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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	18.48%	18.42%	18.41%	18.36%	18.00%
Invested capital³	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)

Economic profit⁴	767,742)	42,936)	369,558)	170,902)	100,953)

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 – 18.48% × 3,791,600 = 767,742

The analysis of economic value added from 2017 to 2021 reveals a general trend of positive value creation, characterized by significant growth in the final year despite a notable contraction in 2020.

Net Operating Profit After Taxes (NOPAT): NOPAT exhibited an overall upward trajectory, increasing from 615,066 thousand USD in 2017 to 1,468,252 thousand USD in 2021. A significant disruption occurred in 2020, where NOPAT declined to 768,464 thousand USD, before rebounding sharply in 2021 to achieve its highest level in the five-year period.
Cost of Capital and Invested Capital: The cost of capital remained remarkably stable throughout the period, drifting slightly upward from 18.00% in 2017 to 18.48% in 2021. Invested capital demonstrated a growth trend through 2020, peaking at 3,937,900 thousand USD, before experiencing a moderate reduction to 3,791,600 thousand USD in 2021.
Economic Profit Performance: Economic profit remained positive for all reported years, indicating that the company consistently generated returns above its cost of capital. However, the magnitude of this value creation was volatile. Growth was steady from 2017 through 2019, reaching 369,558 thousand USD. A sharp contraction was observed in 2020, with economic profit falling to 42,936 thousand USD, a result of the simultaneous decline in NOPAT and the increase in invested capital. The period concluded with a substantial surge in 2021, reaching 767,742 thousand USD, reflecting a significant improvement in capital efficiency and a peak in value generation.

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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	×	18.66%	=	18.45%
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					18.48%

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	×	18.66%	=	18.38%
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					18.42%

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	×	18.66%	=	18.37%
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					18.41%

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	×	18.66%	=	18.32%
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					18.36%

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	×	18.66%	=	17.95%
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					18.00%

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	767,742)	42,936)	369,558)	170,902)	100,953)
Invested capital²	3,791,600)	3,937,900)	3,697,400)	2,904,204)	2,855,739)
Performance Ratio
Economic spread ratio³	20.25%	1.09%	10.00%	5.88%	3.54%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	-1.98%	—	—	—	—
Elevance Health Inc.	1.46%	—	—	—	—
Intuitive Surgical Inc.	12.27%	—	—	—	—
Medtronic PLC	-6.73%	—	—	—	—
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 × 767,742 ÷ 3,791,600 = 20.25%

⁴ Click competitor name to see calculations.

The analysis of economic value creation between 2017 and 2021 reveals a period of significant volatility, characterized by an initial growth phase, a sharp contraction in 2020, and a robust recovery in 2021.

Economic Profit: Economic profit exhibited a strong upward trajectory from 2017 to 2019, increasing from 100,953 thousand to 369,558 thousand. A substantial decline occurred in 2020, where profit fell to 42,936 thousand. However, 2021 marked a period of exceptional growth, with economic profit surging to 767,742 thousand, the highest level recorded during the analyzed period.
Invested Capital: Invested capital showed a consistent expansion for the first four years, rising from 2,855,739 thousand in 2017 to a peak of 3,937,900 thousand in 2020. In 2021, a slight reduction in invested capital was observed, with the figure settling at 3,791,600 thousand, suggesting a move toward capital optimization.
Economic Spread Ratio: The economic spread ratio closely mirrored the fluctuations in economic profit. The ratio improved steadily from 3.54% in 2017 to 10.00% in 2019, indicating an increasing spread over the cost of capital. A sharp contraction to 1.09% was observed in 2020, representing a significant compression in value creation. This was followed by a dramatic expansion in 2021, with the ratio reaching 20.25%, signaling a substantial increase in the efficiency of capital deployment relative to the required return.

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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	767,742)	42,936)	369,558)	170,902)	100,953)
Net sales	5,232,500)	4,386,300)	4,348,000)	3,722,800)	3,435,300)
Performance Ratio
Economic profit margin²	14.67%	0.98%	8.50%	4.59%	2.94%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	-2.85%	—	—	—	—
Elevance Health Inc.	0.68%	—	—	—	—
Intuitive Surgical Inc.	9.66%	—	—	—	—
Medtronic PLC	-16.16%	—	—	—	—
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 × 767,742 ÷ 5,232,500 = 14.67%

³ Click competitor name to see calculations.

Between 2017 and 2021, the organization exhibited a general expansion in both top-line revenue and its capacity to generate economic profit, despite a significant period of volatility in 2020. The overall trajectory indicates a strengthening ability to create value above the cost of capital.

Revenue Growth Trends: Net sales demonstrated consistent growth over the five-year period, increasing from US$ 3,435,300 thousand in 2017 to US$ 5,232,500 thousand in 2021. The most pronounced acceleration in sales occurred between 2020 and 2021, signaling a robust expansion in market scale.
Economic Profit Performance: Economic profit followed a non-linear growth path. An initial upward trend was observed from 2017 through 2019, with values rising from US$ 100,953 thousand to US$ 369,558 thousand. A sharp contraction occurred in 2020, where economic profit declined to US$ 42,936 thousand. However, a substantial recovery was realized in 2021, with economic profit peaking at US$ 767,742 thousand.
Economic Profit Margin Analysis: The economic profit margin mirrored the volatility seen in absolute economic profit. The margin expanded from 2.94% in 2017 to 8.50% in 2019, before contracting sharply to 0.98% in 2020. The period concluded with a significant surge to 14.67% in 2021. The fact that the 2021 margin is significantly higher than the 2019 peak suggests that the growth in economic profit far outpaced the growth in net sales, reflecting enhanced operational efficiency and superior value creation relative to the capital employed.

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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