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
Hilton Worldwide Holdings Inc., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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
= 1,514 – 17.98% × 10,493 = -373
The analysis of economic profit from 2019 to 2023 reveals a consistent failure to generate positive economic value added, as economic profit remained negative throughout the entire five-year period. While operating performance showed a strong recovery after a significant downturn, the returns generated were insufficient to exceed the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trajectory is observed, characterized by a severe contraction in 2020, where NOPAT fell to negative 279 million US$. A subsequent recovery occurred, with profit peaking in 2022 at 1,814 million US$ before moderating to 1,514 million US$ in 2023.
- Cost of Capital
- The cost of capital exhibited a general upward trend following a brief decrease in 2020. From a starting point of 16.69% in 2019, the rate climbed steadily to reach 17.98% by 2023, effectively raising the financial hurdle required to achieve a positive economic profit.
- Invested Capital
- Invested capital peaked in 2020 at 12,956 million US$ and has since followed a consistent downward trend, decreasing to 10,493 million US$ by 2023. This contraction indicates a reduction in the capital base used to generate operating returns.
- Economic Profit Performance
- Economic profit reached its nadir in 2020 at negative 2,311 million US$. A significant recovery trend was observed between 2021 and 2022, with the loss narrowing to negative 184 million US$. However, this progress reversed in 2023, as the economic loss widened to negative 373 million US$. The persistent negative values indicate that the company's return on invested capital has remained below its cost of capital for the duration of the analyzed period.
AI Ask an analyst for more
Net Operating Profit after Taxes (NOPAT)
Hilton Worldwide Holdings Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 revenues.
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Hilton stockholders.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 924 × 4.33% = 40
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 504 × 21.00% = 106
7 Addition of after taxes interest expense to net income (loss) attributable to Hilton stockholders.
- Net Income (Loss) Attributable to Hilton Stockholders
- The net income exhibited considerable volatility during the observed period. In 2019, the company reported a positive net income of $881 million. However, in 2020, the net income turned negative, recording a loss of $715 million, indicative of significant financial challenges during that year. Subsequently, there was a recovery with net income returning to a positive value of $410 million in 2021. The upward trend continued strongly into 2022, with net income reaching $1,255 million, followed by a slight decrease to $1,141 million in 2023. Despite this recent decline, the net income remained substantially higher than pre-pandemic levels, reflecting an overall recovery and growth trajectory.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT followed a pattern similar to net income but demonstrated stronger growth in the latter years. Starting at $1,213 million in 2019, NOPAT decreased to a negative $279 million in 2020, illustrating operational challenges during that period. A recovery phase occurred in 2021 with NOPAT rising to $614 million. This positive trend accelerated markedly in 2022, where NOPAT increased significantly to $1,814 million, followed by a modest decline to $1,514 million in 2023. Despite the slight reduction, the NOPAT values for 2022 and 2023 were well above pre-pandemic levels, signaling improved operational efficiency and profitability post-2020.
- Summary of Trends
- Both net income and NOPAT experienced a sharp downturn in 2020, likely due to extraordinary external factors impacting financial performance. The subsequent years reveal a consistent recovery, with both metrics surpassing the levels observed in 2019 by a substantial margin in 2022 and 2023. The slight decreases observed in 2023 for both net income and NOPAT suggest a potential stabilization or minor pullback following robust growth. Overall, the company demonstrates resilience and an ability to return to, and exceed, prior profitability levels after a significant dip.
AI Ask an analyst for more
Cash Operating Taxes
Hilton Worldwide Holdings Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
The financial data for the period from December 31, 2019, to December 31, 2023, exhibits notable fluctuations in the provision (benefit) for income taxes and cash operating taxes. The provision for income taxes, expressed in millions of US dollars, shows significant variability over the years. In 2019, the provision stood at a positive 358 million, indicating tax expense. However, in 2020, there was a marked reversal to a negative figure of -204 million, which suggests a tax benefit or credit during that year. This shift likely reflects the impact of extraordinary events or changes in profitability and tax strategy during the pandemic year. In the subsequent years, 2021 through 2023, the provision for income taxes rose steadily from 153 million to 541 million, indicating a return to tax expenses and an increasing tax burden over this period.
Conversely, cash operating taxes demonstrate a consistent upward trend throughout the five-year span. Starting at 474 million in 2019, cash taxes dropped sharply to 130 million in 2020, aligning with the overall decline in tax provision during that year. This decrease likely corresponds to reduced taxable income or enhanced tax reliefs during 2020. From 2021 onwards, cash operating taxes increased significantly each year—from 249 million in 2021, to 539 million in 2022, and reaching 911 million in 2023. The sharp increase in cash operating taxes in 2023 suggests a substantial rise in taxable income or changes in tax payment policies, possibly reflecting improved operational performance or changes in tax laws.
- Provision for Income Taxes
- 2019: Positive tax expense noted at 358 million.
- 2020: Shift to a tax benefit of -204 million, indicating reduced tax burden or credits.
- 2021-2023: Progressive increase from 153 million to 541 million, signaling rising tax expenses.
- Cash Operating Taxes
- 2019: Moderate cash tax payment of 474 million.
- 2020: Sharp decline to 130 million, reflecting reduced cash tax outflows amid challenging conditions.
- 2021-2023: Steady increase from 249 million to 911 million, highlighting growth in actual tax payments.
Overall, the data reveals that 2020 was an anomalous year with reduced tax liabilities, both on a reported and cash basis, likely influenced by external economic disruptions. Following this period, there was a clear recovery and escalation in both tax expenses provided for and taxes paid in cash, which points to improved profitability and potential normalization of tax obligations. The divergence between provision and cash taxes is less pronounced in later years, indicating closer alignment between accounting tax expense and cash tax outflow.
AI Ask an analyst for more
Invested Capital
Hilton Worldwide Holdings Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 revenues.
5 Addition of equity equivalents to total Hilton stockholders’ deficit.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
The financial data reveals several distinct trends regarding the company's debt, equity position, and invested capital over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases consistently fluctuated within a range between approximately $9.1 billion and $11.6 billion. A notable increase occurred in 2020, rising sharply from $9.2 billion to $11.6 billion, likely reflecting elevated borrowing or leasing activities during that year. Subsequently, the debt level declined in 2021 and 2022 but increased again in 2023, settling slightly above $10 billion. This pattern suggests the company managed its leverage actively, possibly in response to external conditions impacting its financing needs.
- Total Hilton Stockholders’ Deficit
- The stockholders’ deficit exhibited significant volatility across the period, with all reported values remaining negative, indicating persistent equity shortfall. The deficit deepened markedly in 2020, deteriorating from -$482 million to -$1.49 billion, which may denote accumulated losses or increased liabilities. While some improvement occurred in 2021, the deficit worsened again in 2022 and reached its peak negative value of -$2.36 billion in 2023. This trend reflects ongoing challenges in achieving positive equity and may raise concerns about the company's capital structure and financial stability.
- Invested Capital
- Invested capital showed a rising trend from 2019 to 2020, increasing from $11.4 billion to almost $13 billion. After 2020, there was a steady decline over the next three years, with invested capital decreasing to approximately $10.5 billion by 2023. This decline might indicate asset disposals, reductions in capital expenditures, or changes in operational investments, potentially reflecting a strategic shift or responses to external market pressures.
In summary, the data suggests that the company experienced elevated leverage and equity deficits during the analyzed timeframe, especially around 2020 and onwards. Despite managing invested capital levels, ongoing equity challenges may impact financial flexibility and risk profile. Close monitoring and possible strategic adjustments to improve equity and manage debt levels could be necessary to enhance overall financial health.
AI Ask an analyst for more
Cost of Capital
Hilton Worldwide Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,431) | 49,431) | ÷ | 59,263) | = | 0.83 | 0.83 | × | 20.73% | = | 17.29% | ||
| Long-term debt3 | 8,908) | 8,908) | ÷ | 59,263) | = | 0.15 | 0.15 | × | 5.40% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 924) | 924) | ÷ | 59,263) | = | 0.02 | 0.02 | × | 4.33% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 59,263) | 1.00 | 17.98% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | 40,181) | 40,181) | ÷ | 49,234) | = | 0.82 | 0.82 | × | 20.73% | = | 16.92% | ||
| Long-term debt3 | 8,109) | 8,109) | ÷ | 49,234) | = | 0.16 | 0.16 | × | 4.92% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 944) | 944) | ÷ | 49,234) | = | 0.02 | 0.02 | × | 4.22% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 49,234) | 1.00 | 17.62% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
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 | 43,641) | 43,641) | ÷ | 53,664) | = | 0.81 | 0.81 | × | 20.73% | = | 16.86% | ||
| Long-term debt3 | 9,013) | 9,013) | ÷ | 53,664) | = | 0.17 | 0.17 | × | 3.65% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 1,010) | 1,010) | ÷ | 53,664) | = | 0.02 | 0.02 | × | 3.87% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 53,664) | 1.00 | 17.40% | ||||||||||
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 | 30,934) | 30,934) | ÷ | 43,005) | = | 0.72 | 0.72 | × | 20.73% | = | 14.91% | ||
| Long-term debt3 | 10,930) | 10,930) | ÷ | 43,005) | = | 0.25 | 0.25 | × | 3.49% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 1,141) | 1,141) | ÷ | 43,005) | = | 0.03 | 0.03 | × | 3.82% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 43,005) | 1.00 | 15.69% | ||||||||||
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 | 31,335) | 31,335) | ÷ | 40,831) | = | 0.77 | 0.77 | × | 20.73% | = | 15.91% | ||
| Long-term debt3 | 8,326) | 8,326) | ÷ | 40,831) | = | 0.20 | 0.20 | × | 4.36% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 1,170) | 1,170) | ÷ | 40,831) | = | 0.03 | 0.03 | × | 3.76% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 40,831) | 1.00 | 16.69% | ||||||||||
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 »
Economic Spread Ratio
Hilton Worldwide Holdings Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (373) | (184) | (1,401) | (2,311) | (692) | |
| Invested capital2 | 10,493) | 11,342) | 11,581) | 12,956) | 11,409) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -3.55% | -1.62% | -12.10% | -17.84% | -6.06% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | 9.37% | 11.00% | -11.10% | — | — | |
| Booking Holdings Inc. | 14.64% | 3.79% | -13.66% | — | — | |
| Chipotle Mexican Grill Inc. | 7.02% | 2.82% | -1.67% | — | — | |
| DoorDash, Inc. | -39.50% | -53.28% | -39.79% | — | — | |
| McDonald’s Corp. | 8.67% | 5.87% | 8.30% | — | — | |
| Starbucks Corp. | 5.21% | 2.80% | 4.06% | -8.49% | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -373 ÷ 10,493 = -3.55%
4 Click competitor name to see calculations.
An analysis of the economic value added metrics reveals a period of sustained negative economic profit, characterized by a sharp deterioration in 2020, a significant recovery phase through 2022, and a slight regression in 2023.
- Economic Profit Trends
- Economic profit remained consistently negative from 2019 to 2023, indicating that the returns generated did not exceed the cost of capital. A substantial decline was observed in 2020, with economic profit falling to -2,311 million US$. This was followed by a period of recovery, where losses narrowed to -1,401 million US$ in 2021 and reached a five-year high of -184 million US$ in 2022, before widening again to -373 million US$ in 2023.
- Invested Capital Dynamics
- Invested capital exhibited an initial increase, peaking at 12,956 million US$ in 2020. Following this peak, a steady downward trend is observed, with invested capital decreasing to 11,581 million US$ in 2021, 11,342 million US$ in 2022, and finally reaching 10,493 million US$ by 2023. This represents a contraction of the capital base following the 2020 expansion.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the analyzed period, reflecting a persistent shortfall in value creation. The ratio experienced a severe drop to -17.84% in 2020, marking the period of greatest inefficiency relative to the cost of capital. A strong corrective trend followed, with the ratio improving to -12.10% in 2021 and nearly reaching break-even at -1.62% in 2022. However, a marginal decline to -3.55% occurred in 2023, suggesting a slight erosion of the gains made during the recovery period.
AI Ask an analyst for more
Economic Profit Margin
Hilton Worldwide Holdings Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (373) | (184) | (1,401) | (2,311) | (692) | |
| Revenues | 10,235) | 8,773) | 5,788) | 4,307) | 9,452) | |
| Add: Increase (decrease) in deferred revenues | 215) | 173) | (128) | 215) | (17) | |
| Adjusted revenues | 10,450) | 8,946) | 5,660) | 4,522) | 9,435) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -3.57% | -2.06% | -24.76% | -51.12% | -7.33% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | 5.45% | 8.74% | -10.04% | — | — | |
| Booking Holdings Inc. | 7.82% | 3.02% | -18.71% | — | — | |
| Chipotle Mexican Grill Inc. | 4.26% | 1.76% | -1.21% | — | — | |
| DoorDash, Inc. | -23.96% | -43.06% | -25.88% | — | — | |
| McDonald’s Corp. | 17.02% | 11.51% | 17.04% | — | — | |
| Starbucks Corp. | 3.22% | 1.79% | 3.31% | -8.28% | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -373 ÷ 10,450 = -3.57%
3 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a severe contraction followed by a substantial recovery in revenue, although economic profit remained negative throughout the entire period. The data indicates a period of high volatility, particularly surrounding the year 2020, with a subsequent trend toward stabilization by 2023.
- Adjusted Revenue Trends
- Adjusted revenues exhibited a V-shaped recovery pattern. After a sharp decline from US$ 9,435 million in 2019 to a low of US$ 4,522 million in 2020, revenues grew steadily over the following three years. By December 31, 2023, adjusted revenues reached US$ 10,450 million, surpassing pre-2020 levels.
- Economic Profit Analysis
- Economic profit remained in negative territory for the five-year duration, indicating that the company did not generate returns in excess of its cost of capital. The most significant deficit occurred in 2020, with a loss of US$ 2,311 million. While the deficit narrowed significantly to US$ 184 million by 2022, a slight reversal occurred in 2023, with the economic profit widening to a loss of US$ 373 million.
- Economic Profit Margin Dynamics
- The economic profit margin mirrored the volatility of the revenue stream. The margin deteriorated sharply to -51.12% in 2020, reflecting the disproportionate impact of falling revenues against the capital charge. A strong recovery trend followed, with the margin improving to -2.06% in 2022. However, the margin experienced a minor decline to -3.57% in 2023, suggesting that despite record revenues, the cost of capital continues to exceed the net operating profit after tax.
AI Ask an analyst for more