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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Freeport-McMoRan Inc. pages available for free this week:
- Cash Flow Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Current Ratio since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
Freeport-McMoRan Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of the financial figures reveals several notable trends and insights over the five-year period under review.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a significant increase from 2020 to 2021, rising sharply from 1,698 million USD to 6,188 million USD. However, in the subsequent years, NOPAT demonstrated a downward trend, declining to 5,116 million USD in 2022, then further to 4,632 million USD in 2023, and slightly decreasing again to 4,538 million USD in 2024. Despite the initial growth spike, the later years indicate diminishing profitability on an operational basis.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating minimally between 19.89% and 20.82%. This suggests that the company’s risk profile and capital acquisition costs stayed consistent without notable volatility.
- Invested Capital
- Invested capital increased gradually from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022. Following this peak, it experienced a reduction to 35,126 million USD in 2023 and further to 33,889 million USD in 2024. This pattern indicates the company initially increased its asset investment until 2022 but then reversed course, possibly due to divestitures or capital optimization strategies.
- Economic Profit
- Economic profit, which accounts for the cost of capital, remained negative throughout the period, indicating the company consistently failed to generate returns above its capital costs. The deficit narrowed considerably from -4,700 million USD in 2020 to -1,078 million USD in 2021, reflecting improved value creation during that transition. However, economic profit deteriorated again in 2022 to -2,363 million USD and continued to decline marginally in 2023 and 2024 to -2,647 million USD and -2,518 million USD respectively, highlighting ongoing challenges in achieving value-generating profitability.
Net Operating Profit after Taxes (NOPAT)
Freeport-McMoRan Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common stockholders.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to common stockholders.
- Net Income Attributable to Common Stockholders
- The net income attributable to common stockholders showed a significant increase from 599 million USD in 2020 to a peak of 4306 million USD in 2021. However, after this peak, net income declined to 3468 million USD in 2022 and continued to decrease further to 1848 million USD in 2023. There was a slight recovery in 2024, with net income rising marginally to 1889 million USD. Overall, the data indicates a pronounced volatility with a substantial peak in 2021 followed by a consistent downward trend in the subsequent years through 2024.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes also demonstrated a strong upward movement from 1698 million USD in 2020 to 6188 million USD in 2021. Following this, NOPAT experienced a decline to 5116 million USD in 2022 and a further decrease to 4632 million USD in 2023. By 2024, NOPAT slightly decreased again to 4538 million USD. Despite the reductions after 2021, NOPAT levels remained substantially higher than the 2020 baseline, signifying an overall improved operating profitability compared to the start of the period.
- General Observations
- Both net income and NOPAT peaked in 2021, indicating a year of exceptional profitability. Post-2021, both metrics declined, with net income showing a sharper drop compared to NOPAT. This divergence suggests that factors affecting net income beyond operating performance, such as non-operating expenses or one-time gains/losses, could have influenced net income volatility. Despite declines, the company maintained profitability above initial 2020 levels over the five-year span. The slight uptick in net income in 2024 may hint at stabilization or recovering profitability after several years of decrease.
Cash Operating Taxes
Freeport-McMoRan Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data reveals trends in the provision for income taxes and cash operating taxes over a five-year period ending December 31, 2024.
- Provision for Income Taxes
- There is a notable increase from 944 million US dollars in 2020 to 2299 million in 2021, indicating a sharp rise in tax provisions. The figures then remain relatively stable around the 2200-2270 million range for the years 2022 and 2023. In 2024, a further increase to 2523 million is observed, suggesting continuing growth in tax obligations.
- Cash Operating Taxes
- This category exhibits a significant surge from 774 million US dollars in 2020 to 2217 million in 2021, reflecting a major increase in cash tax payments. There is a slight downward trend in 2022 and 2023, with cash operating taxes recorded at 2088 million and 2009 million respectively. However, in 2024, a sharp rise occurs, reaching 2672 million, surpassing previous years' levels.
Overall, the trends indicate a substantial increase in both provision for income taxes and cash operating taxes starting in 2021. While the provision for income taxes shows a steady upward trend after 2021, cash operating taxes display more variability with a dip in the middle years followed by a significant rebound in 2024. This pattern may reflect changes in the company's profitability, tax strategies, or external tax environment impacting its tax liabilities and payments.
Invested Capital
Freeport-McMoRan Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investment securities.
The financial data reveals several key trends regarding the company’s capital structure and equity position over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases show fluctuation but overall a slight decrease from 2020 to 2024. After peaking in 2022 at 10,952 million USD, the debt level declines to 9,738 million USD by the end of 2024. This suggests an effort to reduce debt or improve debt management after a temporary increase in 2022.
- Stockholders’ Equity
- Stockholders’ equity demonstrates consistent growth year over year. Starting at 10,174 million USD in 2020, it rises steadily to reach 17,581 million USD in 2024. This upward trend indicates strengthening equity, possibly due to retained earnings growth, issuing equity, or increased profitability enhancing the company’s net asset base.
- Invested Capital
- Invested capital increases from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022, followed by a decline to 33,889 million USD in 2024. The increase up to 2022 may reflect expanded operational assets or investment in capital projects, while the subsequent decline suggests divestitures, asset sales, or depreciation outpacing new investments.
Overall, the data reflects a company focused on strengthening equity while managing debt levels relatively stable after a notable increase in 2022. Investment in capital assets has peaked and begun to recede moderately, indicating possible strategic shifts in capital allocation or operational adjustments during the latter years.
Cost of Capital
Freeport-McMoRan Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Freeport-McMoRan Inc., economic spread ratio calculation
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
- Economic Profit
- The economic profit displayed a significant improvement from 2020 to 2021, moving from a large negative value of -4700 million US dollars to -1078 million. However, after 2021, economic profit deteriorated again, worsening to -2363 million in 2022 and further to -2647 million in 2023, before slightly improving to -2518 million in 2024. The overall trend indicates persistent negative economic profit throughout the period, albeit with notable fluctuations.
- Invested Capital
- Invested capital showed an upward trend from 2020 through 2022, growing from 32,173 million US dollars to 36,035 million. This upward movement was followed by a gradual decline in the subsequent years, dropping to 35,126 million in 2023 and 33,889 million in 2024. The data suggests that the company initially increased its capital investment but subsequently reduced it in the later years.
- Economic Spread Ratio
- The economic spread ratio, expressed as a percentage, improved significantly from a deeply negative -14.61% in 2020 to -3.08% in 2021, coinciding with the improvement in economic profit. However, following 2021, the ratio again declined, moving to -6.56% in 2022, then worsening further to -7.53% in 2023 and slightly improving to -7.43% in 2024. Although there was initial progress, the economic spread ratio remained negative throughout the period, indicating ongoing challenges in generating returns above the cost of capital.
- Overall Analysis
- The data reflects an overall challenging financial environment, with continuous negative economic profit and spread ratios despite some periods of improvement. The increase in invested capital through 2022 followed by a reduction suggests a strategic adjustment to capital deployment in response to performance trends. Persistent negative returns indicate that the company has struggled to generate sufficient value over and above its invested capital costs during these years.
Economic Profit Margin
Freeport-McMoRan Inc., economic profit margin calculation
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
- Adjusted Revenues
- The adjusted revenues exhibited a generally increasing trend over the observed periods. From US$ 14,251 million in 2020, revenues rose substantially to US$ 22,971 million in 2021. Following that, revenues remained relatively stable around the US$ 22,665 to US$ 22,940 million range in 2022 and 2023, before increasing again to US$ 25,385 million in 2024. This progression indicates overall revenue growth with a period of stabilization between 2021 and 2023.
- Economic Profit
- The economic profit values consistently remained negative throughout all periods, indicating economic losses despite reported revenues. The losses were most severe in 2020, reaching -US$ 4,700 million, then significantly improved to -US$ 1,078 million in 2021. However, the economic profit deteriorated again in the subsequent years, with -US$ 2,363 million in 2022, slightly worsening to -US$ 2,647 million in 2023, and marginal improvement to -US$ 2,518 million in 2024. This pattern suggests an initial substantial reduction of losses in 2021, followed by a regression into greater economic losses thereafter, although not returning to 2020 levels.
- Economic Profit Margin
- The economic profit margin also showed fluctuations but remained negative across all years, reflecting economic inefficiency relative to revenue. In 2020, the margin was severely negative at -32.98%. It improved dramatically in 2021 to -4.69%, indicating better economic performance relative to sales. However, from 2022 onwards, the margin declined again to -10.42% in 2022, -11.54% in 2023, and slightly improved to -9.92% in 2024. This pattern aligns with the economic profit trend, showing initial recovery before a return to higher losses relative to revenues.
- Overall Insights
- Although adjusted revenues have increased over the period, economic profit and economic profit margin show persistent negative results, indicating ongoing challenges in translating sales into economic value. The major improvement in 2021 was not sustained, suggesting potential operational or cost issues emerging after that year. Continued negative margins point to inefficient capital usage or high costs relative to the returns generated, calling for a strategic reassessment to enhance profitability and economic value generation.