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
Fidelity National Information Services Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -17,009 – 10.77% × 52,862 = -22,704
The financial trajectory from 2018 to 2022 is characterized by a persistent failure to generate positive economic value, culminating in a significant erosion of economic profit by the end of the period. A consistent trend of negative economic profit indicates that the operating returns were insufficient to cover the cost of the capital employed throughout the five-year window.
- Net Operating Profit After Taxes (NOPAT)
- An overall downward trend in NOPAT is observed, beginning with 889 million US$ in 2018 and declining to 325 million US$ by 2020. Although a modest recovery to 524 million US$ occurred in 2021, the 2022 fiscal year saw a severe reversal, with NOPAT plummeting to -17,009 million US$.
- Invested Capital
- A substantial expansion of the capital base occurred between 2018 and 2019, where invested capital rose from 22,222 million US$ to 75,448 million US$. This level remained relatively stagnant through 2021 before contracting to 52,862 million US$ in 2022.
- Cost of Capital
- The cost of capital exhibited a gradual and steady decline, moving from 12.34% in 2018 to 10.77% in 2022. While this represents a decrease in the hurdle rate for value creation, the reduction was not sufficient to counteract the deteriorating operating performance.
- Economic Profit Synthesis
- Economic profit remained negative for all reported years, indicating a continuous destruction of shareholder value. The deficit widened significantly in 2019 as the surge in invested capital increased the total capital charge. The most acute decline occurred in 2022, with economic profit reaching -22,704 million US$, a result driven primarily by the collapse of NOPAT.
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Net Operating Profit after Taxes (NOPAT)
Fidelity National Information Services Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 equity equivalents to net earnings (loss) attributable to FIS common stockholders.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 414 × 2.80% = 12
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 312 × 21.00% = 65
7 Addition of after taxes interest expense to net earnings (loss) attributable to FIS common stockholders.
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 25 × 21.00% = 5
9 Elimination of after taxes investment income.
- Net earnings (loss) attributable to common stockholders
- From 2018 through 2021, net earnings displayed a significant downward trend. Beginning at 846 million USD in 2018, earnings decreased sharply to 298 million USD in 2019 and further to 158 million USD in 2020. A partial recovery occurred in 2021, with net earnings increasing to 417 million USD. However, 2022 saw a dramatic reversal, with net earnings recording a substantial loss amounting to -16,720 million USD, indicating a severe deterioration in profitability during that year.
- Net operating profit after taxes (NOPAT)
- NOPAT followed a pattern similar to net earnings over the same period. Starting at 889 million USD in 2018, NOPAT declined to 578 million USD in 2019 and further to 325 million USD in 2020. An improvement occurred in 2021, with NOPAT rising to 524 million USD. In 2022, NOPAT experienced a significant negative swing, registering a loss of -17,009 million USD, closely mirroring the net earnings loss and highlighting operational challenges impacting the company drastically in that year.
- Overall insights
- The data reveal a weakening profitability trend from 2018 to 2020, followed by some operational recovery in 2021. The extreme losses recorded in 2022 suggest extraordinary events or impairments that severely affected financial performance. Both net earnings and NOPAT demonstrate a high correlation in their trajectory, underscoring consistent operational and financial difficulties particularly in the final year observed.
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Cash Operating Taxes
Fidelity National Information Services Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Provision for income taxes
- The provision for income taxes exhibited a notable fluctuation over the analyzed years. Initially, there was a significant decline from 208 million US dollars in 2018 to 100 million in 2019, followed by a slight decrease to 96 million in 2020. However, from 2020 onwards, the provision increased sharply to 371 million in 2021 and slightly further to 377 million in 2022. This pattern indicates a period of reduced tax obligations or accounting adjustments in the middle years, followed by a substantial rise in tax provisions in the most recent years.
- Cash operating taxes
- Cash operating taxes demonstrated a variable upward trend with some fluctuations. The amount decreased from 389 million in 2018 to 290 million in 2019, then rebounded to 381 million in 2020. After 2020, there was a significant increase to 508 million in 2021, and this upward trajectory accelerated sharply to 962 million in 2022. This progression suggests increasing cash tax outflows in recent years, which may reflect growing taxable income or changes in tax payment schedules.
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Invested Capital
Fidelity National Information Services Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 deferred revenue.
5 Addition of equity equivalents to total FIS stockholders’ equity.
6 Removal of accumulated other comprehensive income.
Over the observed period, the total reported debt and leases displayed a significant increase from 2018 to 2019, rising from approximately 9.4 billion to 20.8 billion US dollars. This level remained relatively stable through to 2022, fluctuating slightly but staying near the 20.5 billion mark.
The total stockholders’ equity exhibited a sharp growth from 2018 to 2019, more than quadrupling from just over 10.2 billion to nearly 49.4 billion US dollars. However, this equity value began to decline gradually after 2019, decreasing to approximately 47.3 billion in 2021, before falling more substantially to around 27.2 billion by the end of 2022.
Invested capital followed a somewhat similar trend as the debt figures, showing a substantial rise from 22.2 billion in 2018 to a peak of 75.4 billion in 2019. Following that peak, invested capital remained relatively steady around 73.3 to 75.0 billion through 2020 and 2021 but then saw a marked decrease to approximately 52.8 billion in 2022.
Overall, the data suggest a period of significant capital expansion and leverage increase around 2019, followed by a phase of declining equity and invested capital starting in 2021 and continuing through 2022. This pattern may indicate strategic changes in capital structure or operational adjustments during the latter years of the period analyzed.
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Cost of Capital
Fidelity National Information Services Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 38,192) | 38,192) | ÷ | 56,870) | = | 0.67 | 0.67 | × | 15.04% | = | 10.10% | ||
| Debt3 | 18,264) | 18,264) | ÷ | 56,870) | = | 0.32 | 0.32 | × | 2.60% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 414) | 414) | ÷ | 56,870) | = | 0.01 | 0.01 | × | 2.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 56,870) | 1.00 | 10.77% | ||||||||||
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 | 56,235) | 56,235) | ÷ | 77,682) | = | 0.72 | 0.72 | × | 15.04% | = | 10.89% | ||
| Debt3 | 20,923) | 20,923) | ÷ | 77,682) | = | 0.27 | 0.27 | × | 0.90% × (1 – 21.00%) | = | 0.19% | ||
| Operating lease liability4 | 524) | 524) | ÷ | 77,682) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 77,682) | 1.00 | 11.09% | ||||||||||
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 | 83,393) | 83,393) | ÷ | 105,653) | = | 0.79 | 0.79 | × | 15.04% | = | 11.87% | ||
| Debt3 | 21,655) | 21,655) | ÷ | 105,653) | = | 0.20 | 0.20 | × | 1.70% × (1 – 21.00%) | = | 0.28% | ||
| Operating lease liability4 | 605) | 605) | ÷ | 105,653) | = | 0.01 | 0.01 | × | 3.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 105,653) | 1.00 | 12.16% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 96,627) | 96,627) | ÷ | 118,314) | = | 0.82 | 0.82 | × | 15.04% | = | 12.28% | ||
| Debt3 | 21,092) | 21,092) | ÷ | 118,314) | = | 0.18 | 0.18 | × | 1.66% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 595) | 595) | ÷ | 118,314) | = | 0.01 | 0.01 | × | 3.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 118,314) | 1.00 | 12.53% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
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 | 34,591) | 34,591) | ÷ | 44,150) | = | 0.78 | 0.78 | × | 15.04% | = | 11.78% | ||
| Debt3 | 9,125) | 9,125) | ÷ | 44,150) | = | 0.21 | 0.21 | × | 3.28% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 434) | 434) | ÷ | 44,150) | = | 0.01 | 0.01 | × | 3.28% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 44,150) | 1.00 | 12.34% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Fidelity National Information Services Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (22,704) | (7,610) | (8,799) | (8,875) | (1,854) | |
| Invested capital2 | 52,862) | 73,331) | 75,049) | 75,448) | 22,222) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -42.95% | -10.38% | -11.72% | -11.76% | -8.34% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 3.83% | 5.64% | 6.25% | — | — | |
| Adobe Inc. | 6.40% | 8.78% | 1.06% | — | — | |
| AppLovin Corp. | -26.83% | -30.22% | — | — | — | |
| Cadence Design Systems Inc. | 6.52% | 6.73% | — | — | — | |
| CrowdStrike Holdings Inc. | -8.02% | -10.28% | — | — | — | |
| Datadog Inc. | -11.90% | -4.08% | — | — | — | |
| International Business Machines Corp. | -11.32% | -6.18% | — | — | — | |
| Intuit Inc. | -9.87% | -2.34% | 1.11% | — | — | |
| Microsoft Corp. | 18.44% | 27.48% | — | — | — | |
| Oracle Corp. | -7.75% | 0.46% | — | — | — | |
| Palantir Technologies Inc. | -32.87% | -40.33% | — | — | — | |
| Palo Alto Networks Inc. | 3.25% | -5.45% | -6.28% | — | — | |
| Salesforce Inc. | -14.70% | -12.56% | — | — | — | |
| ServiceNow Inc. | 0.67% | 1.89% | — | — | — | |
| Synopsys Inc. | -0.94% | -6.97% | -6.77% | — | — | |
| Workday Inc. | -14.19% | -19.44% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -22,704 ÷ 52,862 = -42.95%
4 Click competitor name to see calculations.
The analysis of economic value added reveals a period of sustained value destruction, characterized by persistent negative economic profit and a deteriorating economic spread ratio. The trend indicates a consistent inability to generate returns exceeding the cost of capital over the five-year period observed.
- Economic Profit Trends
- A consistent negative trajectory is evident, with economic profit moving from -1,854 million US dollars in 2018 to -8,875 million US dollars in 2019. Although a modest recovery occurred between 2020 and 2021, the period ended with a severe collapse in 2022, where losses expanded to -22,704 million US dollars, marking the lowest point in the series.
- Invested Capital Fluctuations
- Invested capital experienced a sharp increase between 2018 and 2019, rising from 22,222 million US dollars to 75,448 million US dollars. This capital base remained relatively stable through 2021 before undergoing a significant reduction to 52,862 million US dollars by the end of 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the entire duration, confirming that the company failed to create economic value. The ratio fluctuated between -8.34% in 2018 and -10.38% in 2021, showing relative stability despite the negative returns. However, 2022 saw a precipitous decline to -42.95%, indicating a critical widening of the gap between the return on invested capital and the cost of capital.
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Economic Profit Margin
Fidelity National Information Services Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (22,704) | (7,610) | (8,799) | (8,875) | (1,854) | |
| Revenue | 14,528) | 13,877) | 12,552) | 10,333) | 8,423) | |
| Add: Increase (decrease) in deferred revenue | (1) | 14) | 71) | 63) | (76) | |
| Adjusted revenue | 14,527) | 13,891) | 12,623) | 10,396) | 8,347) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -156.29% | -54.78% | -69.71% | -85.37% | -22.21% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | 1.84% | 2.89% | 3.18% | — | — | |
| Adobe Inc. | 7.45% | 10.94% | 1.52% | — | — | |
| AppLovin Corp. | -50.24% | -60.51% | — | — | — | |
| Cadence Design Systems Inc. | 6.50% | 6.84% | — | — | — | |
| CrowdStrike Holdings Inc. | -12.56% | -21.36% | — | — | — | |
| Datadog Inc. | -8.23% | -3.24% | — | — | — | |
| International Business Machines Corp. | -19.60% | -11.75% | — | — | — | |
| Intuit Inc. | -18.99% | -2.97% | 1.25% | — | — | |
| Microsoft Corp. | 17.67% | 22.81% | — | — | — | |
| Oracle Corp. | -14.23% | 0.91% | — | — | — | |
| Palantir Technologies Inc. | -55.15% | -66.43% | — | — | — | |
| Palo Alto Networks Inc. | 3.78% | -7.33% | -10.20% | — | — | |
| Salesforce Inc. | -40.81% | -28.80% | — | — | — | |
| ServiceNow Inc. | 0.54% | 1.63% | — | — | — | |
| Synopsys Inc. | -1.33% | -11.09% | -11.63% | — | — | |
| Workday Inc. | -19.23% | -25.36% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -22,704 ÷ 14,527 = -156.29%
3 Click competitor name to see calculations.
Between 2018 and 2022, a significant divergence is observed between revenue growth and economic value creation. While adjusted revenue maintained a consistent upward trajectory, economic profit remained negative throughout the entire period, indicating that the returns generated were insufficient to cover the company's cost of capital.
- Economic Profit Trends
- Economic profit exhibited substantial volatility and a general downward trajectory. Following an initial decline from -1,854 million USD in 2018 to -8,875 million USD in 2019, the value remained relatively stable through 2021. However, a severe deterioration occurred in 2022, with economic profit falling to -22,704 million USD, representing a significant increase in economic value destruction.
- Adjusted Revenue Performance
- Adjusted revenue demonstrated steady year-over-year growth, increasing from 8,347 million USD in 2018 to 14,527 million USD by the end of 2022. This consistent expansion of the top line indicates a growing scale of operations that failed to translate into economic profit.
- Economic Profit Margin Analysis
- The economic profit margin remained consistently negative, reflecting a persistent failure to achieve economic value added. The margin widened sharply from -22.21% in 2018 to -85.37% in 2019, before experiencing a partial recovery to -54.78% in 2021. This trend was abruptly reversed in 2022, with the margin collapsing to -156.29%, indicating that the gap between operating returns and the cost of capital expanded drastically despite the increase in adjusted revenue.
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