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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	14.15%	14.12%	14.11%	14.07%	13.80%
Invested capital³	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)

Economic profit⁴	931,665)	212,622)	528,759)	295,573)	221,086)

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 – 14.15% × 3,791,600 = 931,665

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Edwards Lifesciences Corp. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

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.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Edwards Lifesciences Corp. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Edwards Lifesciences Corp. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Edwards Lifesciences Corp. invested capital increased from 2019 to 2020 but then slightly decreased from 2020 to 2021 not reaching 2019 level.

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	×	14.28%	=	14.12%
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					14.15%

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	×	14.28%	=	14.08%
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					14.12%

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	×	14.28%	=	14.07%
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					14.11%

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	×	14.28%	=	14.02%
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					14.07%

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	×	14.28%	=	13.74%
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					13.80%

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	931,665)	212,622)	528,759)	295,573)	221,086)
Invested capital²	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)
Performance Ratio
Economic spread ratio³	24.57%	5.40%	14.30%	10.18%	7.74%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	0.84%	-2.42%	-3.75%	—	—
Cigna Group	-0.14%	2.75%	-0.46%	—	—
CVS Health Corp.	0.03%	0.47%	-0.31%	—	—
Danaher Corp.	-1.93%	-3.33%	-6.74%	—	—
Elevance Health Inc.	1.25%	-0.74%	0.10%	—	—
Humana Inc.	2.76%	9.63%	7.77%	—	—
Intuitive Surgical Inc.	21.06%	9.05%	25.73%	—	—
Medtronic PLC	-4.00%	-3.14%	-2.04%	-5.63%	—
UnitedHealth Group Inc.	4.67%	5.25%	5.27%	—	—

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 × 931,665 ÷ 3,791,600 = 24.57%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Edwards Lifesciences Corp. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

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	931,665)	212,622)	528,759)	295,573)	221,086)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Performance Ratio
Economic profit margin²	17.81%	4.85%	12.16%	7.94%	6.44%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	1.21%	-4.23%	-6.83%	—	—
Cigna Group	-0.08%	1.62%	-0.28%	—	—
CVS Health Corp.	0.02%	0.24%	-0.17%	—	—
Danaher Corp.	-4.82%	-9.76%	-21.84%	—	—
Elevance Health Inc.	0.59%	-0.35%	0.05%	—	—
Humana Inc.	1.02%	2.77%	2.28%	—	—
Intuitive Surgical Inc.	16.57%	9.28%	19.07%	—	—
Medtronic PLC	-9.60%	-7.73%	-4.86%	-13.33%	—
UnitedHealth Group Inc.	2.29%	2.68%	2.57%	—	—

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 × 931,665 ÷ 5,232,500 = 17.81%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Edwards Lifesciences Corp. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

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