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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- Income Statement
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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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 financial data indicates several notable trends over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a strong increase from 2020 to 2021, rising sharply from 1,698 million to 6,188 million US dollars. However, after the peak in 2021, NOPAT showed a declining trajectory over the subsequent years, decreasing to 5,116 million in 2022, 4,632 million in 2023, and 4,538 million in 2024. Despite this decline, the NOPAT in 2024 remains substantially higher than the 2020 level.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, hovering around 20.7%–20.8%. It started at 19.89% in 2020 and rose slightly to just above 20.7% in later years, showing only minor fluctuations without a discernible trend of significant increase or decrease.
- Invested Capital
- Invested capital showed an upward trend until 2022, increasing from 32,173 million US dollars in 2020 to a peak of 36,035 million in 2022. Afterward, invested capital decreased moderately, falling to 35,126 million in 2023 and further down to 33,889 million in 2024.
- Economic Profit
- The economic profit values were negative for all years analyzed, indicating that the returns did not surpass the cost of capital. Although the economic profit improved significantly from -4,700 million in 2020 to -1,078 million in 2021, it deteriorated again in subsequent years. From 2022 onwards, economic profit declined to -2,362 million, then further to -2,646 million in 2023, and slightly improved but remained negative at -2,518 million in 2024.
In summary, while operating profitability after taxes experienced a notable increase early in the period, it has been on a declining trend more recently. The invested capital expanded initially but started to contract following 2022. Despite these fluctuations, the company consistently incurred negative economic profit, suggesting returns that do not adequately cover the cost of capital throughout the entire period. The stability of the cost of capital implies that changes in economic profit are more likely driven by operational factors and invested capital dynamics rather than financing costs.
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 × ÷ =
The financial data reflects the company's economic profit, invested capital, and economic spread ratio over five years. The analysis reveals specific trends and insights into the company's financial performance and capital efficiency.
- Economic Profit
- There is a noticeable improvement in economic profit from a significant loss of US$ -4,700 million in 2020 to a reduced loss of US$ -1,078 million in 2021. However, this trend did not sustain as losses increased again to US$ -2,362 million in 2022, followed by a slight deterioration in 2023 (-US$ 2,646 million) and a slight improvement in 2024 (-US$ 2,518 million). Overall, economic profit remains negative throughout the period, indicating persistent economic losses despite some fluctuations.
- Invested Capital
- Invested capital steadily increased from US$ 32,173 million in 2020 to a peak of US$ 36,035 million in 2022. Thereafter, it declined to US$ 35,126 million in 2023 and further to US$ 33,889 million in 2024. This pattern suggests that capital deployment grew until 2022 but was partially retracted in the subsequent years, signaling possible divestments or lower reinvestment levels.
- Economic Spread Ratio
- The economic spread ratio, indicating the difference between return on invested capital and the cost of capital, was negative throughout the whole period. The ratio improved significantly from -14.61% in 2020 to -3.08% in 2021, reflecting a reduction in the economic loss margin. However, it then deteriorated to -6.55% in 2022 and worsened further to -7.53% and -7.43% in 2023 and 2024 respectively. This indicates a relative decline in the company's ability to generate returns above its cost of capital after 2021.
In summary, the company experienced an initial improvement in economic profit and spread ratio in 2021, accompanied by increasing invested capital. However, from 2022 onwards, economic profit and spread ratios declined despite a reduction in invested capital, suggesting challenges in translating capital investment into positive economic returns. The persistent negative economic profit and spread underline ongoing value destruction during the analyzed timeframe.
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 × ÷ =
- Revenue Trends
- The adjusted revenues demonstrate an overall upward trend from 2020 through 2024. Beginning at approximately $14.3 billion in 2020, revenues increased sharply in 2021 to nearly $23.0 billion. Subsequently, revenues stabilized around the $22.7 billion to $23.0 billion range for 2022 and 2023, before rising again to approximately $25.4 billion in 2024. This indicates the company's ability to maintain and grow its revenue base despite fluctuations elsewhere in the financial metrics.
- Economic Profit Analysis
- The economic profit remains negative throughout the five-year period, signifying that the company has not generated returns exceeding its cost of capital. However, there is a notable improvement in economic profit from 2020 to 2021, with losses decreasing significantly from about -$4.7 billion to approximately -$1.1 billion. After 2021, there is some regression as losses increase in 2022 and 2023 to around -$2.4 billion and -$2.6 billion respectively, and slightly improve in 2024 to about -$2.5 billion. Despite the ongoing negative values, the fluctuations suggest variability in operational efficiency or capital costs over time.
- Economic Profit Margin Insights
- The economic profit margin mirrors the pattern observed in economic profit. It shows a marked improvement from negative 33.0% in 2020 to nearly negative 4.7% in 2021, indicating enhanced profitability relative to revenue in that year. The margin deteriorates over the following two years to about negative 10.4% in 2022 and negative 11.5% in 2023. A slight recovery occurs in 2024, bringing the margin to just under negative 10%. Consistently negative margins confirm the economic profit losses, but the trend suggests periods of relative improvement and decline in economic returns.
- Overall Financial Performance
- The data reflect a company experiencing significant revenue growth alongside persistent economic profit deficits. The initial improvement in 2021 indicates a period of increased operational effectiveness or favorable market conditions, but subsequent years reveal challenges sustaining economic profitability despite stable or growing revenues. The negative economic profit margins throughout the period underscore the continuing need to address cost structures or capital utilization to attain positive economic value added.