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Microsoft Excel LibreOffice Calc

Estée Lauder Cos. Inc. (EL)


Economic Value Added (EVA)

Difficulty: Advanced

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

Estée Lauder Cos. Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

2019 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

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.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Estée Lauder Cos. Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Net earnings attributable to The Estée Lauder Companies Inc. hidden hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden hidden
Increase (decrease) in allowance for doubtful accounts and customer deductions2 hidden hidden hidden hidden hidden hidden
Increase (decrease) in deferred revenue3 hidden hidden hidden hidden hidden hidden
Increase (decrease) in accrued restructuring initiatives4 hidden hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden hidden
Interest expense, operating lease liability6 hidden hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden hidden
Tax benefit of interest expense7 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes8 hidden hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

2019 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in allowance for doubtful accounts and customer deductions.

3 Addition of increase (decrease) in deferred revenue.

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

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

6 Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

7 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

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

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

10 Elimination of after taxes investment income.

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.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Estée Lauder Cos. Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Provision for income taxes hidden hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

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.’s cash operating taxes increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Current debt hidden hidden hidden hidden hidden hidden
Long-term debt hidden hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden hidden
Stockholders’ equity, The Estée Lauder Companies Inc. hidden hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden hidden
Allowance for doubtful accounts and customer deductions3 hidden hidden hidden hidden hidden hidden
Deferred revenue4 hidden hidden hidden hidden hidden hidden
Accrued restructuring initiatives5 hidden hidden hidden hidden hidden hidden
Equity equivalents6 hidden hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax7 hidden hidden hidden hidden hidden hidden
Noncontrolling interests hidden hidden hidden hidden hidden hidden
Adjusted stockholders’ equity, The Estée Lauder Companies Inc. hidden hidden hidden hidden hidden hidden
Available-for-sale investments8 hidden hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

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 initiatives.

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

7 Removal of accumulated other comprehensive income.

8 Subtraction of available-for-sale investments.

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.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Estée Lauder Cos. Inc., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 28.10%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 28.10%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2018-08-24).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2017-08-25).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2016-08-24).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2015-08-20).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Current and long-term debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2014-08-20).

1 US$ in millions

2 Equity. See Details »

3 Current and long-term debt. See Details »

4 Operating lease liability. See Details »


Economic Spread

Estée Lauder Cos. Inc., economic spread calculation

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

2019 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Economic spread 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.’s economic spread deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Economic Profit Margin

Estée Lauder Cos. Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Add: Increase (decrease) in deferred revenue hidden hidden hidden hidden hidden hidden
Adjusted net sales hidden hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

2019 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s 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.’s economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.