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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	18.41%	18.36%	18.35%	18.30%	17.94%
Invested capital³	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)

Economic profit⁴	770,130)	45,408)	371,877)	172,719)	102,703)

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 – 18.41% × 3,791,600 = 770,130

The analysis of economic profit between 2017 and 2021 reveals a general upward trajectory in value creation, characterized by substantial growth in net operating profit after taxes (NOPAT) and a significant recovery following a performance contraction in 2020.

Net Operating Profit After Taxes (NOPAT): NOPAT demonstrated a strong overall increase, growing from US$ 615.1 million in 2017 to US$ 1.47 billion in 2021. While a downward trend was observed in 2020, where NOPAT decreased to US$ 768.5 million, the subsequent recovery in 2021 represents the highest absolute profit level within the analyzed period.
Invested Capital and Cost of Capital: Invested capital experienced a steady rise from US$ 2.86 billion in 2017 to a peak of US$ 3.94 billion in 2020, before slightly contracting to US$ 3.79 billion in 2021. During this same interval, the cost of capital remained relatively constant, exhibiting only a marginal increase from 17.94% to 18.41%, suggesting a stable risk profile and funding environment.
Economic Profit Performance: Economic profit exhibited significant volatility, though the long-term trend is positive. Value creation increased from US$ 102.7 million in 2017 to US$ 371.9 million in 2019. A sharp decline occurred in 2020, with economic profit falling to US$ 45.4 million, coinciding with the dip in NOPAT and the peak in invested capital. However, 2021 marked a dramatic turnaround, with economic profit surging to US$ 770.1 million, indicating that the return on invested capital significantly exceeded the cost of capital by the end of the period.

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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	×	18.59%	=	18.38%
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					18.41%

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	×	18.59%	=	18.32%
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					18.36%

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	×	18.59%	=	18.31%
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					18.35%

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	×	18.59%	=	18.25%
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					18.30%

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	×	18.59%	=	17.89%
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					17.94%

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	770,130)	45,408)	371,877)	172,719)	102,703)
Invested capital²	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)
Performance Ratio
Economic spread ratio³	20.31%	1.15%	10.06%	5.95%	3.60%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	-1.92%	—	—	—	—
Elevance Health Inc.	1.50%	—	—	—	—
Intuitive Surgical Inc.	12.34%	—	—	—	—
Medtronic PLC	-6.68%	—	—	—	—
UnitedHealth Group Inc.	3.96%	—	—	—	—

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 × 770,130 ÷ 3,791,600 = 20.31%

⁴ Click competitor name to see calculations.

The financial performance between 2017 and 2021 is characterized by significant volatility in economic profit and a fluctuating economic spread ratio, despite a relatively stable trajectory in invested capital.

Economic Profit Trends: Economic profit demonstrated a strong upward trend from 2017 to 2019, increasing from $102.7 million to $371.9 million. This growth was interrupted in 2020 by a sharp decline to $45.4 million. However, a substantial recovery occurred in 2021, with economic profit reaching a five-year peak of $770.1 million.
Invested Capital Dynamics: Invested capital experienced a period of steady expansion from 2017 through 2020, rising from $2.86 billion to $3.94 billion. In 2021, a slight contraction was observed, with invested capital decreasing to $3.79 billion, suggesting a shift toward more efficient capital utilization or a reduction in asset intensity.
Economic Spread Ratio Analysis: The economic spread ratio exhibited significant variance over the period. An initial growth phase saw the ratio rise from 3.60% in 2017 to 10.06% in 2019, indicating improving efficiency in generating returns above the cost of capital. A severe contraction to 1.15% occurred in 2020, aligning with the drop in economic profit. The period concluded with a dramatic increase to 20.31% in 2021, representing a substantial expansion in the spread and a marked increase in the value created per unit of invested capital.

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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	770,130)	45,408)	371,877)	172,719)	102,703)
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%	8.55%	4.64%	2.99%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	-2.77%	—	—	—	—
Elevance Health Inc.	0.70%	—	—	—	—
Intuitive Surgical Inc.	9.71%	—	—	—	—
Medtronic PLC	-16.04%	—	—	—	—
UnitedHealth Group Inc.	1.94%	—	—	—	—

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 × 770,130 ÷ 5,232,500 = 14.72%

³ Click competitor name to see calculations.

The overall financial performance between 2017 and 2021 is characterized by consistent revenue growth coupled with a highly volatile yet expanding capacity for economic value creation. While top-line growth remained steady, the ability to generate economic profit experienced significant fluctuations, culminating in a substantial peak in the final year of the period.

Net Sales Growth: Revenue experienced a consistent upward trajectory, increasing from 3,435,300 thousand USD in 2017 to 5,232,500 thousand USD by 2021. This indicates a sustained expansion of market reach, although the growth rate slowed notably between 2019 and 2020 before accelerating again in 2021.
Economic Profit Fluctuations: Economic profit exhibited significant instability over the five-year duration. An initial growth phase saw values rise from 102,703 thousand USD in 2017 to 371,877 thousand USD in 2019. This was followed by a sharp contraction in 2020, where economic profit fell to 45,408 thousand USD, before recovering aggressively to a period high of 770,130 thousand USD in 2021.
Economic Profit Margin Analysis: The economic profit margin reflects the underlying volatility of the value creation process. The margin improved from 2.99% in 2017 to 8.55% in 2019, before plummeting to 1.04% in 2020. The period ended with a significant expansion to 14.72% in 2021, suggesting that by the end of the period, the company had significantly increased its efficiency in generating returns above its cost of capital relative to its sales volume.

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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