak of 8.56% in 2019, before falling to a period low of 1.04% in 2020. By the end of 2021, the margin expanded to 14.72%, suggesting a marked increase in the efficiency of value creation relative to net sales during the final year of the observation period.
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