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.
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Freeport-McMoRan Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Total Asset Turnover 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a sharp increase from 1698 million USD in 2020 to a peak of 6188 million USD in 2021. Following this peak, there is a noticeable decline over the subsequent years, decreasing to 5116 million USD in 2022, then further decreasing to 4632 million USD in 2023 and slightly lower to 4538 million USD in 2024. This indicates a strong performance surge in 2021, followed by a downward trend in operational profitability.
- Cost of Capital
- The cost of capital remained relatively stable but consistently high throughout the period. It was 19.54% in 2020 and saw a gradual increase to 20.37% in 2021, remaining nearly flat around 20.39% in 2022, 20.36% in 2023, and slightly increasing again to 20.46% in 2024. This indicates a consistently high capital charge that the company must overcome to generate positive economic profit.
- Invested Capital
- Invested capital showed an upward trend from 32173 million USD in 2020 to a maximum of 36035 million USD in 2022. After this peak, it declined slightly to 35126 million USD in 2023 and further to 33889 million USD in 2024. This suggests an expansion phase that peaked in 2022, followed by a modest contraction or optimization of capital employed.
- Economic Profit
- The economic profit remained negative throughout the entire period, indicating that the company did not create value over and above its cost of capital. The negative economic profit decreased sharply from -4589 million USD in 2020 to -951 million USD in 2021, showing improvement in value creation or reduction in capital costs relative to returns. However, from 2022 onward, economic profit deteriorated again to -2232 million USD, then further to -2519 million USD in 2023, and slightly improved to -2395 million USD in 2024. This pattern suggests challenges in sustaining returns above the high cost of capital despite initial improvement.
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 showed significant fluctuations over the period analyzed. Starting from a considerable negative value of -4589 million US dollars in 2020, it improved substantially in 2021 to -951 million US dollars. However, in 2022, economic profit declined again to -2232 million US dollars and continued to worsen slightly in 2023 to -2519 million US dollars, with a marginal improvement to -2395 million US dollars projected in 2024. Overall, the trend indicates persistent economic losses, with some recovery after 2020 but no return to positive economic profit levels.
- Invested Capital
- Invested capital increased steadily from 32173 million US dollars in 2020 to a peak of 36035 million US dollars in 2022. After this peak, invested capital decreased gradually to 35126 million US dollars in 2023 and further to 33889 million US dollars in 2024. This suggests that after a period of growing investment up to 2022, the company started to scale back or optimize its capital deployment in subsequent years.
- Economic Spread Ratio
- The economic spread ratio, which measures the efficiency of capital use relative to cost of capital, was negative throughout the period. It improved notably from -14.26% in 2020 to -2.71% in 2021, indicating a reduction in economic losses relative to capital employed. However, the ratio then deteriorated to -6.19% in 2022 and further to around -7% in both 2023 and 2024. This pattern aligns with the economic profit trend, reflecting ongoing challenges in generating returns above the cost of capital despite some initial progress in 2021.
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 general upward trend over the five-year period. Starting at $14,251 million in 2020, revenues increased sharply to $22,971 million in 2021. Following a slight decline to $22,665 million in 2022, revenues stabilized and rose again to $22,940 million in 2023, culminating in a notable increase to $25,385 million in 2024. Overall, this suggests a strong revenue growth trajectory despite minor fluctuations in the middle years.
- Economic Profit
- Economic profit remained negative throughout the period, indicating that the company's economic value generated was less than the cost of capital each year. It showed improvement from -$4,589 million in 2020 to -$951 million in 2021, suggesting better profitability or cost management during that interval. However, this was followed by a downturn, with economic profit declining to -$2,232 million in 2022 and further deteriorating to -$2,519 million in 2023. A slight recovery was observed in 2024, with economic profit improving marginally to -$2,395 million. Despite some improvement from the 2020 baseline, economic profit continued to be substantially negative in recent years.
- Economic Profit Margin
- The economic profit margin mirrored the trends seen in economic profit, remaining negative throughout the entire period. It improved markedly from -32.2% in 2020 to -4.14% in 2021, indicating a reduction in economic loss relative to revenues. Nevertheless, the margin worsened again in 2022 to -9.85%, and further declined to -10.98% in 2023. There was a modest improvement to -9.43% in 2024, yet the margin stayed considerably below zero, reflecting ongoing challenges in generating returns above the cost of capital.
- Overall Analysis
- The data reveals a company experiencing growing revenues amid persistent negative economic profitability. The initial improvement in economic profit and margin in 2021 was significant but not sustained, as both metrics worsened in subsequent years before modest recovery in 2024. The continued negative economic profit margin suggests that despite increasing revenues, the company struggled to generate sufficient economic value relative to its capital costs. This pattern points to possible issues related to cost structure, capital efficiency, or market conditions that hampered value creation even as sales expanded.