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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Hewlett Packard Enterprise Co., economic profit calculation

US$ in millions

12 months ended:	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Net operating profit after taxes (NOPAT)¹	2,752)	818)	3,529)	77)	2,514)	2,346)
Cost of capital²	13.84%	13.34%	12.29%	10.73%	12.10%	12.64%
Invested capital³	43,254)	41,543)	42,837)	42,440)	43,287)	44,277)

Economic profit⁴	(3,232)	(4,722)	(1,735)	(4,476)	(2,723)	(3,252)

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,752 – 13.84% × 43,254 = -3,232

The analysis of economic profit from 2018 to 2023 reveals a consistent inability to generate value above the cost of capital. Throughout the observed six-year period, economic profit remained negative, indicating that the company's operating returns were insufficient to cover its capital charges.

Net Operating Profit After Taxes (NOPAT): NOPAT exhibited significant volatility throughout the period. A sharp decline occurred in 2020, where profit fell to US$ 77 million, followed by a substantial recovery to US$ 3,529 million in 2021. This volatility persisted into 2022 with a dip to US$ 818 million before rebounding to US$ 2,752 million in 2023. These fluctuations suggest an unstable operating environment or inconsistent operational efficiency.
Cost of Capital: A general upward trend in the cost of capital is observed from 2020 onward. After reaching a period low of 10.73% in 2020, the rate increased steadily to 13.84% by 2023. This rise in the hurdle rate increases the threshold for achieving positive economic profit, making it more difficult for the company to create value for shareholders.
Invested Capital: Invested capital remained relatively stable, fluctuating within a narrow range between a high of US$ 44,277 million in 2018 and a low of US$ 41,543 million in 2022. The lack of significant expansion or contraction in the capital base indicates that the negative economic profit is not a result of over-investment, but rather a result of insufficient returns relative to the cost of those investments.
Economic Profit Trends: Economic profit remained negative across all reported years, with the most significant value destruction occurring in 2022 at -US$ 4,722 million. Although a peak improvement was noted in 2021, where the deficit narrowed to -US$ 1,735 million, the overall pattern confirms a persistent gap between the return on invested capital and the cost of capital.

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Hewlett Packard Enterprise Co., NOPAT calculation

US$ in millions

12 months ended:	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Net earnings (loss) attributable to HPE	2,025)	868)	3,427)	(322)	1,049)	1,908)
Deferred income tax expense (benefit)¹	(67)	(249)	(167)	(294)	1,079)	(38)
Increase (decrease) in allowance for doubtful accounts²	12)	2)	(23)	15)	(8)	(3)
Increase (decrease) in deferred revenue³	533)	26)	165)	230)	162)	208)
Increase (decrease) in product warranty liability⁴	(42)	33)	(58)	(15)	(30)	(45)
Increase (decrease) in accrued restructuring⁵	(12)	(98)	(76)	171)	(99)	(151)
Increase (decrease) in equity equivalents⁶	424)	(286)	(159)	107)	1,104)	(29)
Interest expense	326)	260)	289)	332)	311)	353)
Interest expense, operating lease liability⁷	44)	33)	31)	28)	129)	135)
Adjusted interest expense	370)	293)	320)	360)	440)	488)
Tax benefit of interest expense⁸	(78)	(61)	(67)	(76)	(92)	(114)
Adjusted interest expense, after taxes⁹	292)	231)	252)	285)	347)	374)
(Gain) loss on marketable securities	—)	—)	—)	(4)	(3)	(9)
Investment income, before taxes	—)	—)	—)	(4)	(3)	(9)
Tax expense (benefit) of investment income¹⁰	—)	—)	—)	1)	1)	2)
Investment income, after taxes¹¹	—)	—)	—)	(3)	(2)	(7)
(Income) loss from discontinued operations, net of tax¹²	—)	—)	—)	—)	—)	104)
Net income (loss) attributable to noncontrolling interest	11)	5)	9)	11)	16)	(4)
Net operating profit after taxes (NOPAT)	2,752)	818)	3,529)	77)	2,514)	2,346)

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in product warranty liability.

⁵ Addition of increase (decrease) in accrued restructuring.

⁶ Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to HPE.

⁷ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,160 × 3.80% = 44

⁸ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 370 × 21.00% = 78

⁹ Addition of after taxes interest expense to net earnings (loss) attributable to HPE.

¹⁰ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

¹¹ Elimination of after taxes investment income.

¹² Elimination of discontinued operations.

Net Earnings (Loss) Attributable to HPE

The net earnings of the company demonstrate a fluctuating but generally volatile pattern over the six-year period. Starting at 1,908 million USD in 2018, earnings decreased significantly to 1,049 million USD in 2019. The company then recorded a loss in 2020 of -322 million USD, marking the only year in the dataset with a negative result.

Following this downturn, net earnings rebounded sharply in 2021 to reach 3,427 million USD, which represents the highest figure in the period examined. However, in the subsequent years, earnings again moderated to 868 million USD in 2022 before increasing to 2,025 million USD in 2023.

This pattern suggests considerable volatility in profitability, likely influenced by operational or external factors during the timeframe.

Net Operating Profit After Taxes (NOPAT)

NOPAT trends show a somewhat different trajectory but align with net earnings to reflect variability in operational efficiency and profitability. Beginning at 2,346 million USD in 2018, NOPAT increased modestly to 2,514 million USD in 2019.

Significantly, 2020 experienced a dramatic drop to just 77 million USD, indicating a steep decline in core operating profitability likely linked to the loss experienced the same year.

Subsequently, there was a robust recovery by 2021, reaching a peak of 3,529 million USD, the highest level in the series. NOPAT then decreased substantially to 818 million USD in 2022 before rising again to 2,752 million USD in 2023.

The NOPAT figures reinforce the indication of operational challenges and recovery phases over the period, with 2020 standing out as an exceptional downturn year.

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Hewlett Packard Enterprise Co., cash operating taxes calculation

US$ in millions

12 months ended:	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Provision (benefit) for taxes	205)	8)	160)	(120)	504)	(1,744)
Less: Deferred income tax expense (benefit)	(67)	(249)	(167)	(294)	1,079)	(38)
Add: Tax savings from interest expense	78)	61)	67)	76)	92)	114)
Less: Tax imposed on investment income	—)	—)	—)	1)	1)	2)
Cash operating taxes	350)	318)	394)	249)	(483)	(1,594)

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

The analysis of the provision and cash operating taxes over the six-year period reveals notable fluctuations that merit attention.

Provision (benefit) for taxes: The provision for taxes exhibited significant volatility. In 2018, a substantial tax benefit was recorded, evidenced by a large negative figure of -1744 million USD. This shifted in 2019 to a provision of 504 million USD, indicating a move to a tax expense. Subsequently, the year 2020 showed another negative figure (-120 million USD), denoting a tax benefit once again. The trend reversed in 2021 and 2023 with positive provisions of 160 million USD and 205 million USD, respectively, with 2022 showing a minimal provision of 8 million USD. Overall, the provision for taxes oscillated between benefits and expenses, reflecting considerable year-to-year variability possibly due to changes in taxable income, tax legislation, deferred tax assets or liabilities, or extraordinary tax events.
Cash operating taxes: Cash operating taxes also demonstrated wide variability during the period. The years 2018 and 2019 recorded negative cash taxes of -1594 million USD and -483 million USD respectively, suggesting cash tax refunds or benefits. However, starting 2020, cash operating taxes turned positive and increased somewhat steadily: 249 million USD in 2020, rising to 394 million USD in 2021, then slightly decreasing to 318 million USD in 2022 before increasing again to 350 million USD in 2023. This pattern indicates a shift from receiving tax refunds to consistently paying cash taxes, albeit with some fluctuations in the amounts paid. The earlier negative cash taxes could relate to tax credits, refunds, or adjustments, whereas the subsequent positive payments suggest more stable taxable income or changes in tax payment strategies.

In summary, both tax provisions and cash operating taxes showed marked fluctuations over the six years. The early years highlight strong tax benefits and refunded cash taxes, which shifted toward more consistently positive tax provisions and payments in more recent years. This pattern suggests evolving tax circumstances, potentially impacted by operational profitability, tax policy changes, or adjustments in deferred tax accounting.

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Hewlett Packard Enterprise Co., invested capital calculation (financing approach)

US$ in millions

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Notes payable and short-term borrowings	4,868)	4,612)	3,552)	3,755)	4,425)	2,005)
Long-term debt	7,487)	7,853)	9,896)	12,186)	9,395)	10,136)
Operating lease liability¹	1,160)	1,019)	1,130)	1,086)	3,349)	3,389)
Total reported debt & leases	13,515)	13,484)	14,578)	17,027)	17,169)	15,530)
Total HPE stockholders’ equity	21,182)	19,864)	19,971)	16,049)	17,098)	21,239)
Net deferred tax (assets) liabilities²	(1,938)	(1,807)	(1,529)	(1,488)	(1,204)	(2,175)
Allowance for doubtful accounts³	37)	25)	23)	46)	31)	39)
Deferred revenue⁴	6,939)	6,406)	6,380)	6,215)	5,985)	5,823)
Product warranty liability⁵	318)	360)	327)	385)	400)	430)
Accrued restructuring⁶	180)	192)	290)	366)	195)	294)
Equity equivalents⁷	5,536)	5,176)	5,491)	5,524)	5,407)	4,411)
Accumulated other comprehensive (income) loss, net of tax⁸	3,084)	3,098)	2,915)	3,939)	3,727)	3,218)
Non-controlling interests	56)	45)	46)	47)	51)	35)
Adjusted total HPE stockholders’ equity	29,858)	28,183)	28,423)	25,559)	26,283)	28,903)
Available-for-sale investments⁹	(119)	(124)	(164)	(146)	(165)	(156)
Invested capital	43,254)	41,543)	42,837)	42,440)	43,287)	44,277)

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

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.

⁵ Addition of product warranty liability.

⁶ Addition of accrued restructuring.

⁷ Addition of equity equivalents to total HPE stockholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of available-for-sale investments.

Total Reported Debt & Leases: The total reported debt and leases exhibited a general declining trend from October 31, 2018, to October 31, 2023. Starting at 15,530 million USD in 2018, the debt increased to a peak of 17,169 million USD in 2019. However, from 2019 onward, a notable downward trend is observed, reaching a low of 13,484 million USD by 2022. A slight uptick occurred in 2023, increasing marginally to 13,515 million USD. Overall, the data indicate a reduction in leverage over the five-year period following the 2019 peak.
Total HPE Stockholders’ Equity: Stockholders’ equity showed a more fluctuating pattern over the observed years. It started at 21,239 million USD in 2018, then declined sharply to 17,098 million USD in 2019 and further to 16,049 million USD in 2020. This reduction suggests a contraction in equity or potentially share repurchases or losses affecting the equity base. Nevertheless, from 2020 onwards, equity values rebounded significantly, climbing to 19,971 million USD in 2021 and maintaining a steady state near 19,800 million USD in 2022. By 2023, equity increased again to 21,182 million USD, nearing the 2018 level. This resurgence indicates potential retained earnings growth, capital injections, or asset revaluations enhancing the equity position.
Invested Capital: The invested capital followed a slightly decreasing trend with minor fluctuations. The figure begins at 44,277 million USD in 2018 and gradually decreases to 43,287 million USD in 2019 and subsequently to 42,440 million USD in 2020. From 2020 to 2021, there was a marginal increase to 42,837 million USD, followed by a decline to 41,543 million USD in 2022. The final figure in 2023 increases again to 43,254 million USD. These variations suggest moderate adjustments in the company’s total capital base used for operations, with a slight overall decrease but some recovery in the most recent year.
Summary Insights: The data collectively reveal a company managing its capital structure with a focus on reducing debt levels after 2019 while recovering stockholders’ equity after a significant dip by 2020. The modest fluctuations in invested capital imply adjustments in financing or operational investments. The decreasing trend in debt combined with the recovery of equity may indicate strengthening financial stability and an effort to optimize capital costs through deleveraging. The rebound in equity over the latter years supports the notion of improved profitability or capital management actions.

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Hewlett Packard Enterprise Co., cost of capital calculations

Oct 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,217)	22,217)	÷	35,577)	=	0.62	0.62	×	19.95%	=	12.46%
Short-term and long-term debt³	12,200)	12,200)	÷	35,577)	=	0.34	0.34	×	4.73% × (1 – 21.00%)	=	1.28%
Operating lease liability⁴	1,160)	1,160)	÷	35,577)	=	0.03	0.03	×	3.80% × (1 – 21.00%)	=	0.10%
Total:	35,577)					1.00					13.84%

Based on: 10-K (reporting date: 2023-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Oct 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,881)	20,881)	÷	34,100)	=	0.61	0.61	×	19.95%	=	12.21%
Short-term and long-term debt³	12,200)	12,200)	÷	34,100)	=	0.36	0.36	×	3.70% × (1 – 21.00%)	=	1.05%
Operating lease liability⁴	1,019)	1,019)	÷	34,100)	=	0.03	0.03	×	3.20% × (1 – 21.00%)	=	0.08%
Total:	34,100)					1.00					13.34%

Based on: 10-K (reporting date: 2022-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Oct 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	19,673)	19,673)	÷	35,403)	=	0.56	0.56	×	19.95%	=	11.08%
Short-term and long-term debt³	14,600)	14,600)	÷	35,403)	=	0.41	0.41	×	3.49% × (1 – 21.00%)	=	1.14%
Operating lease liability⁴	1,130)	1,130)	÷	35,403)	=	0.03	0.03	×	2.70% × (1 – 21.00%)	=	0.07%
Total:	35,403)					1.00					12.29%

Based on: 10-K (reporting date: 2021-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Oct 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,677)	15,677)	÷	33,863)	=	0.46	0.46	×	19.95%	=	9.23%
Short-term and long-term debt³	17,100)	17,100)	÷	33,863)	=	0.50	0.50	×	3.58% × (1 – 21.00%)	=	1.43%
Operating lease liability⁴	1,086)	1,086)	÷	33,863)	=	0.03	0.03	×	2.60% × (1 – 21.00%)	=	0.07%
Total:	33,863)					1.00					10.73%

Based on: 10-K (reporting date: 2020-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Oct 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,726)	20,726)	÷	38,674)	=	0.54	0.54	×	19.95%	=	10.69%
Short-term and long-term debt³	14,600)	14,600)	÷	38,674)	=	0.38	0.38	×	3.84% × (1 – 21.00%)	=	1.15%
Operating lease liability⁴	3,349)	3,349)	÷	38,674)	=	0.09	0.09	×	3.84% × (1 – 21.00%)	=	0.26%
Total:	38,674)					1.00					12.10%

Based on: 10-K (reporting date: 2019-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Oct 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,477)	20,477)	÷	36,066)	=	0.57	0.57	×	19.95%	=	11.33%
Short-term and long-term debt³	12,200)	12,200)	÷	36,066)	=	0.34	0.34	×	3.98% × (1 – 23.30%)	=	1.03%
Operating lease liability⁴	3,389)	3,389)	÷	36,066)	=	0.09	0.09	×	3.98% × (1 – 23.30%)	=	0.29%
Total:	36,066)					1.00					12.64%

Based on: 10-K (reporting date: 2018-10-31).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Hewlett Packard Enterprise Co., economic spread ratio calculation, comparison to benchmarks

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(3,232)	(4,722)	(1,735)	(4,476)	(2,723)	(3,252)
Invested capital²	43,254)	41,543)	42,837)	42,440)	43,287)	44,277)
Performance Ratio
Economic spread ratio³	-7.47%	-11.37%	-4.05%	-10.55%	-6.29%	-7.35%
Benchmarks
Economic Spread Ratio, Competitors⁴
Apple Inc.	137.56%	199.07%	195.44%	143.41%	—	—
Arista Networks Inc.	20.60%	16.12%	31.17%	—	—	—
Cisco Systems Inc.	3.37%	3.35%	2.59%	—	—	—
Dell Technologies Inc.	-0.70%	3.17%	-1.35%	—	—	—
Lumentum Holdings Inc.	-19.02%	-6.35%	5.97%	—	—	—
Super Micro Computer Inc.	-1.51%	-9.69%	-18.15%	—	—	—

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,232 ÷ 43,254 = -7.47%

⁴ Click competitor name to see calculations.

The financial performance between October 31, 2018, and October 31, 2023, is characterized by a persistent inability to generate positive economic profit, indicating a continuous destruction of shareholder value over the six-year period. The results exhibit significant volatility, with no established trend toward economic viability.

Economic Profit Trends: Economic profit remained negative throughout the entire observed period. The most significant deficit occurred on October 31, 2022, reaching -4,722 million US$, following a notable recovery in 2021 where the deficit narrowed to its lowest point of -1,735 million US$. This volatility suggests inconsistent operational efficiency or fluctuating external costs that prevent the company from exceeding its cost of capital.
Invested Capital Stability: The invested capital base remained relatively stable, fluctuating within a narrow range between 41,543 million US$ in 2022 and 44,277 million US$ in 2018. This stability indicates that the negative economic profit is not a result of aggressive capital expansion, but rather a result of the returns generated on the existing capital base being insufficient to cover the cost of that capital.
Economic Spread Ratio Analysis: The economic spread ratio remained negative for all six years, confirming that the return on invested capital consistently fell below the weighted average cost of capital. The ratio reached its worst level of -11.37% in 2022, mirroring the peak in economic profit losses. The most favorable spread was recorded in 2021 at -4.05%. The persistence of a negative spread suggests a structural challenge in achieving a competitive return on the company's invested assets.

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Hewlett Packard Enterprise Co., economic profit margin calculation, comparison to benchmarks

	Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019	Oct 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(3,232)	(4,722)	(1,735)	(4,476)	(2,723)	(3,252)

Net revenue	29,135)	28,496)	27,784)	26,982)	29,135)	30,852)
Add: Increase (decrease) in deferred revenue	533)	26)	165)	230)	162)	208)
Adjusted net revenue	29,668)	28,522)	27,949)	27,212)	29,297)	31,060)
Performance Ratio
Economic profit margin²	-10.89%	-16.56%	-6.21%	-16.45%	-9.29%	-10.47%
Benchmarks
Economic Profit Margin, Competitors³
Apple Inc.	21.64%	23.53%	22.71%	18.79%	—	—
Arista Networks Inc.	15.55%	11.11%	18.26%	—	—	—
Cisco Systems Inc.	3.36%	3.76%	2.89%	—	—	—
Dell Technologies Inc.	-0.39%	1.66%	-1.16%	—	—	—
Lumentum Holdings Inc.	-31.20%	-9.27%	6.73%	—	—	—
Super Micro Computer Inc.	-0.51%	-4.12%	-6.54%	—	—	—

Based on: 10-K (reporting date: 2023-10-31), 10-K (reporting date: 2022-10-31), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-31), 10-K (reporting date: 2019-10-31), 10-K (reporting date: 2018-10-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenue
= 100 × -3,232 ÷ 29,668 = -10.89%

³ Click competitor name to see calculations.

A comprehensive analysis of the economic value added reveals a persistent trend of economic value destruction over the six-year period from 2018 to 2023. The company consistently failed to generate returns exceeding its cost of capital, as evidenced by negative economic profit figures in every reported fiscal year.

Economic Profit Trends: The economic profit exhibited significant volatility, ranging from a peak of -1,735 million USD in 2021 to a trough of -4,722 million USD in 2022. While there was a notable recovery in 2021, this gain was short-lived, followed by the most severe decline in the series during the 2022 fiscal year. By 2023, the figure improved to -3,232 million USD, returning to levels similar to those observed in 2018.
Adjusted Net Revenue Performance: Revenue patterns show a gradual decline from 31,060 million USD in 2018 to a low of 27,212 million USD in 2020. Following this trough, a steady upward trajectory is observed, with revenue climbing back to 29,668 million USD by 2023. Despite this recovery in top-line performance, the growth in revenue did not translate into positive economic profit.
Economic Profit Margin Analysis: The economic profit margin remained negative throughout the period, mirroring the volatility of the absolute economic profit. The margin reached its most favorable point in 2021 at -6.21%, suggesting an increase in capital efficiency or a temporary reduction in the cost of capital. However, the margin deteriorated sharply to -16.56% in 2022, marking the lowest point of efficiency in the analyzed timeframe. The 2023 margin of -10.89% indicates a partial recovery, though the company continues to operate with a negative spread between its return on capital and its cost of capital.

The correlation between revenue and economic profit is inconsistent. For instance, the revenue growth observed between 2020 and 2021 coincided with a significant improvement in the economic profit margin. Conversely, the revenue increase from 2021 to 2022 occurred simultaneously with a sharp collapse in economic profit, indicating that the factors driving value destruction during that period were independent of revenue volume.

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Hewlett Packard Enterprise Co. (NYSE:HPE)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin