Elevance Health Inc. (NYSE:ELV)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated a notable increase from 4,739 million USD in 2020 to a peak of 7,193 million USD in 2021. However, there was a subsequent decline to 6,841 million USD in 2022 and further decreases to 6,415 million USD in 2023. In 2024, NOPAT experienced a recovery, rising again to 7,015 million USD. Overall, the trend indicates volatility with a general upward movement by the end of the period.

Cost of Capital

The cost of capital showed a gradual increase from 10.61% in 2020 to 11.53% by 2022 and remained steady at that level through 2023. In 2024, the cost of capital slightly decreased to 10.81%. This trend suggests increasing capital costs initially, potentially related to market conditions or risk perceptions, followed by a modest easing in the final year.

Invested Capital

Invested capital consistently increased each year, rising from 56,634 million USD in 2020 to 78,241 million USD in 2024. This steady growth over the five-year period signifies ongoing investments and asset accumulation, which may support future operational capabilities and growth.

Economic Profit

Economic profit was negative for most of the observed period, starting at -1,268 million USD in 2020, marginally improving to a positive 53 million USD in 2021, then reverting to more substantial negative figures of -861 million USD in 2022, -1,618 million USD in 2023, and -1,444 million USD in 2024. The fluctuations in economic profit correlate inversely with changes in NOPAT and the cost of capital, reflecting challenges in generating returns above capital costs despite growing invested capital.

Summary Insights

While NOPAT showed growth and some recovery by the end of the period, the persistent negative economic profit suggests that the company struggled to generate sufficient returns over its cost of capital. The consistent increase in invested capital indicates ongoing expansion or asset acquisition, but the rising and relatively high cost of capital may be constraining value creation. The peak in economic profit during 2021 appears to coincide with the highest NOPAT and a moderate cost of capital, highlighting 2021 as the most favorable year within the period. Strategic considerations might focus on improving efficiency or capital allocation to enhance economic profitability going forward.

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.

The analysis of the annual financial data reveals several noteworthy trends with respect to economic profit, invested capital, and the economic spread ratio over the five-year period ending in 2024.

Economic Profit (US$ in millions)

The economic profit demonstrates a fluctuating and generally negative pattern throughout the observed time frame. There is an initial substantial loss of -1268 million US dollars in 2020, followed by a notable positive shift to 53 million in 2021. However, this positive outcome is short-lived as economic profit declines sharply to -861 million in 2022, deepens significantly to -1618 million in 2023, and slightly improves to -1444 million in 2024. This pattern indicates volatility and persistent challenges in generating sustainable economic value.

Invested Capital (US$ in millions)

Invested capital shows a steady upward trend, increasing each year from 56634 million in 2020 to 78241 million in 2024. This consistent rise suggests ongoing investment in assets or business expansion efforts over the period, reflecting a growing capital base despite the fluctuations in economic profit.

Economic Spread Ratio (%)

The economic spread ratio, which reflects the difference between return on invested capital and cost of capital, starts negative at -2.24% in 2020, improves to a slightly positive 0.08% in 2021, then returns to negative territory for the remainder of the period: -1.29% in 2022, worsening to -2.32% in 2023, and slightly recovering to -1.85% in 2024. This trend aligns with the economic profit fluctuations and highlights challenges in achieving returns above the cost of capital on a sustained basis.

In summary, the data indicates that while invested capital is steadily increasing, the company struggles to consistently translate this growth into positive economic profit, as evidenced by persistent negative economic spread ratios after 2021. The fluctuations and generally negative economic profit alongside the negative economic spread ratios suggest the company may be facing profitability and efficiency challenges despite ongoing investments.

The analysis of the annual financial data reveals several notable trends and changes over the five-year period.

Economic Profit

The economic profit shows significant volatility and generally negative values throughout the period. Specifically, a substantial loss of 1,268 million US dollars was observed at the start, followed by a positive economic profit of 53 million in the subsequent year. However, from 2022 onwards, economic profit returned to negative territory with losses increasing to 861 million, then worsening further to 1,618 million and 1,444 million by the end of 2024. This pattern indicates ongoing challenges in generating value above the cost of capital despite a brief positive performance in 2021.

Operating Revenue

Operating revenue demonstrates a consistent upward trend throughout all reported years. Starting from 120,808 million US dollars in 2020, it rose steadily each year, reaching 136,943 million in 2021 and continuing to increase to 155,660 million in 2022, 170,209 million in 2023, and finally 175,204 million in 2024. This continuous growth suggests a strong ability to expand sales or service income over the period.

Economic Profit Margin

The economic profit margin aligns with the economic profit trend, remaining negative or close to zero for most years. It was initially -1.05% in 2020, improved slightly to a positive 0.04% in 2021, then declined again to -0.55% in 2022, further decreasing to -0.95% in 2023, and marginally recovering to -0.82% in 2024. Despite the increase in operating revenue, the margin remains negative, indicating that the company's profitability relative to revenue has not reached a sustainable positive level.

Overall, while the company exhibits strong and steady revenue growth, it struggles to convert that growth into positive economic profit, suggesting ongoing operational or cost-efficiency issues that prevent it from achieving sustained economic value creation.