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
GameStop Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
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
= -85,929 – 3.85% × 1,857,700 = -157,510
The financial performance over the six-year period is characterized by persistent value destruction, as evidenced by consistently negative economic profit. While there are fluctuations in the magnitude of these losses, the entity has not achieved a positive net operating profit after taxes (NOPAT), which remains the primary driver of the negative economic value added.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT has remained negative throughout the observed period. The most significant deficit occurred in February 2019 at -781,477 thousand USD. A period of volatility followed, with a notable improvement in January 2021 (-85,038 thousand USD) before regressing in January 2022 (-333,718 thousand USD). By February 2024, NOPAT improved to -85,929 thousand USD, suggesting a movement toward stabilization despite the continued absence of operating profitability.
- Invested Capital and Cost of Capital
- The cost of capital has remained remarkably stable, fluctuating within a narrow range between 3.71% and 4.46%. In contrast, invested capital showed significant variance, declining from 2,995,218 thousand USD in 2019 to a low of 1,656,300 thousand USD in 2021. A subsequent increase to 2,440,500 thousand USD was recorded in 2022, followed by a gradual reduction to 1,857,700 thousand USD by February 2024.
- Economic Profit and Value Creation
- Economic profit has been negative in every reporting period, confirming that the return on invested capital is insufficient to cover the cost of capital. The most severe value destruction was recorded in 2019 with an economic profit of -915,162 thousand USD. Although the magnitude of the loss narrowed in 2021 (-148,596 thousand USD) and 2024 (-157,510 thousand USD), the persistent negative figures indicate a sustained failure to generate economic value for shareholders over the analyzed timeframe.
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Net Operating Profit after Taxes (NOPAT)
GameStop Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income (loss).
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 574,300 × 6.10% = 35,032
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 35,032 × 21.00% = 7,357
7 Addition of after taxes interest expense to net income (loss).
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 49,500 × 21.00% = 10,395
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
The financial performance observed between February 2019 and February 2024 reveals a notable divergence between bottom-line net income and core operating profitability. While the entity transitioned from substantial net losses to a marginal net profit by the final period, the net operating profit after taxes (NOPAT) remained consistently negative, indicating a persistent struggle to generate positive value from primary operations.
- Net Income Trajectory
- A general trend of loss reduction is evident, beginning with a net loss of 673 million US dollars in 2019. Although losses fluctuated between 2021 and 2023, the period ending February 3, 2024, marked a significant turning point with the achievement of a positive net income of 6.7 million US dollars. This represents a complete reversal of the deficit trends seen in the preceding five years.
- NOPAT Volatility and Trends
- Operating performance exhibited significant volatility. NOPAT improved from a deficit of 781.5 million US dollars in 2019 to a peak of negative 85 million US dollars in 2021. However, this progress was interrupted by a decline to negative 333.7 million US dollars in 2022. A gradual recovery followed, with the deficit narrowing to 85.9 million US dollars by February 2024.
- Operating Profitability vs. Net Earnings
- A critical discrepancy is observed in the 2024 results. Despite the reporting of a positive net income, the NOPAT remains negative. This divergence suggests that the return to net profitability was not driven by core operating efficiencies or an increase in operating margins, but likely resulted from non-operating income, tax adjustments, or other non-core financial activities.
- Economic Value Implications
- From an economic value perspective, the consistent negative NOPAT across all six analyzed periods indicates that the company has failed to generate an operating profit sufficient to cover its cost of capital. Consequently, the core operations have continued to destroy economic value throughout the entire timeframe, regardless of the fluctuations in net income.
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Cash Operating Taxes
GameStop Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
The financial data reveals significant volatility in both the accounting income tax expense and the actual cash operating taxes paid between February 2019 and February 2024. A period of instability is marked by a transition from tax expenses to tax benefits and a subsequent return to positive tax obligations.
- Income Tax Expense Trends
- A transition occurred from positive tax expenses in 2019 and 2020 to substantial tax benefits in 2021 and 2022. The accounting benefit peaked in 2021 at 55.3 million US dollars. By 2023 and 2024, the company returned to a position of tax expense, although these values remained considerably lower than the levels observed in the 2019-2020 period.
- Cash Operating Tax Volatility
- Cash operating taxes exhibited extreme fluctuations, most notably a sharp decline from 117.5 million US dollars in 2019 to a negative 123.4 million US dollars in 2021. This indicates a substantial cash inflow from tax recoveries or refunds during that fiscal year. Subsequent years show a return to positive cash outflows, though the 3.5 million US dollars recorded in 2024 represents a significant reduction in the cash tax burden compared to the 2019 baseline.
- Divergence Between Accrual and Cash Taxes
- A marked divergence exists between the reported income tax expense and the cash operating taxes paid. This is most evident in 2021, where the cash recovery far exceeded the accounting tax benefit. This pattern suggests the utilization of deferred tax assets or the receipt of significant tax refunds that impacted the company's cash position more acutely than the accrual-based tax expense recorded on the income statement.
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Invested Capital
GameStop Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
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 stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
8 Subtraction of marketable securities.
The analysis of invested capital from February 2019 to February 2024 reveals a period of significant structural realignment in the capital base. Total invested capital exhibited a general downward trajectory from a peak of US$ 2,995,218 thousand in 2019 to US$ 1,857,700 thousand in 2024, despite a temporary surge in 2022.
- Debt and Lease Obligations
- A consistent and sustained reduction in total reported debt and leases is observed over the six-year period. Obligations decreased from US$ 1,623,718 thousand in 2019 to US$ 602,800 thousand in 2024, representing a contraction of approximately 62.9%. This downward trend indicates a systematic deleveraging of the balance sheet.
- Stockholders' Equity
- Equity levels experienced high volatility. After an initial decline from US$ 1,336,200 thousand in 2019 to a low of US$ 436,700 thousand in 2021, a substantial increase occurred in 2022, where equity rose to US$ 1,602,500 thousand. Since this peak, equity has stabilized, ending the period at US$ 1,338,600 thousand in 2024.
- Invested Capital Dynamics
- The fluctuation in invested capital is the result of opposing trends between debt and equity. The sharp decline in invested capital between 2019 and 2021 was driven by both falling debt and falling equity. However, the spike in 2022 to US$ 2,440,500 thousand was exclusively driven by the surge in stockholders' equity, which offset the continued reduction in debt. By 2024, the invested capital base had contracted further to US$ 1,857,700 thousand, reflecting a more lean capital structure compared to the 2019 baseline.
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Cost of Capital
GameStop Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,741,035) | 4,741,035) | ÷ | 5,340,335) | = | 0.89 | 0.89 | × | 3.75% | = | 3.33% | ||
| Debt, net3 | 25,000) | 25,000) | ÷ | 5,340,335) | = | 0.00 | 0.00 | × | 0.85% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 574,300) | 574,300) | ÷ | 5,340,335) | = | 0.11 | 0.11 | × | 6.10% × (1 – 21.00%) | = | 0.52% | ||
| Total: | 5,340,335) | 1.00 | 3.85% | ||||||||||
Based on: 10-K (reporting date: 2024-02-03).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 7,053,236) | 7,053,236) | ÷ | 7,663,436) | = | 0.92 | 0.92 | × | 3.75% | = | 3.45% | ||
| Debt, net3 | 33,100) | 33,100) | ÷ | 7,663,436) | = | 0.00 | 0.00 | × | 0.85% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 577,100) | 577,100) | ÷ | 7,663,436) | = | 0.08 | 0.08 | × | 5.70% × (1 – 21.00%) | = | 0.34% | ||
| Total: | 7,663,436) | 1.00 | 3.80% | ||||||||||
Based on: 10-K (reporting date: 2023-01-28).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,696,479) | 6,696,479) | ÷ | 7,338,579) | = | 0.91 | 0.91 | × | 3.75% | = | 3.42% | ||
| Debt, net3 | 37,700) | 37,700) | ÷ | 7,338,579) | = | 0.01 | 0.01 | × | 0.85% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 604,400) | 604,400) | ÷ | 7,338,579) | = | 0.08 | 0.08 | × | 4.30% × (1 – 21.00%) | = | 0.28% | ||
| Total: | 7,338,579) | 1.00 | 3.71% | ||||||||||
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,711,536) | 12,711,536) | ÷ | 13,769,736) | = | 0.92 | 0.92 | × | 3.75% | = | 3.46% | ||
| Debt, net3 | 374,100) | 374,100) | ÷ | 13,769,736) | = | 0.03 | 0.03 | × | 7.86% × (1 – 21.00%) | = | 0.17% | ||
| Operating lease liability4 | 684,100) | 684,100) | ÷ | 13,769,736) | = | 0.05 | 0.05 | × | 5.20% × (1 – 21.00%) | = | 0.20% | ||
| Total: | 13,769,736) | 1.00 | 3.84% | ||||||||||
Based on: 10-K (reporting date: 2021-01-30).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 273,302) | 273,302) | ÷ | 1,451,402) | = | 0.19 | 0.19 | × | 3.75% | = | 0.71% | ||
| Debt, net3 | 409,400) | 409,400) | ÷ | 1,451,402) | = | 0.28 | 0.28 | × | 6.75% × (1 – 21.00%) | = | 1.50% | ||
| Operating lease liability4 | 768,700) | 768,700) | ÷ | 1,451,402) | = | 0.53 | 0.53 | × | 4.10% × (1 – 21.00%) | = | 1.72% | ||
| Total: | 1,451,402) | 1.00 | 3.93% | ||||||||||
Based on: 10-K (reporting date: 2020-02-01).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,034,946) | 1,034,946) | ÷ | 2,666,765) | = | 0.39 | 0.39 | × | 3.75% | = | 1.46% | ||
| Debt, net3 | 828,900) | 828,900) | ÷ | 2,666,765) | = | 0.31 | 0.31 | × | 6.22% × (1 – 21.00%) | = | 1.53% | ||
| Operating lease liability4 | 802,918) | 802,918) | ÷ | 2,666,765) | = | 0.30 | 0.30 | × | 6.22% × (1 – 21.00%) | = | 1.48% | ||
| Total: | 2,666,765) | 1.00 | 4.46% | ||||||||||
Based on: 10-K (reporting date: 2019-02-02).
1 US$ in thousands
2 Equity. See details »
3 Debt, net. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
GameStop Corp., economic spread ratio calculation, comparison to benchmarks
| Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (157,510) | (302,215) | (424,207) | (148,596) | (430,642) | (915,162) | |
| Invested capital2 | 1,857,700) | 1,936,100) | 2,440,500) | 1,656,300) | 1,926,200) | 2,995,218) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -8.48% | -15.61% | -17.38% | -8.97% | -22.36% | -30.55% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -5.13% | -10.66% | -21.61% | -1.84% | — | — | |
| Home Depot Inc. | 12.88% | 16.94% | 21.39% | 12.23% | — | — | |
| Lowe’s Cos. Inc. | 18.68% | 13.68% | 21.65% | 9.20% | — | — | |
| TJX Cos. Inc. | 7.14% | 4.20% | 4.22% | -12.63% | — | — | |
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -157,510 ÷ 1,857,700 = -8.48%
4 Click competitor name to see calculations.
An analysis of the financial performance from February 2019 to February 2024 reveals a consistent state of economic value destruction, as evidenced by negative economic profit and a negative economic spread ratio throughout the period. However, there is a discernible long-term trend toward the reduction of these losses, suggesting a gradual improvement in the relationship between the return on invested capital and the cost of capital.
- Economic Profit Trends
- Economic profit remained negative across all six years, indicating that the company did not generate returns sufficient to cover its cost of capital. The most significant value destruction occurred in February 2019, with a loss of 915,162 thousand US dollars. While a notable recovery was observed by January 2021, losses widened again in January 2022 to 424,207 thousand US dollars before steadily decreasing to 157,510 thousand US dollars by February 2024.
- Invested Capital Fluctuations
- The capital base employed by the company exhibited significant volatility. Invested capital decreased from a peak of 2,995,218 thousand US dollars in 2019 to a low of 1,656,300 thousand US dollars in 2021. A subsequent increase to 2,440,500 thousand US dollars occurred in 2022, followed by a gradual contraction to 1,857,700 thousand US dollars by February 2024. This suggests shifting strategies in asset utilization or capital restructuring over the period.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the weighted average cost of capital, remained negative, confirming that the company operated below its required return threshold. The ratio improved from -30.55% in 2019 to -8.97% in 2021. Despite a setback in 2022 where the ratio dropped to -17.38%, a recovery trend followed, concluding at -8.48% in February 2024. This indicates that while the company is still destroying value, the gap between its actual returns and the cost of capital has narrowed significantly over the six-year horizon.
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Economic Profit Margin
GameStop Corp., economic profit margin calculation, comparison to benchmarks
| Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (157,510) | (302,215) | (424,207) | (148,596) | (430,642) | (915,162) | |
| Net sales | 5,272,800) | 5,927,200) | 6,010,700) | 5,089,800) | 6,466,000) | 8,285,300) | |
| Add: Increase (decrease) in deferred revenue | (83,300) | 69,600) | 22,400) | 3,400) | (7,700) | (8,200) | |
| Adjusted net sales | 5,189,500) | 5,996,800) | 6,033,100) | 5,093,200) | 6,458,300) | 8,277,100) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -3.04% | -5.04% | -7.03% | -2.92% | -6.67% | -11.06% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -3.00% | -6.01% | -11.28% | -0.79% | — | — | |
| Home Depot Inc. | 4.72% | 5.95% | 6.80% | 4.60% | — | — | |
| Lowe’s Cos. Inc. | 5.61% | 3.49% | 5.89% | 2.91% | — | — | |
| TJX Cos. Inc. | 2.78% | 1.72% | 1.71% | -8.79% | — | — | |
Based on: 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -157,510 ÷ 5,189,500 = -3.04%
3 Click competitor name to see calculations.
The financial performance from February 2, 2019, to February 3, 2024, is characterized by persistent negative economic profit, though a general trend toward a reduction in the magnitude of these losses relative to sales is evident.
- Economic Profit Analysis
- Economic profit remained negative throughout the six-year period, indicating that the company did not generate returns in excess of its cost of capital. A significant reduction in losses occurred between 2019 and 2021, where the deficit narrowed from -915,162 thousand US$ to -148,596 thousand US$. Although a resurgence in losses was observed in 2022, reaching -424,207 thousand US$, a subsequent recovery trend emerged, resulting in a loss of -157,510 thousand US$ by February 2024.
- Adjusted Net Sales Trends
- Net sales exhibited volatility over the analyzed timeframe. A downward trend was observed from 2019 to 2021, with sales decreasing from 8,277,100 thousand US$ to 5,093,200 thousand US$. This was followed by a partial recovery in 2022 and 2023, with sales peaking at 6,033,100 thousand US$ in 2022, before declining again to 5,189,500 thousand US$ by the end of the period.
- Economic Profit Margin Evaluation
- The economic profit margin consistently remained in negative territory, reflecting an inability to achieve economic value added. The margin improved from -11.06% in 2019 to its most favorable level of -2.92% in 2021. Despite a sharp deterioration to -7.03% in 2022, the margin has since shown a steady upward trajectory, closing at -3.04% in February 2024. This suggests a gradual improvement in the efficiency of capital utilization relative to sales, despite the overall lack of positive economic profit.
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