Economic Value Added (EVA)
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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.
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Estée Lauder Cos. Inc. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
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 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT demonstrates a volatile trend across the reported periods. It increased from 1,482 million USD in 2018 to a peak of 2,923 million USD in 2021, indicating substantial profitability growth during this period. However, a sharp decline follows in 2023, dropping to 1,239 million USD, which is akin to the 2018 level, suggesting challenges in maintaining profitability after 2021.
- Cost of Capital
- The cost of capital fluctuated slightly but generally remained within a narrow range, from 13.37% in 2018 to a high of 13.96% in 2021, before declining to 13% in 2023. This indicates a relatively stable capital cost environment, with a minor reduction in later years potentially benefiting investment returns.
- Invested Capital
- Invested capital steadily increased from 10,334 million USD in 2018 to 17,123 million USD in 2023, highlighting ongoing investment and asset growth. The growth was interrupted only slightly in 2022, where a minor reduction was observed, but the overall trend indicates a company expanding its asset base significantly over this timeframe.
- Economic Profit
- Economic profit exhibited notable volatility with a positive value of 100 million USD in 2018, rising sharply to 335 million USD in 2019. However, it turned negative in 2020 with a loss of 1,272 million USD, followed by a return to positive territory in 2021 (744 million USD) and 2022 (384 million USD). The year 2023 again showed a significant negative economic profit of 987 million USD, reflecting challenges in generating value beyond the cost of capital in recent years.
Net Operating Profit after Taxes (NOPAT)
Estée Lauder Cos. Inc., NOPAT calculation
US$ in millions
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
= × =
7 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Earnings Attributable to The Estée Lauder Companies Inc.
- The net earnings exhibit significant volatility over the analyzed period. Starting at $1,108 million in mid-2018, the figure rose notably to $1,785 million in mid-2019. A sharp decline occurred in mid-2020, with earnings dropping to $684 million, likely reflecting impacts from external economic conditions or extraordinary events during that year. This was followed by a robust recovery to $2,870 million in mid-2021, marking the peak in the period under review. Subsequent years saw a decrease to $2,390 million in mid-2022 and further down to $1,006 million by mid-2023, indicating a downward trend after the substantial recovery.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT trends closely mirror those of net earnings, suggesting consistent operational profitability dynamics. The value increased from $1,482 million in mid-2018 to $1,921 million in mid-2019, indicating improved operational efficiency or profitability. It then sharply contracted to $591 million in mid-2020, consistent with the net earnings downturn during that year. A strong rebound occurred in mid-2021, with NOPAT peaking at $2,923 million. This was followed by a decline to $2,408 million in mid-2022 and a further reduction to $1,239 million in mid-2023, aligning with the observed decrease in net earnings.
- Summary of Trends and Insights
- Both net earnings and NOPAT display considerable fluctuations over the six-year period, characterized by a sharp downturn in 2020 and a pronounced recovery in 2021. The subsequent declining trend in 2022 and 2023 suggests emerging challenges or changes in the company's operating environment impacting profitability. The correlation between net earnings and NOPAT indicates that operating performance significantly influences net profitability. Monitoring external factors and internal operational efficiencies will be critical to understanding and addressing the causes of recent declines.
Cash Operating Taxes
Estée Lauder Cos. Inc., cash operating taxes calculation
US$ in millions
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).
- Provision for Income Taxes
- The provision for income taxes exhibited a generally decreasing trend from June 30, 2018, through June 30, 2023. Starting at 863 million US dollars in 2018, it sharply declined to 513 million in 2019 and further to 350 million in 2020. A moderate increase was observed in 2021 and 2022, reaching 456 million and 628 million respectively, followed by a decline again in 2023 to 387 million. This fluctuation suggests variability in taxable income or changes in tax rates and accounting policies during the period.
- Cash Operating Taxes
- Cash operating taxes showed a different pattern, with an initial increase from 750 million in 2018 to 629 million in 2019, then a decrease to 541 million in 2020. After that, there was a rising trend, peaking at 823 million in 2022 before decreasing again to 637 million in 2023. This indicates some volatility in actual tax payments, possibly reflecting timing differences between tax provisions and cash payments or changes in the company's cash tax obligations.
Invested Capital
Estée Lauder Cos. Inc., invested capital calculation (financing approach)
US$ in millions
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.
- Total reported debt & leases
- The total reported debt and leases exhibit a fluctuating upward trend across the periods analyzed. Initially, the debt remained relatively stable between 2018 and 2019, slightly decreasing from 6,321 million USD to 6,238 million USD. However, a significant increase occurred in 2020, rising sharply to 8,789 million USD. This figure decreased somewhat in 2021 and 2022, dropping to 8,099 million USD and 7,645 million USD respectively. In 2023, the debt surged again, reaching the highest recorded level of 10,169 million USD, indicating a possible strategy involving greater leverage or increased financing needs.
- Stockholders’ equity
- The stockholders’ equity shows an overall decline from 2018 through 2020, falling from 4,688 million USD to 3,935 million USD. This decreasing equity trend reversed in 2021, with a considerable rise to 6,057 million USD, potentially reflecting improvements in retained earnings or capital injections. In 2022 and 2023, the equity slightly decreased and then stabilized around the 5,590 million USD to 5,585 million USD range, suggesting a plateau in equity growth during the most recent periods.
- Invested capital
- Invested capital consistently increased over the six-year period. Starting at 10,334 million USD in 2018, the figure rose steadily each year reaching 17,123 million USD in 2023. This upward trajectory denotes ongoing investments in company assets or operations, supporting business expansion or restructuring activities. The steady growth reflects an accumulation of both debt and equity used to finance the company's strategic initiatives.
Cost of Capital
Estée Lauder Cos. Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Current and long-term debt3 | ÷ | = | × | × (1 – 28.10%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 28.10%) | = | ||||||||
| Total: | |||||||||||||
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 »
Economic Spread Ratio
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 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Procter & Gamble Co. | |||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrates significant volatility over the observed six-year period. Starting at $100 million in mid-2018, it shows a marked increase to $335 million by mid-2019, followed by a substantial decline to a negative figure of -$1,272 million in mid-2020. A recovery is noticed in mid-2021 with a positive economic profit of $744 million, which then declines again to $384 million in mid-2022 and further drops to -$987 million in mid-2023. This pattern indicates fluctuating profitability with sharp periodic downturns and recoveries.
- Invested Capital
- Invested capital demonstrates a general upward trend from mid-2018 to mid-2023. It increased steadily from $10,334 million in 2018 to $11,514 million in 2019, followed by a more pronounced rise each year reaching $17,123 million by mid-2023. However, a slight reduction is observed from mid-2021 to mid-2022, where invested capital declined from $15,610 million to $14,574 million before rising again the following year. The overall increase suggests ongoing investment and asset growth despite minor fluctuations.
- Economic Spread Ratio
- The economic spread ratio exhibits considerable fluctuations, mirroring the trends seen in economic profit. It starts at a modest positive level of 0.97% in mid-2018, strongly increases to 2.91% in 2019, and then plunges to a significantly negative spread of -9.2% in mid-2020. The ratio recovers to 4.77% in mid-2021, declines to 2.64% in mid-2022, and falls further into negative territory at -5.76% in mid-2023. These changes suggest varying efficiency in generating returns above cost of capital, with periods of both strong value creation and substantial value destruction.
Economic Profit Margin
Estée Lauder Cos. Inc., economic profit margin calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Net sales | |||||||
| Add: Increase (decrease) in deferred revenue | |||||||
| Adjusted net sales | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Procter & Gamble Co. | |||||||
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 × ÷ =
3 Click competitor name to see calculations.
- Adjusted net sales
- Adjusted net sales showed an overall upward trend from 2018 to 2022, increasing from 13,683 million USD to a peak of 17,728 million USD. However, in 2023, there was a noticeable decline to 16,120 million USD, indicating a potential slowdown or market challenges impacting revenue growth during that period.
- Economic profit
- The economic profit exhibited significant volatility over the analyzed period. It increased from 100 million USD in 2018 to a high of 335 million USD in 2019, followed by a substantial drop to negative 1,272 million USD in 2020, likely reflecting adverse conditions in that year. There was a recovery in 2021 with economic profit returning to positive territory at 744 million USD, but this was followed by a decline to 384 million USD in 2022 and a further drop to negative 987 million USD in 2023, suggesting challenges in sustaining profitability.
- Economic profit margin
- The economic profit margin mirrored the fluctuations in economic profit. It increased from 0.73% in 2018 to 2.26% in 2019, then declined sharply to negative 8.95% in 2020. It rebounded to 4.56% in 2021, dropped again to 2.17% in 2022, and turned negative at -6.12% in 2023. These shifts highlight variability in the company's ability to generate returns above its cost of capital across the years.