Elevance Health Inc. (NYSE:ELV)

The analysis of the financial data reveals several key trends in the company's performance and capital utilization over the five-year period ending December 31, 2024.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows an initial strong increase from 4,739 million USD in 2020 to a peak of 7,193 million USD in 2021, indicating an improvement in operational profitability. However, the figures decline in the following years to 6,841 million USD in 2022 and continue to fall to 6,415 million USD in 2023, suggesting a downward trend in after-tax operating efficiency. In 2024, NOPAT recovers somewhat to 7,015 million USD, though it remains below the 2021 high.

Cost of Capital

The cost of capital shows a gradual increase from 10.52% in 2020 to a peak of 11.43% in 2022 and remains stable through 2023 before slightly decreasing to 10.72% in 2024. This trend reflects changes in the company's risk profile or market conditions influencing the required return on invested capital, peaking in the mid-period years before easing somewhat.

Invested Capital

Invested capital follows a consistently upward trajectory throughout the entire period, growing from 56,634 million USD in 2020 to 78,241 million USD in 2024. This steady increase indicates ongoing investments in the company's asset base or operational capacity, suggesting a strategy focused on expansion or modernization.

Economic Profit

Economic profit, which measures the value created in excess of the cost of capital, fluctuates significantly and remains mostly negative. It shows a loss of 1,220 million USD in 2020, a marginal positive value of 113 million USD in 2021, followed by recurring losses of -797 million USD in 2022, -1,551 million USD in 2023, and -1,375 million USD in 2024. This pattern indicates that despite operational profits, the company has struggled to generate returns above its cost of capital, raising concerns about capital efficiency and value creation.

In summary, while operational profitability (NOPAT) experienced volatility with a peak in 2021 and some recovery in 2024, the cost of capital remained elevated in the middle years before slight improvement. The consistent increase in invested capital suggests sustained investment activity, but economic profit figures indicate challenges in generating sufficient returns above the company's capital costs, pointing to potential inefficiencies or increased capital charges impacting value creation during the period.

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 displayed significant volatility over the five-year period. Beginning with a substantial loss of 1,220 million US dollars in 2020, it turned positive to 113 million US dollars in 2021. However, this improvement was not sustained, as economic profit reverted to negative values in subsequent years, reaching -797 million in 2022, then worsening further to -1,551 million in 2023, followed by a slight recovery to -1,375 million in 2024. This pattern indicates ongoing challenges in generating returns above the cost of capital.

Invested Capital

Invested capital showed a steady upward trajectory, increasing from 56,634 million US dollars in 2020 to 78,241 million in 2024. This consistent growth suggests continued investment in assets or business expansion, with the invested capital rising by approximately 38% over the five years.

Economic Spread Ratio

The economic spread ratio, which measures the return relative to invested capital cost, fluctuated around zero but remained predominantly negative during the period. It started at -2.15% in 2020, improved to a marginally positive 0.18% in 2021, and then declined again to -1.19% in 2022. The downward trend continued, reaching -2.23% in 2023 and slightly improving to -1.76% in 2024. Overall, the negative spread ratios indicate that returns were generally insufficient to cover the capital cost, except for a brief positive phase in 2021.

The financial data over the reviewed periods exhibits notable trends in key performance indicators. Operating revenue consistently increased each year, reflecting steady top-line growth. Beginning at 120,808 million US dollars in 2020, revenue rose to 175,204 million US dollars by 2024, indicating a compound upward trajectory in the company's sales or service income.

However, contrasting this positive revenue growth, economic profit figures reveal volatility and persistent challenges in achieving profitability. The economic profit was negative in most years, with a brief positive instance in 2021. Starting at -1,220 million US dollars in 2020, economic profit improved to a positive 113 million US dollars in 2021, but then declined sharply to -797 million US dollars in 2022, and further deteriorated to -1,551 million and -1,375 million US dollars in 2023 and 2024 respectively. This demonstrates periods of loss generation and difficulty in sustaining economic value.

The economic profit margin, which expresses economic profit relative to operating revenue, aligns with the economic profit trend, remaining negative in all years except 2021. The margin was -1.01% in 2020, improved to a marginally positive 0.08% in 2021, then reverted to negative figures of -0.51% in 2022, -0.91% in 2023, and -0.79% in 2024. These margins suggest that despite revenue growth, the company has been unable to consistently convert sales into shareholder value above the cost of capital.

Operating Revenue

Exhibits a steady and significant upward trend over the five years, indicating business expansion or increased market penetration.

Economic Profit

Highly variable, experiencing a brief positive turn in 2021, but predominantly negative, signifying challenges in generating excess returns beyond costs.

Economic Profit Margin

Closely mirrors economic profit trends, with mostly negative margins highlighting inefficiencies or high costs relative to revenue.

In summary, the data analysis reveals strength in revenue growth contrasted by ongoing difficulties in achieving sustained economic profitability. The intermittent positive economic profit in 2021 did not establish a continuing trend, with subsequent years marked by deeper negative economic results. This signals potential areas for management focus on cost control, operational efficiency, or strategic realignment to enhance profitability alongside revenue growth.