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
HCA Healthcare Inc., economic profit calculation
US$ in millions
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
= 9,050 – 17.82% × 36,837 = 2,487
The analysis of economic value added reveals a period of significant volatility in value creation, concluding with a substantial increase in economic profit by the end of the 2021 fiscal year. While there was a consistent expansion of the asset base, the ability to generate returns exceeding the cost of capital varied considerably over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory is observed, with NOPAT increasing from 4,332 million US$ in 2017 to 9,050 million US$ in 2021. A marginal decline occurred in 2020, but this was followed by a sharp increase of approximately 61% in 2021, indicating a strong recovery and expansion in operational profitability.
- Cost of Capital and Invested Capital
- Invested capital demonstrated steady growth, rising from 27,635 million US$ in 2017 to 36,837 million US$ in 2021. Concurrently, the cost of capital exhibited an overall upward trend, increasing from 14.32% to 17.82%. This rising cost of capital effectively increased the financial hurdle required for the company to generate positive economic profit.
- Economic Profit Trends
- Economic profit experienced significant fluctuations, reaching a peak of 2,487 million US$ in 2021. A notable downturn occurred in 2020, when economic profit fell to -356 million US$, signifying that NOPAT was insufficient to cover the cost of the capital employed during that period. The subsequent shift from a negative value in 2020 to a record high in 2021 reflects a rapid improvement in capital efficiency and a surge in value creation for shareholders.
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Net Operating Profit after Taxes (NOPAT)
HCA Healthcare Inc., NOPAT calculation
US$ in millions
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 equity equivalents to net income attributable to HCA Healthcare, Inc..
3 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,147 × 4.40% = 94
4 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,660 × 21.00% = 349
5 Addition of after taxes interest expense to net income attributable to HCA Healthcare, Inc..
- Net Income Attributable to HCA Healthcare, Inc.
- The net income shows a general upward trend over the analyzed period. Starting at 2,216 million US dollars in 2017, the figure increased significantly to 3,787 million in 2018, representing strong growth. There was a slight decline in 2019 to 3,505 million, followed by a moderate recovery in 2020 to 3,754 million. Notably, the net income surged markedly in 2021, reaching 6,956 million US dollars, indicating a substantial increase and a possible improvement in operational efficiency or market conditions.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values also exhibit a consistent upward trajectory with minor fluctuations. Beginning at 4,332 million US dollars in 2017, it rose steadily to 5,865 million in 2018 and slightly higher to 5,941 million in 2019. A small decrease occurred in 2020, with NOPAT declining to 5,607 million. However, a significant increase is evident in 2021, with NOPAT rising sharply to 9,050 million US dollars. This substantial growth in 2021 may reflect enhanced operational performance or effective cost management, contributing to improved profitability after taxes.
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Cash Operating Taxes
HCA Healthcare Inc., cash operating taxes calculation
US$ in millions
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).
- Provision for Income Taxes
- The provision for income taxes exhibited a fluctuating pattern over the five-year period. Initially, there was a decline from 1,638 million US dollars in 2017 to 946 million in 2018. This was followed by an increase in 2019 to 1,099 million. In 2020, the provision slightly decreased to 1,043 million, but surged significantly in 2021 to 2,112 million US dollars, representing the highest level in the observed timeframe.
- Cash Operating Taxes
- Cash operating taxes showed a general upward trend despite some variability. The amount decreased from 1,829 million US dollars in 2017 to 1,319 million in 2018, then marginally declined again to 1,225 million in 2019. However, there was a notable increase in 2020 to 1,505 million, followed by a substantial rise in 2021 to 2,444 million US dollars, reaching the peak value for the period under review.
- Comparative Analysis
- Both the provision for income taxes and cash operating taxes demonstrated significant increases in 2021, more than doubling their respective lows in 2018 and 2019. The divergence in trends between 2017 and 2018 indicates an initial reduction phase before a strong upward movement. The cash operating taxes consistently remained higher than the provision for income taxes each year, suggesting a potential difference in the timing or recognition of tax expenses compared to actual tax payments.
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Invested Capital
HCA Healthcare Inc., invested capital calculation (financing approach)
US$ in millions
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 equity equivalents to stockholders’ equity (deficit) attributable to HCA Healthcare, Inc..
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
- Total reported debt & leases
-
This liability metric showed a generally stable pattern throughout the observed periods, fluctuating slightly but remaining within the range of approximately US$33 billion to US$37 billion. Specifically, the value decreased from US$34.8 billion in 2017 to US$33.1 billion in 2020, followed by an increase to US$36.7 billion in 2021. This trend suggests a degree of active debt management, with a reduction during the 2018-2020 period and an increase in the most recent year.
- Stockholders’ equity (deficit) attributable to HCA Healthcare, Inc.
-
The equity position exhibited a significant improvement from a negative value of US$6.8 billion in 2017 to nearly break-even at US$572 million in 2020, indicating a substantial repair of shareholders’ equity over this four-year span. However, in 2021, there was a reversal back to a negative equity balance of US$933 million, though this deficit was still less severe than the initial figures at the beginning of the period. This reflects volatility in retained earnings or other components influencing equity, as well as possible impacts of operational or non-operational factors on equity structure.
- Invested capital
-
A steady and continuous increase in invested capital is evident across the five-year timeframe, rising from US$27.6 billion in 2017 to US$36.8 billion in 2021. This indicates ongoing investment activity and capital deployment in the business, suggesting expansion or renewal efforts. The upward trend is consistent year-over-year without any contractions or plateaus, signaling sustained capital growth.
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Cost of Capital
HCA Healthcare Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 74,109) | 74,109) | ÷ | 114,797) | = | 0.65 | 0.65 | × | 25.61% | = | 16.53% | ||
| Long-term debt3 | 38,541) | 38,541) | ÷ | 114,797) | = | 0.34 | 0.34 | × | 4.60% × (1 – 21.00%) | = | 1.22% | ||
| Operating lease liability4 | 2,147) | 2,147) | ÷ | 114,797) | = | 0.02 | 0.02 | × | 4.40% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 114,797) | 1.00 | 17.82% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 60,291) | 60,291) | ÷ | 98,157) | = | 0.61 | 0.61 | × | 25.61% | = | 15.73% | ||
| Long-term debt3 | 35,814) | 35,814) | ÷ | 98,157) | = | 0.36 | 0.36 | × | 5.00% × (1 – 21.00%) | = | 1.44% | ||
| Operating lease liability4 | 2,052) | 2,052) | ÷ | 98,157) | = | 0.02 | 0.02 | × | 4.80% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 98,157) | 1.00 | 17.25% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 50,124) | 50,124) | ÷ | 88,999) | = | 0.56 | 0.56 | × | 25.61% | = | 14.42% | ||
| Long-term debt3 | 37,026) | 37,026) | ÷ | 88,999) | = | 0.42 | 0.42 | × | 5.20% × (1 – 21.00%) | = | 1.71% | ||
| Operating lease liability4 | 1,849) | 1,849) | ÷ | 88,999) | = | 0.02 | 0.02 | × | 5.30% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 88,999) | 1.00 | 16.22% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,621) | 48,621) | ÷ | 83,216) | = | 0.58 | 0.58 | × | 25.61% | = | 14.96% | ||
| Long-term debt3 | 32,887) | 32,887) | ÷ | 83,216) | = | 0.40 | 0.40 | × | 5.50% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 1,708) | 1,708) | ÷ | 83,216) | = | 0.02 | 0.02 | × | 5.50% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 83,216) | 1.00 | 16.77% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,284) | 35,284) | ÷ | 71,698) | = | 0.49 | 0.49 | × | 25.61% | = | 12.60% | ||
| Long-term debt3 | 34,689) | 34,689) | ÷ | 71,698) | = | 0.48 | 0.48 | × | 5.20% × (1 – 35.00%) | = | 1.64% | ||
| Operating lease liability4 | 1,725) | 1,725) | ÷ | 71,698) | = | 0.02 | 0.02 | × | 5.20% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 71,698) | 1.00 | 14.32% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
HCA Healthcare 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 millions) | ||||||
| Economic profit1 | 2,487) | (356) | 503) | 880) | 375) | |
| Invested capital2 | 36,837) | 34,570) | 33,534) | 29,729) | 27,635) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 6.75% | -1.03% | 1.50% | 2.96% | 1.36% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -1.98% | — | — | — | — | |
| Elevance Health Inc. | 1.46% | — | — | — | — | |
| Intuitive Surgical Inc. | 12.27% | — | — | — | — | |
| Medtronic PLC | -6.73% | — | — | — | — | |
| UnitedHealth Group Inc. | 3.91% | — | — | — | — | |
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 × 2,487 ÷ 36,837 = 6.75%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 reflects a period of sustained capital expansion coupled with volatile value creation. While the capital base grew consistently, the ability to generate returns exceeding the cost of capital experienced significant fluctuations, culminating in a substantial recovery in the final year of the period.
- Invested Capital Trends
- Invested capital demonstrated a steady and uninterrupted upward trajectory, increasing from 27,635 million USD in 2017 to 36,837 million USD by 2021. This indicates a consistent increase in the total assets deployed to generate earnings throughout the five-year window.
- Economic Profit Volatility
- Economic profit exhibited high variability. An initial rise from 375 million USD in 2017 to 880 million USD in 2018 was followed by a decline to 503 million USD in 2019. The most significant downturn occurred in 2020, where economic profit turned negative at -356 million USD. This trend reversed sharply in 2021, with profit surging to a peak of 2,487 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, mirrored the volatility of economic profit. The ratio fluctuated from 1.36% in 2017 to a peak of 2.96% in 2018, before declining to -1.03% in 2020. This negative spread in 2020 indicates that the returns generated were insufficient to cover the cost of the capital employed. The period concluded with a significant expansion of the spread to 6.75% in 2021, suggesting a marked improvement in capital efficiency and value creation.
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Economic Profit Margin
HCA Healthcare 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 millions) | ||||||
| Economic profit1 | 2,487) | (356) | 503) | 880) | 375) | |
| Revenues | 58,752) | 51,533) | 51,336) | 46,677) | 43,614) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 4.23% | -0.69% | 0.98% | 1.88% | 0.86% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -2.85% | — | — | — | — | |
| Elevance Health Inc. | 0.68% | — | — | — | — | |
| Intuitive Surgical Inc. | 9.66% | — | — | — | — | |
| Medtronic PLC | -16.16% | — | — | — | — | |
| UnitedHealth Group Inc. | 1.92% | — | — | — | — | |
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 ÷ Revenues
= 100 × 2,487 ÷ 58,752 = 4.23%
3 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by consistent revenue expansion contrasted with significant volatility in economic profit and the corresponding economic profit margin.
- Revenue Trajectory
- Revenues demonstrated a continuous upward trend, increasing from 43,614 million US dollars in 2017 to 58,752 million US dollars by 2021. This steady growth indicates a consistent increase in the scale of operations over the five-year period.
- Economic Profit Fluctuations
- Economic profit exhibited substantial instability. An initial increase from 375 million US dollars in 2017 to 880 million US dollars in 2018 was followed by a decline to 503 million US dollars in 2019. A significant downturn occurred in 2020, where economic profit fell to -356 million US dollars, representing a failure to cover the cost of capital. This was followed by a sharp recovery in 2021, with economic profit reaching a period high of 2,487 million US dollars.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit figures. The margin rose to 1.88% in 2018 before contracting to 0.98% in 2019. The transition to a negative margin of -0.69% in 2020 highlights a period of value destruction. However, the margin expanded dramatically to 4.23% in 2021, indicating a substantial improvement in the ability to generate economic value relative to total revenues.
The divergence between the linear growth of revenues and the non-linear movement of the economic profit margin suggests that value creation was heavily impacted by factors other than top-line growth, particularly during the 2020 fiscal year, before achieving a high level of efficiency in 2021.
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