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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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2010
- Return on Assets (ROA) since 2010
- Current Ratio since 2010
- Total Asset Turnover since 2010
- Price to Book Value (P/BV) since 2010
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Economic Profit
Generac Holdings Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a consistent upward trend from 2017 to 2021. It increased from approximately $230.6 million in 2017 to $641.3 million in 2021. The most notable growth occurred between 2020 and 2021, where NOPAT rose significantly by over 50%, indicating improving operational efficiency or increased profitability during this period.
- Cost of Capital
- The cost of capital increased steadily from 10.8% in 2017 to peak at 14.07% in 2020, followed by a slight decline to 13.94% in 2021. This suggests rising capital costs over the years with a marginal easing in the last year. The rising trend may reflect increased risk or higher required returns by investors during the majority of this period.
- Invested Capital
- The invested capital rose consistently each year, starting from approximately $1.71 billion in 2017 and reaching around $3.77 billion in 2021. The most substantial increase is observed between 2020 and 2021, signaling significant capital investment or asset acquisition during this timeframe. This growth indicates expansion or reinvestment activities by the company.
- Economic Profit
- The economic profit fluctuated over the period. It increased from about $45.9 million in 2017 to nearly $79.1 million in 2018 but saw a sharp decline to approximately $24.8 million in 2019. Subsequently, there was a moderate recovery in 2020, followed by a substantial jump to $115.7 million in 2021. The volatility in economic profit, especially the dip in 2019, contrasts with the more consistent growth seen in NOPAT and invested capital, suggesting variable returns above the cost of capital during the period.
Net Operating Profit after Taxes (NOPAT)
Generac Holdings Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
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 related to extended warranties.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Generac Holdings Inc..
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to Generac Holdings Inc..
The annual financial data reveals a consistent upward trend in both net income attributable to Generac Holdings Inc. and net operating profit after taxes (NOPAT) over the five-year period from 2017 to 2021.
- Net Income Attributable to Generac Holdings Inc.
- This metric increased steadily each year, starting at $159,386 thousand in 2017 and reaching $550,494 thousand by the end of 2021. The growth is particularly notable between 2019 and 2021, where net income rose substantially, indicating improved profitability.
- Net Operating Profit After Taxes (NOPAT)
- Likewise, NOPAT demonstrated a positive growth trajectory, increasing from $230,606 thousand in 2017 to $641,346 thousand in 2021. The increase in NOPAT aligns with the trend seen in net income, and the largest annual increments occurred from 2019 onward.
Overall, the data indicates strong financial performance with expanding profitability. The acceleration in growth after 2019 suggests successful operational improvements or favorable market conditions during this period. Both net income and NOPAT exhibit similar patterns, reinforcing the company’s capacity to convert operating results into net earnings effectively.
Cash Operating Taxes
Generac Holdings Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
The data reveals a consistent upward trend in both the provision for income taxes and cash operating taxes over the five-year period from December 31, 2017, to December 31, 2021.
- Provision for Income Taxes
-
The provision for income taxes increased steadily from $43.6 million in 2017 to $134.96 million in 2021. This represents more than a threefold increase over the five years. Notably, the most significant annual increases were observed between 2019 and 2020, and between 2020 and 2021, indicating a surge in taxable income or changes in tax rates or tax liabilities.
- Cash Operating Taxes
-
Cash operating taxes also showed a consistent rise from $39.5 million in 2017 to $143.73 million in 2021. Similar to the provision for income taxes, the growth in cash operating taxes accelerated particularly after 2019, with a marked increase from 2019 to 2020 and again into 2021.
The parallel upward movement of both provision and cash operating taxes suggests increasing profitability or taxable events impacting the company's tax obligations. The faster growth in cash operating taxes relative to the provision, especially after 2019, might indicate changes in tax payment timing or adjustments to deferred tax assets or liabilities.
Overall, the data points to escalating tax expenses over the period, which could affect net profitability and cash flow management, meriting further analysis to understand the underlying drivers such as revenue growth, changes in tax legislation, or tax strategy adjustments.
Invested Capital
Generac Holdings Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
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 related to extended warranties.
5 Addition of product warranty liability.
6 Addition of equity equivalents to stockholders’ equity attributable to Generac Holdings Inc..
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
- Total Reported Debt & Leases
- The total reported debt and leases showed a relatively stable trend from 2017 to 2020, fluctuating slightly between approximately 935,873 and 972,646 thousand US dollars. However, in 2021, there was a notable increase to 1,083,975 thousand US dollars, representing a rise compared to prior years.
- Stockholders’ Equity Attributable to Generac Holdings Inc.
- Stockholders’ equity exhibited a consistent and substantial growth over the five-year period. Beginning at 559,552 thousand US dollars in 2017, it increased steadily each year, reaching 2,213,774 thousand US dollars in 2021. This growth signifies a strong enhancement of the equity base, more than tripling its initial value.
- Invested Capital
- Invested capital demonstrated an upward trajectory throughout the period analyzed. Starting from 1,710,524 thousand US dollars in 2017, it rose continuously each year, culminating at 3,771,373 thousand US dollars in 2021. The increase indicates ongoing investments or retained earnings contributing to capital growth, with the largest annual rise observed between 2020 and 2021.
- Overall Analysis
- The data indicates that while the company maintained a relatively stable debt level until 2020 with a spike in 2021, it simultaneously experienced pronounced expansion in both equity and invested capital. The substantial growth in equity suggests strong financial health and possibly profitable operations or capital injections, which supported the increase in invested capital. The rise in debt in the latest year may reflect additional financing activities to support expansion or operational needs. Overall, the financial position shows strengthening capital structure and capacity.
Cost of Capital
Generac Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings and finance lease obligation3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Borrowings and finance lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings and finance lease obligation3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Borrowings and finance lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings and finance lease obligation3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Borrowings and finance lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings and finance lease obligation3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Borrowings and finance lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings and finance lease obligation3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Borrowings and finance lease obligation. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Generac Holdings Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of the annual financial data reveals several notable trends and fluctuations in economic profit, invested capital, and economic spread ratio over the five-year period from 2017 to 2021.
- Economic Profit
- The economic profit demonstrated variability throughout the period. Beginning at 45,914 thousand US dollars in 2017, it increased significantly to 79,089 thousand US dollars in 2018. However, there was a substantial decline in 2019, with economic profit dropping to 24,814 thousand US dollars. This was followed by a recovery in 2020 to 44,302 thousand US dollars and a notable surge in 2021, reaching 115,726 thousand US dollars, the highest value in this timeframe.
- Invested Capital
- There was a consistent upward trajectory in invested capital year-over-year. Starting from 1,710,524 thousand US dollars in 2017, it increased to 1,970,846 thousand in 2018 and continued rising steadily to 2,246,986 thousand in 2019, 2,684,660 thousand in 2020, culminating at 3,771,373 thousand US dollars in 2021. This reflects a strategy of sustained investment growth over the period.
- Economic Spread Ratio
- The economic spread ratio experienced fluctuations analogous to economic profit but with distinct variations. It started at 2.68% in 2017, increased to a peak of 4.01% in 2018, then declined sharply to 1.10% in 2019. This was followed by a moderate rise to 1.65% in 2020 and a significant improvement to 3.07% in 2021. The trend indicates periods of varying efficiency in generating economic returns relative to invested capital.
In summary, the data reveals that despite a steady increase in invested capital, economic profit did not maintain a linear pattern, showing periods of both decline and growth. The economic spread ratio's fluctuations suggest varying effectiveness in capital utilization each year. The strong rebound in economic profit and improved spread ratio in 2021 may indicate enhanced profitability or operational improvements during that year.
Economic Profit Margin
Generac Holdings Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue related to extended warranties | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several key trends regarding the company’s performance between 2017 and 2021.
- Economic Profit
- The economic profit shows notable fluctuations over the five-year period. Starting at approximately $45.9 million in 2017, it increased significantly to about $79.1 million in 2018. However, there was a sharp decline to $24.8 million in 2019, followed by a recovery to $44.3 million in 2020. The year 2021 saw a pronounced increase, with economic profit reaching a peak of approximately $115.7 million. This reflects a strong rebound and considerable value creation in the latest year analyzed.
- Adjusted Net Sales
- Adjusted net sales exhibit a consistent upward trajectory throughout the period. Beginning at approximately $1.69 billion in 2017, sales steadily increased each year, reaching nearly $3.76 billion by the end of 2021. The most substantial growth occurred between 2020 and 2021, where sales surged by over $1.2 billion, indicating accelerated revenue expansion in the most recent year.
- Economic Profit Margin
- The economic profit margin, representing the ratio of economic profit to sales, follows a pattern similar to economic profit but with some variability. The margin increased from 2.71% in 2017 to a peak of 3.89% in 2018, then declined sharply to 1.12% in 2019. It improved again to 1.77% in 2020 and rose further to 3.08% in 2021. This indicates fluctuations in profitability relative to sales, with the margin more than doubling from its lowest point in 2019 to the last reported year.
- Overall Insights
- The data reflects a company experiencing fluctuating profitability but sustained revenue growth. The substantial increase in both economic profit and adjusted net sales in 2021 suggests improved operational efficiency and possibly favorable market conditions or successful strategic initiatives. The volatility in economic profit margin indicates periods of varying cost management effectiveness or changing market dynamics affecting profitability. The strong rebound in 2021 underscores a positive financial trajectory, signaling enhanced value generation in the most recent period analyzed.