Elevance Health Inc. (NYSE:ELV)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited an overall increasing trend from 2020 through 2024, rising from 4,739 million USD in 2020 to 7,015 million USD in 2024. There was a notable peak in 2021 at 7,193 million USD, followed by a dip in 2022 and 2023 before rebounding in 2024 to near previous highs.

Cost of Capital

The cost of capital showed a gradual increase from 10.62% in 2020 to a peak of 11.55% in 2022 and 2023, before decreasing to 10.83% in 2024. This pattern suggests varying capital market conditions, potentially influencing investment and financing decisions.

Invested Capital

Invested capital steadily grew over the observed periods, starting at 56,634 million USD in 2020 and increasing each year to reach 78,241 million USD by 2024. This consistent growth in invested capital indicates ongoing capital deployment and expansion efforts.

Economic Profit

Economic profit fluctuated significantly, starting with a negative value of -1,277 million USD in 2020, improving to a marginal positive of 42 million USD in 2021, and then declining sharply into negative territory reaching -1,630 million USD in 2023. A slight improvement was observed in 2024 with economic profit at -1,456 million USD, yet it remained negative. These results suggest that the returns on invested capital were generally insufficient to cover the cost of capital for most years except 2021.

Shareholders’ Net Income

The shareholders’ net income exhibited an upward trend from 2020 to 2021, increasing significantly from 4,572 million USD to 6,104 million USD. However, this upward momentum did not sustain in the following years. From 2021 to 2022, net income slightly decreased to 6,025 million USD, followed by a marginal decline in 2023 to 5,987 million USD. By the end of 2024, the figure remained relatively stable at 5,980 million USD, indicating a plateau after the initial growth.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a robust increase from 4,739 million USD in 2020 to 7,193 million USD in 2021, signaling improved operational effectiveness and profitability. Subsequent years showed a decline in NOPAT to 6,841 million USD in 2022 and further down to 6,415 million USD in 2023, suggesting a reduction in operating efficiency or increased costs during this period. Notably, there was a recovery in 2024, with NOPAT rising again to 7,015 million USD, reaching levels approaching the 2021 peak.

Overall Observations

Both shareholders’ net income and NOPAT experienced substantial growth from 2020 to 2021. Following this peak, net income maintained relatively steady levels with minor declines, while NOPAT exhibited more volatility, decreasing over two years before partially rebounding in 2024. This pattern could indicate external or operational factors affecting profitability after initial gains. The relative steadiness in net income compared to NOPAT fluctuations may also suggest effective management of non-operating factors such as taxes, financing costs, or extraordinary items during the period analyzed.

The financial data over the five-year period reveals several notable trends related to tax expenses and cash operating taxes.

Income Tax Expense

The income tax expense showed a general upward trend from 2020 to 2024, starting at 1,666 million US dollars in 2020 and increasing to 1,933 million US dollars in 2024. There was a slight dip in 2022 compared to 2021, where the expense decreased from 1,830 million to 1,750 million, followed by a minor further decline in 2023 to 1,724 million. However, the expense rose significantly in 2024, reaching the highest recorded value over the period.

Cash Operating Taxes

Cash operating taxes demonstrated greater volatility during the period. The value initially decreased from 2,363 million US dollars in 2020 to 1,823 million in 2021, indicating a substantial reduction of approximately 22.9%. This trend reversed in the following years, with cash operating taxes increasing to 1,931 million in 2022, then surging to 2,637 million in 2023. Although there was a slight decline in 2024 to 2,550 million, cash operating taxes remained well above the 2021 and 2022 levels.

Overall, the patterns suggest that while income tax expense has been relatively stable with minor fluctuations, cash operating taxes have experienced more pronounced changes with a sharp decline early in the period and a significant rebound later. The year 2024 marked a notable peak for income tax expense, and cash operating taxes remain elevated compared to the middle years of the timeframe.

Total Reported Debt & Leases

The total reported debt and leases show a consistent upward trend over the five-year period. Starting from US$20,992 million at the end of 2020, the figure rose to US$24,028 million in 2021, reflecting a substantial increase of approximately 14.5%. This growth continued at a slower but steady pace in 2022 and 2023, reaching US$25,046 million and US$25,969 million, respectively. The most significant increase occurred in 2024, where debt and leases climbed markedly to US$32,043 million. This sharp rise in the final year signals a potential strategic increase in leverage or financing activities.

Shareholders’ Equity

Shareholders' equity experienced a positive growth trajectory throughout the period. Beginning at US$33,199 million in 2020, equity expanded steadily to US$36,060 million in 2021 and US$36,307 million in 2022, showing moderate annual increases. The upward movement became more pronounced in the subsequent years, culminating in an equity balance of US$41,315 million by the end of 2024. This steady accumulation of equity suggests ongoing profitability or capital retention strategies enhancing the company’s net assets.

Invested Capital

Invested capital also displayed a consistent increasing pattern, starting from US$56,634 million in 2020 and growing annually through to 2024. Elevations to US$63,876 million in 2021, US$66,804 million in 2022, and US$69,669 million in 2023 illustrate gradual capital expansion. By 2024, invested capital reached US$78,241 million, indicating an accelerated growth rate. This trend points to ongoing investments in operational or business assets, which may correspond to expansion efforts or increased asset base supporting growth initiatives.

Overall Financial Position Insights

The data reveals a pattern of expanding financial resources alongside increasing obligations. The rise in total debt and leases is proportionally higher than the growth in shareholders' equity, especially in the latest period, reflecting potentially greater reliance on external financing. Simultaneously, the increase in invested capital suggests that the company has been actively deploying capital into its business operations. The balance between rising debt and equity levels indicates a leveraged growth strategy, which may affect risk profiles and financial flexibility going forward. Monitoring the impact of this leverage on profitability and cash flows would be essential for a comprehensive financial assessment.

Economic Profit

The economic profit demonstrated significant volatility over the analyzed periods. Initially, there was a substantial economic loss of -1277 million USD at the end of 2020, followed by a positive economic profit of 42 million USD in 2021. However, the subsequent years showed a return to negative economic profit positions, with losses deepening to -873 million USD in 2022, -1630 million USD in 2023, and slightly improving to -1456 million USD in 2024. This indicates that profitability was not sustained after 2021, reflecting challenges in generating returns above the cost of capital in recent years.

Invested Capital

Invested capital exhibited a consistent upward trend throughout the period. Starting at 56,634 million USD in 2020, it increased steadily each year to reach 78,241 million USD by the end of 2024. This growth signals ongoing investment and asset accumulation, potentially aimed at future growth or operational expansion.

Economic Spread Ratio

The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital as a percentage, showed a pattern closely aligned with economic profit trends. It was negative at -2.26% in 2020, marginally positive at 0.07% in 2021, before reverting to negative values in the following years: -1.31% in 2022, -2.34% in 2023, and -1.86% in 2024. This pattern reflects the fluctuating ability of the company to exceed the cost of capital, with only a short-lived positive spread in 2021.

Summary

Overall, the data highlights a pattern of rising invested capital against a backdrop of predominantly negative economic profit and economic spread ratio in recent years. The brief positive economic profit and economic spread ratio in 2021 appear as an outlier in an otherwise challenging period regarding value creation. The increasing invested capital combined with persistent negative economic profits suggests that the company has faced difficulties in generating adequate returns relative to its capital investments during the majority of the analyzed timeline.

Operating Revenue

The operating revenue shows a consistent upward trend from 2020 to 2024. Starting at approximately $120.8 billion in 2020, it increased to about $136.9 billion in 2021, and continued to grow to $155.7 billion in 2022. This growth persisted through 2023 and 2024, reaching approximately $175.2 billion by the end of 2024. This demonstrates steady business expansion over the five-year period.

Economic Profit

The economic profit demonstrates significant volatility and negative values for most of the periods analyzed. In 2020, economic profit was substantially negative at -$1.277 billion. It turned positive in 2021 with a minor gain of $42 million but then reverted to negative territory in the subsequent years, reaching -$873 million in 2022, deteriorating further to -$1.63 billion in 2023, and slightly improving to -$1.456 billion by 2024. Despite the revenue growth, the economic profit remains negative in four out of five years, indicating challenges in generating returns above the cost of capital.

Economic Profit Margin

The economic profit margin follows a pattern similar to economic profit, remaining mostly negative throughout the analyzed periods. It was -1.06% in 2020, improved marginally to a positive 0.03% in 2021, but then declined in the following years to -0.56% in 2022, further to -0.96% in 2023, and slightly recovering to -0.83% in 2024. This consistent negative margin suggests persistent inefficiencies or costs outweighing the economic benefits from operational activities, despite growing revenues.

Overall Insights

Although there is clear growth in operating revenue over the five-year horizon, the company struggles to translate this growth into positive economic profit consistently. The data reveals that revenue increases have not sufficed to overcome the associated costs and capital charges, leading to recurring negative economic profit and margins. The brief positive economic profit in 2021 appears to be an isolated occurrence rather than the beginning of a sustained trend. This implies a need for improved operational efficiency or cost management to enhance profitability in future periods.