Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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
Elevance Health Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,015 – 10.98% × 78,241 = -1,576
The period under review demonstrates a fluctuating relationship between net operating profit after taxes, cost of capital, and invested capital, resulting in consistently negative economic profit. While NOPAT experienced initial growth, it did not consistently outpace the cost of capital applied to the increasing invested capital base.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$4,739 million in 2020 to US$7,193 million in 2021, representing substantial growth. However, this was followed by a decrease to US$6,841 million in 2022 and a further decline to US$6,415 million in 2023. A modest recovery to US$7,015 million is observed in 2024, but remains below the 2021 peak.
- Cost of Capital
- The cost of capital generally increased from 10.77% in 2020 to 11.72% in both 2022 and 2023. A decrease to 10.98% is noted in 2024. This increasing cost of capital contributed to the negative economic profit observed throughout the period.
- Invested Capital
- Invested capital consistently increased throughout the period, rising from US$56,634 million in 2020 to US$78,241 million in 2024. This growth in invested capital, coupled with the cost of capital, placed downward pressure on economic profit.
- Economic Profit
- Economic profit remained negative across all years examined. The largest negative economic profit was recorded in 2023 at US$-1,748 million. While the negative economic profit lessened slightly in 2021 (US$-62 million), it quickly deteriorated again. The economic profit in 2024 is US$-1,576 million, indicating a continued shortfall in generating returns exceeding the cost of capital.
The trend suggests that while the company has been able to grow its NOPAT and invest capital, it has not consistently generated returns sufficient to cover its cost of capital. The increase in invested capital, combined with a relatively high and fluctuating cost of capital, has resulted in persistent economic losses.
Net Operating Profit after Taxes (NOPAT)
Elevance Health Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 shareholders’ net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 811 × 3.96% = 32
5 2024 Calculation
Tax benefit of interest expenses = Adjusted interest expenses × Statutory income tax rate
= 1,217 × 21.00% = 256
6 Addition of after taxes interest expense to shareholders’ net income.
- 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.
Cash Operating Taxes
Elevance Health Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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.
Invested Capital
Elevance Health Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 shareholders’ equity.
5 Removal of accumulated other comprehensive income.
- 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$78,241 million, indicating an accelerated growth rate. This trend points to ongoing investments in operational or business assets, which may correspond to expansion efforts or increased asset base supporting growth initiatives.
- Overall Financial Position Insights
-
The data reveals a pattern of expanding financial resources alongside increasing obligations. The rise in total debt and leases is proportionally higher than the growth in shareholders' equity, especially in the latest period, reflecting potentially greater reliance on external financing. Simultaneously, the increase in invested capital suggests that the company has been actively deploying capital into its business operations. The balance between rising debt and equity levels indicates a leveraged growth strategy, which may affect risk profiles and financial flexibility going forward. Monitoring the impact of this leverage on profitability and cash flows would be essential for a comprehensive financial assessment.
Cost of Capital
Elevance Health Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 88,781) | 88,781) | ÷ | 118,417) | = | 0.75 | 0.75 | × | 13.49% | = | 10.11% | ||
| Debt3 | 28,825) | 28,825) | ÷ | 118,417) | = | 0.24 | 0.24 | × | 4.39% × (1 – 21.00%) | = | 0.84% | ||
| Operating lease liability4 | 811) | 811) | ÷ | 118,417) | = | 0.01 | 0.01 | × | 3.96% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 118,417) | 1.00 | 10.98% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 118,517) | 118,517) | ÷ | 143,160) | = | 0.83 | 0.83 | × | 13.49% | = | 11.17% | ||
| Debt3 | 23,794) | 23,794) | ÷ | 143,160) | = | 0.17 | 0.17 | × | 4.05% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 849) | 849) | ÷ | 143,160) | = | 0.01 | 0.01 | × | 3.66% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 143,160) | 1.00 | 11.72% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 115,673) | 115,673) | ÷ | 139,194) | = | 0.83 | 0.83 | × | 13.49% | = | 11.21% | ||
| Debt3 | 22,589) | 22,589) | ÷ | 139,194) | = | 0.16 | 0.16 | × | 3.83% × (1 – 21.00%) | = | 0.49% | ||
| Operating lease liability4 | 932) | 932) | ÷ | 139,194) | = | 0.01 | 0.01 | × | 2.98% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 139,194) | 1.00 | 11.72% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 110,657) | 110,657) | ÷ | 138,066) | = | 0.80 | 0.80 | × | 13.49% | = | 10.81% | ||
| Debt3 | 26,412) | 26,412) | ÷ | 138,066) | = | 0.19 | 0.19 | × | 3.51% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 997) | 997) | ÷ | 138,066) | = | 0.01 | 0.01 | × | 2.69% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 138,066) | 1.00 | 11.36% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 72,573) | 72,573) | ÷ | 97,799) | = | 0.74 | 0.74 | × | 13.49% | = | 10.01% | ||
| Debt3 | 24,269) | 24,269) | ÷ | 97,799) | = | 0.25 | 0.25 | × | 3.77% × (1 – 21.00%) | = | 0.74% | ||
| Operating lease liability4 | 957) | 957) | ÷ | 97,799) | = | 0.01 | 0.01 | × | 3.21% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 97,799) | 1.00 | 10.77% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Elevance Health Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (1,576) | (1,748) | (986) | (62) | (1,363) | |
| Invested capital2 | 78,241) | 69,669) | 66,804) | 63,876) | 56,634) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.01% | -2.51% | -1.48% | -0.10% | -2.41% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -2.49% | -2.80% | -0.58% | -0.12% | -3.39% | |
| Intuitive Surgical Inc. | 9.76% | 3.31% | 3.03% | 18.64% | 6.63% | |
| Medtronic PLC | -5.66% | -5.42% | -4.18% | -5.81% | -4.87% | |
| UnitedHealth Group Inc. | -0.50% | 4.38% | 3.41% | 3.26% | 3.90% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,576 ÷ 78,241 = -2.01%
4 Click competitor name to see calculations.
The economic spread ratio exhibited a volatile pattern over the five-year period. While initially negative, the ratio demonstrated improvement in 2021 before declining again in subsequent years. Economic profit consistently remained negative throughout the observed timeframe, though its magnitude fluctuated. Invested capital showed a consistent upward trend.
- Economic Spread Ratio
- The economic spread ratio began at -2.41% in 2020. A significant improvement was noted in 2021, with the ratio increasing to -0.10%. However, this positive trend reversed in 2022, falling to -1.48%. Further deterioration occurred in 2023, reaching -2.51%, before a slight recovery to -2.01% in 2024. This indicates a generally negative economic spread, with limited periods of relative improvement, and a recent stabilization.
- Economic Profit
- Economic profit was negative across all reported years. The largest negative value was recorded in 2020 at -1,363 US$ millions. The figure improved substantially in 2021 to -62 US$ millions, but then worsened to -986 US$ millions in 2022. A further decline was observed in 2023, reaching -1,748 US$ millions, followed by a slight decrease in the negative value to -1,576 US$ millions in 2024. The consistent negative economic profit suggests the company’s returns are not exceeding its cost of capital.
- Invested Capital
- Invested capital demonstrated a consistent upward trajectory throughout the period. Starting at 56,634 US$ millions in 2020, it increased to 63,876 US$ millions in 2021, 66,804 US$ millions in 2022, 69,669 US$ millions in 2023, and reached 78,241 US$ millions in 2024. This continuous growth in invested capital, coupled with consistently negative economic profit, may indicate increasing capital deployment without a corresponding increase in returns.
The combination of a negative and fluctuating economic spread ratio, consistently negative economic profit, and increasing invested capital suggests potential challenges in generating returns commensurate with the capital employed. The slight improvement in the economic spread ratio in 2024, alongside a reduced negative economic profit, may warrant further investigation to determine if this represents a sustainable trend.
Economic Profit Margin
Elevance Health Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (1,576) | (1,748) | (986) | (62) | (1,363) | |
| Operating revenue | 175,204) | 170,209) | 155,660) | 136,943) | 120,808) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -0.90% | -1.03% | -0.63% | -0.05% | -1.13% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -3.57% | -4.16% | -0.81% | -0.17% | -5.91% | |
| Intuitive Surgical Inc. | 9.08% | 3.30% | 2.61% | 14.67% | 6.79% | |
| Medtronic PLC | -12.00% | -12.25% | -9.18% | -13.93% | -11.99% | |
| UnitedHealth Group Inc. | -0.25% | 2.18% | 1.75% | 1.60% | 1.99% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenue
= 100 × -1,576 ÷ 175,204 = -0.90%
3 Click competitor name to see calculations.
The economic profit margin demonstrates a volatile pattern over the five-year period. While initially negative, the metric experienced a substantial improvement in 2021 before declining again in subsequent years. Economic profit itself consistently remained negative throughout the observed timeframe, indicating the company’s returns did not exceed its cost of capital.
- Economic Profit Margin Trend
- The economic profit margin began at -1.13% in 2020. A significant positive shift occurred in 2021, with the margin improving to -0.05%. However, this improvement was not sustained. The margin deteriorated to -0.63% in 2022, then further to -1.03% in 2023, and stabilized slightly at -0.90% in 2024. This suggests increasing difficulty in generating returns above the cost of capital in the later years of the period.
- Relationship between Economic Profit and Revenue
- Operating revenue consistently increased throughout the period, rising from US$120,808 million in 2020 to US$175,204 million in 2024. Despite this revenue growth, economic profit remained negative, and even worsened in 2023. This indicates that the increase in revenue was not sufficient to offset rising costs or capital charges, or that the revenue growth was achieved at the expense of profitability. The divergence between revenue growth and negative economic profit is a key observation.
The fluctuations in the economic profit margin, coupled with consistently negative economic profit, suggest potential challenges in capital allocation or operational efficiency. Further investigation into the components of economic profit – net operating profit after tax and the cost of capital – would be necessary to pinpoint the specific drivers of this performance.