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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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Economic Profit
Hubbell Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of economic profit from 2018 to 2022 reveals a persistent trend of value destruction, as economic profit remained negative throughout the entire five-year period. Although there was a recovery in operating performance toward the end of the period, the company failed to generate returns exceeding its cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A V-shaped trend is observed in NOPAT. Following a peak of $591.7 million in 2018, profits declined for two consecutive years, reaching a minimum of $403.3 million in 2020. A recovery phase followed, with NOPAT increasing to $458.4 million in 2021 and further rising to $597.8 million in 2022, effectively restoring operating profitability to 2018 levels.
- Cost of Capital
- A consistent upward trajectory is noted in the cost of capital. The rate increased steadily from 14.87% in 2018 to 16.71% in 2022. This continuous rise indicates an increasing financial hurdle for the company to achieve positive economic value added.
- Invested Capital
- Invested capital remained relatively stable between 2018 and 2021, fluctuating within a narrow range between $4.2 billion and $4.3 billion. However, a notable increase occurred in 2022, with invested capital rising to $4.5 billion, marking the highest level of capital deployment in the analyzed period.
- Economic Profit
- Economic profit exhibited significant volatility while remaining in negative territory. The deficit expanded from -$33.7 million in 2018 to a peak loss of -$271.2 million in 2020. While the deficit narrowed to -$155.0 million by 2022, the company has not achieved a positive economic profit, indicating that the growth in NOPAT was insufficient to overcome the combined impact of a rising cost of capital and an increased capital base.
Overall, the data indicates that while operational efficiency improved between 2020 and 2022, the simultaneous increase in the cost of capital and the expansion of invested capital hindered the company's ability to create economic value.
Net Operating Profit after Taxes (NOPAT)
Hubbell Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in contract liabilities, deferred revenue.
5 Addition of increase (decrease) in accrued warranties.
6 Addition of increase (decrease) in accrued liabilities for restructuring actions.
7 Addition of increase (decrease) in equity equivalents to net income attributable to Hubbell Incorporated.
8 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
9 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
10 Addition of after taxes interest expense to net income attributable to Hubbell Incorporated.
11 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
12 Elimination of after taxes investment income.
13 Elimination of discontinued operations.
- Net Income Attributable to Hubbell Incorporated
- The net income showed fluctuations throughout the observed periods. Starting at 360,200 thousand US dollars in 2018, it increased to 400,900 thousand US dollars in 2019. However, there was a decline in 2020 to 351,200 thousand US dollars, followed by a recovery to 399,500 thousand US dollars in 2021. In 2022, the net income rose significantly to 545,900 thousand US dollars, marking the highest value in the series and indicating improved profitability in that year.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes declined from 591,651 thousand US dollars in 2018 to 472,549 thousand US dollars in 2019 and further to 403,273 thousand US dollars in 2020, showing a downward trend in operating profitability over these three years. This trend reversed in 2021 with an increase to 458,435 thousand US dollars, followed by a substantial rise to 597,801 thousand US dollars in 2022, reaching the highest level in the period assessed. This recovery suggests a notable improvement in operating efficiency and profitability in the most recent year examined.
Cash Operating Taxes
Hubbell Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
The data reveals fluctuations in the tax-related financial items over the five-year period ending in 2022.
- Provision for Income Taxes
- The provision for income taxes showed a general pattern of variability. Starting at 100,900 thousand USD in 2018, it increased to 113,100 thousand USD in 2019. This was followed by a decline to 97,500 thousand USD in 2020 and a further decrease to 88,200 thousand USD in 2021. However, in 2022, there was a significant rise to 140,200 thousand USD, marking the highest value in the observed period.
- Cash Operating Taxes
- Cash operating taxes displayed notable volatility across the years. The amount nearly doubled from 67,810 thousand USD in 2018 to 122,697 thousand USD in 2019. It then decreased to 107,537 thousand USD in 2020 and further declined to 90,971 thousand USD in 2021. The year 2022 saw a sharp increase to 179,191 thousand USD, the peak in the given timeline.
Overall, both provision for income taxes and cash operating taxes exhibit significant fluctuations year-over-year. Despite some declines in the intermediate years, each ended with considerable increases in 2022. This indicates possible changes in taxable income, tax rates, or tax planning strategies influencing tax expenses during the most recent year compared to the previous years.
Invested Capital
Hubbell Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
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 LIFO reserve. See details »
5 Addition of contract liabilities, deferred revenue.
6 Addition of accrued warranties.
7 Addition of accrued liabilities for restructuring actions.
8 Addition of equity equivalents to total Hubbell Incorporated shareholders’ equity.
9 Removal of accumulated other comprehensive income.
10 Subtraction of construction-in-progress.
11 Subtraction of investments.
- Total Reported Debt & Leases
-
The total reported debt and leases exhibited a declining trend from 2018 to 2021, decreasing from approximately 1,892,035 thousand USD in 2018 to 1,530,600 thousand USD in 2021. This reflects a reduction in debt levels over the four-year period. However, in 2022, there was a slight increase to 1,558,000 thousand USD, indicating a modest rise after several years of decline.
- Total Hubbell Incorporated Shareholders’ Equity
-
Shareholders’ equity consistently increased throughout the period, starting from around 1,780,600 thousand USD in 2018 and reaching 2,360,900 thousand USD by the end of 2022. This steady growth suggests improving net assets and potentially increased retained earnings or capital contributions over time.
- Invested Capital
-
Invested capital showed modest fluctuations but generally trended upward over the observed years. Starting at roughly 4,206,535 thousand USD in 2018, it remained relatively stable until 2021 with small variances, then increased notably to 4,504,100 thousand USD in 2022. This reflects an overall growth in the capital invested in the company’s operations, possibly supporting expansion or increased asset base.
- Summary of Trends
-
The data reveal a conservative approach to debt management, with a reduction in total debt and leases for most of the period and only a slight uptick in the final year. Concurrently, the steady rise in shareholders’ equity highlights strengthening financial resilience and an increasing cushion for creditors. The invested capital’s gradual growth aligns with a broader investment or reinvestment strategy supporting the company’s operational and strategic objectives. Collectively, these trends suggest a focus on financial stability combined with measured growth.
Cost of Capital
Hubbell Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Hubbell Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
Analysis of the five-year period reveals a consistent inability to generate positive economic value, as evidenced by negative economic profit and a negative economic spread ratio across all reporting dates.
- Economic Profit Trends
- Economic profit experienced a significant decline between 2018 and 2020, with the deficit expanding from -33,743 thousand US$ to a peak loss of -271,234 thousand US$. A subsequent recovery trend emerged in 2021 and 2022, resulting in a reduced deficit of -154,964 thousand US$ by the end of the period.
- Invested Capital Stability
- Invested capital remained relatively stable, fluctuating within a narrow range from 4,206,535 thousand US$ in 2018 to 4,504,100 thousand US$ in 2022. This stability indicates that the volatility in economic profit was not a result of significant changes in the capital base, but rather shifts in the return generated relative to the cost of that capital.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative throughout the analyzed timeframe, indicating that the return on invested capital failed to exceed the weighted average cost of capital. The ratio deteriorated from -0.80% in 2018 to a low of -6.27% in 2020, before improving to -3.44% by December 31, 2022.
The synchronized movement of the economic profit and the economic spread ratio confirms that the peak value destruction occurred in 2020. While the trend shifted toward value recovery in the final two years, the company continued to operate with a negative economic spread, failing to create absolute economic value by the end of 2022.
Economic Profit Margin
Hubbell Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in contract liabilities, deferred revenue | ||||||
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of the economic value added metrics reveals a period of consistent negative economic profit from 2018 through 2022, indicating that the return on capital remained below the company's cost of capital throughout this timeframe. While the economic deficit widened significantly in the early part of the period, a recovery trend emerged after 2020.
- Economic Profit Trends
- Economic profit experienced a sharp decline from -33,743 thousand USD in 2018 to a peak deficit of -271,234 thousand USD in 2020. Following this trough, the losses narrowed to -232,529 thousand USD in 2021 and further improved to -154,964 thousand USD by 2022, suggesting an incremental restoration of value creation efficiency.
- Adjusted Net Sales Performance
- Revenue exhibited volatility, with a slight increase in 2019 followed by a contraction in 2020 and 2021, where sales hovered around 4.18 billion USD. A significant rebound occurred in 2022, with adjusted net sales reaching a five-year high of 4,977,000 thousand USD.
- Economic Profit Margin Dynamics
- The economic profit margin mirrored the trajectory of absolute economic profit, deteriorating from -0.75% in 2018 to a low of -6.48% in 2020. The subsequent recovery to -3.11% in 2022 indicates that the expansion in net sales, combined with improved operational outcomes, contributed to a reduction in the relative economic loss per dollar of sales.