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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

Estée Lauder Cos. Inc., economic profit calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net operating profit after taxes (NOPAT)¹	1,239)	2,408)	2,923)	591)	1,921)	1,482)
Cost of capital²	11.88%	12.67%	12.73%	12.29%	12.57%	12.21%
Invested capital³	17,123)	14,574)	15,610)	13,826)	11,514)	10,334)

Economic profit⁴	(795)	562)	936)	(1,109)	474)	220)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,239 – 11.88% × 17,123 = -795

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Estée Lauder Cos. Inc. economic profit decreased from 2021 to 2022 and from 2022 to 2023.

Estée Lauder Cos. Inc., NOPAT calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net earnings attributable to The Estée Lauder Companies Inc.	1,006)	2,390)	2,870)	684)	1,785)	1,108)
Deferred income tax expense (benefit)¹	(186)	(149)	(230)	(143)	(66)	175)
Increase (decrease) in allowance for credit losses²	6)	(10)	(16)	31)	3)	(1)
Increase (decrease) in deferred revenue³	210)	(9)	92)	(82)	(19)	—)
Increase (decrease) in accrued restructuring charges⁴	(43)	(6)	19)	(91)	22)	31)
Increase (decrease) in equity equivalents⁵	(13)	(174)	(135)	(285)	(60)	205)
Interest expense	255)	167)	173)	161)	133)	128)
Interest expense, operating lease liability⁶	51)	54)	58)	66)	97)	94)
Adjusted interest expense	306)	221)	231)	227)	230)	222)
Tax benefit of interest expense⁷	(64)	(46)	(49)	(48)	(48)	(62)
Adjusted interest expense, after taxes⁸	242)	174)	183)	180)	182)	160)
(Gain) loss on marketable securities	—)	—)	—)	—)	6)	—)
Investment income, before taxes	—)	—)	—)	—)	6)	—)
Tax expense (benefit) of investment income⁹	—)	—)	—)	—)	(1)	—)
Investment income, after taxes¹⁰	—)	—)	—)	—)	5)	—)
Net income (loss) attributable to noncontrolling interest	4)	18)	5)	12)	9)	9)
Net operating profit after taxes (NOPAT)	1,239)	2,408)	2,923)	591)	1,921)	1,482)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in accrued restructuring charges.

⁵ Addition of increase (decrease) in equity equivalents to net earnings attributable to The Estée Lauder Companies Inc..

⁶ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,055 × 2.50% = 51

⁷ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 306 × 21.00% = 64

⁸ Addition of after taxes interest expense to net earnings attributable to The Estée Lauder Companies Inc..

⁹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Estée Lauder Cos. Inc. NOPAT decreased from 2021 to 2022 and from 2022 to 2023.

Estée Lauder Cos. Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Provision for income taxes	387)	628)	456)	350)	513)	863)
Less: Deferred income tax expense (benefit)	(186)	(149)	(230)	(143)	(66)	175)
Add: Tax savings from interest expense	64)	46)	49)	48)	48)	62)
Less: Tax imposed on investment income	—)	—)	—)	—)	(1)	—)
Cash operating taxes	637)	823)	735)	541)	629)	750)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Estée Lauder Cos. Inc. cash operating taxes increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Estée Lauder Cos. Inc., invested capital calculation (financing approach)

US$ in millions

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Current debt	997)	268)	32)	1,222)	516)	183)
Long-term debt, excluding current maturities	7,117)	5,144)	5,537)	4,914)	2,896)	3,361)
Operating lease liability¹	2,055)	2,233)	2,530)	2,653)	2,826)	2,777)
Total reported debt & leases	10,169)	7,645)	8,099)	8,789)	6,238)	6,321)
Stockholders’ equity, The Estée Lauder Companies Inc.	5,585)	5,590)	6,057)	3,935)	4,386)	4,688)
Net deferred tax (assets) liabilities²	(240)	(3)	218)	(44)	(295)	(120)
Allowance for credit losses³	16)	10)	20)	63)	32)	29)
Deferred revenue⁴	572)	362)	371)	279)	361)	—)
Accrued restructuring charges⁵	82)	125)	131)	112)	204)	182)
Equity equivalents⁶	430)	494)	740)	410)	302)	91)
Accumulated other comprehensive (income) loss, net of tax⁷	934)	762)	470)	665)	563)	434)
Redeemable noncontrolling interest	832)	842)	857)	—)	—)	—)
Noncontrolling interests	—)	—)	34)	27)	25)	22)
Adjusted stockholders’ equity, The Estée Lauder Companies Inc.	7,781)	7,688)	8,158)	5,037)	5,276)	5,235)
Construction in progress⁸	(827)	(759)	(647)	—)	—)	—)
Available-for-sale investments⁹	—)	—)	—)	—)	—)	(1,222)
Invested capital	17,123)	14,574)	15,610)	13,826)	11,514)	10,334)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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 deferred revenue.

⁵ Addition of accrued restructuring charges.

⁶ Addition of equity equivalents to stockholders’ equity, The Estée Lauder Companies Inc..

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of available-for-sale investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Estée Lauder Cos. Inc. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Estée Lauder Cos. Inc., cost of capital calculations

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	56,047)	56,047)	÷	65,767)	=	0.85	0.85	×	13.47%	=	11.48%
Current and long-term debt³	7,665)	7,665)	÷	65,767)	=	0.12	0.12	×	3.65% × (1 – 21.00%)	=	0.34%
Operating lease liability⁴	2,055)	2,055)	÷	65,767)	=	0.03	0.03	×	2.50% × (1 – 21.00%)	=	0.06%
Total:	65,767)					1.00					11.88%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	94,733)	94,733)	÷	102,105)	=	0.93	0.93	×	13.47%	=	12.50%
Current and long-term debt³	5,139)	5,139)	÷	102,105)	=	0.05	0.05	×	3.19% × (1 – 21.00%)	=	0.13%
Operating lease liability⁴	2,233)	2,233)	÷	102,105)	=	0.02	0.02	×	2.40% × (1 – 21.00%)	=	0.04%
Total:	102,105)					1.00					12.67%

Based on: 10-K (reporting date: 2022-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	123,134)	123,134)	÷	131,926)	=	0.93	0.93	×	13.47%	=	12.57%
Current and long-term debt³	6,262)	6,262)	÷	131,926)	=	0.05	0.05	×	3.18% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	2,530)	2,530)	÷	131,926)	=	0.02	0.02	×	2.30% × (1 – 21.00%)	=	0.03%
Total:	131,926)					1.00					12.73%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	80,434)	80,434)	÷	89,989)	=	0.89	0.89	×	13.47%	=	12.04%
Current and long-term debt³	6,902)	6,902)	÷	89,989)	=	0.08	0.08	×	3.19% × (1 – 21.00%)	=	0.19%
Operating lease liability⁴	2,653)	2,653)	÷	89,989)	=	0.03	0.03	×	2.50% × (1 – 21.00%)	=	0.06%
Total:	89,989)					1.00					12.29%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	71,123)	71,123)	÷	77,655)	=	0.92	0.92	×	13.47%	=	12.34%
Current and long-term debt³	3,706)	3,706)	÷	77,655)	=	0.05	0.05	×	3.45% × (1 – 21.00%)	=	0.13%
Operating lease liability⁴	2,826)	2,826)	÷	77,655)	=	0.04	0.04	×	3.45% × (1 – 21.00%)	=	0.10%
Total:	77,655)					1.00					12.57%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	49,788)	49,788)	÷	56,232)	=	0.89	0.89	×	13.47%	=	11.93%
Current and long-term debt³	3,667)	3,667)	÷	56,232)	=	0.07	0.07	×	3.39% × (1 – 28.10%)	=	0.16%
Operating lease liability⁴	2,777)	2,777)	÷	56,232)	=	0.05	0.05	×	3.39% × (1 – 28.10%)	=	0.12%
Total:	56,232)					1.00					12.21%

Based on: 10-K (reporting date: 2018-06-30).

¹ US$ in millions

² Equity. See details »

³ Current and long-term debt. See details »

⁴ Operating lease liability. See details »

Estée Lauder Cos. Inc., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(795)	562)	936)	(1,109)	474)	220)
Invested capital²	17,123)	14,574)	15,610)	13,826)	11,514)	10,334)
Performance Ratio
Economic spread ratio³	-4.64%	3.86%	6.00%	-8.02%	4.12%	2.13%
Benchmarks
Economic Spread Ratio, Competitors⁴
Procter & Gamble Co.	7.23%	7.64%	7.21%	4.90%	-3.56%	1.68%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -795 ÷ 17,123 = -4.64%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Estée Lauder Cos. Inc. economic spread ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

Estée Lauder Cos. Inc., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(795)	562)	936)	(1,109)	474)	220)

Net sales	15,910)	17,737)	16,215)	14,294)	14,863)	13,683)
Add: Increase (decrease) in deferred revenue	210)	(9)	92)	(82)	(19)	—)
Adjusted net sales	16,120)	17,728)	16,307)	14,212)	14,844)	13,683)
Performance Ratio
Economic profit margin²	-4.93%	3.17%	5.74%	-7.80%	3.19%	1.61%
Benchmarks
Economic Profit Margin, Competitors³
Procter & Gamble Co.	8.52%	8.95%	9.01%	6.98%	-4.73%	2.31%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -795 ÷ 16,120 = -4.93%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Estée Lauder Cos. Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

Estée Lauder Cos. Inc. (NYSE:EL)

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