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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Hubbell Inc. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Earnings (P/E) 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 financial performance from 2018 to 2022 is characterized by a persistent negative economic profit, indicating that the company failed to generate returns sufficient to cover its weighted average cost of capital. Despite a significant recovery in operating profitability toward the end of the period, the simultaneous increase in the cost of capital has constrained the ability to achieve positive economic value added.
- Net Operating Profit After Taxes (NOPAT)
- A V-shaped trend is observed in NOPAT. Profits declined from 591,651 thousand USD in 2018 to a low of 403,273 thousand USD in 2020. However, a strong recovery followed, with NOPAT increasing to 458,435 thousand USD in 2021 and reaching a period high of 597,801 thousand USD by December 31, 2022.
- Cost of Capital
- The cost of capital exhibited a consistent upward trajectory throughout the five-year period. Starting at 14.98% in 2018, the rate increased annually, reaching 16.84% in 2022. This steady rise in the required rate of return has increased the threshold for generating positive economic profit.
- Invested Capital
- Invested capital remained relatively stable between 2018 and 2021, fluctuating within a narrow range around 4.2 to 4.3 billion USD. A more pronounced increase occurred in 2022, where invested capital rose to 4,504,100 thousand USD, representing a higher capital base that must be supported by operating returns.
- Economic Profit Trends
- Economic profit remained negative for all reported years. The deficit widened significantly from -38,458 thousand USD in 2018 to a peak loss of -276,388 thousand USD in 2020, coinciding with the lowest NOPAT. While economic profit improved to -160,786 thousand USD by 2022 due to the recovery in NOPAT, the increasing cost of capital and the expanded capital base continue to prevent the company from creating 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.
The financial performance regarding economic value creation from 2018 to 2022 exhibits a period of significant deterioration followed by a partial recovery. Throughout the analyzed timeframe, economic profit remained consistently negative, indicating that the returns generated were insufficient to cover the cost of capital.
- Economic Profit Trends
- A sharp decline in economic profit is observed between 2018 and 2020, with the deficit widening from -38,458 thousand US$ to a peak loss of -276,388 thousand US$. Following 2020, a recovery trend is evident, as economic profit improved to -237,837 thousand US$ in 2021 and further recovered to -160,786 thousand US$ by December 31, 2022.
- Invested Capital Stability
- Invested capital remained relatively stable over the five-year period, fluctuating within a narrow range. After staying near 4.2 billion US$ between 2018 and 2019, there was a moderate increase to 4,325,800 thousand US$ in 2020, followed by a slight dip and a subsequent rise to 4,504,100 thousand US$ in 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects a strong correlation with economic profit, showing a marked decrease from -0.91% in 2018 to a low of -6.39% in 2020. A consistent improvement is noted in the subsequent years, with the ratio rising to -5.53% in 2021 and -3.57% in 2022. While the ratio is trending upward, the persistent negative values confirm that the company continued to operate with a negative spread, failing to achieve a return on invested capital that exceeded its cost of capital.
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 financial performance of Hubbell Inc. between 2018 and 2022 is characterized by a consistent failure to generate positive economic value, as evidenced by negative economic profit throughout the period. However, after a significant deterioration that peaked in 2020, a trend of recovery is observable in the final two years of the analysis.
- Economic Profit Trends
- Economic profit remained negative for the entirety of the five-year period, indicating that the company's net operating profit after taxes did not exceed its cost of capital. The deficit expanded rapidly from -38,458 thousand USD in 2018 to a peak loss of -276,388 thousand USD in 2020. Following this trough, the economic loss narrowed to -237,837 thousand USD in 2021 and further improved to -160,786 thousand USD by December 31, 2022.
- Adjusted Net Sales Volatility
- Net sales exhibited fluctuations that correlate with the volatility in economic value. After a slight increase in 2019, sales declined to a low of 4,181,000 thousand USD in 2021. A sharp recovery occurred in 2022, with adjusted net sales reaching 4,977,000 thousand USD, the highest level within the observed timeframe. This growth in revenue corresponds with the reduction in the absolute economic profit deficit.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the trajectory of the absolute economic profit. The margin deteriorated from -0.85% in 2018 to -6.60% in 2020, marking the point of lowest capital efficiency. Since 2020, the margin has steadily improved, rising to -5.69% in 2021 and reaching -3.23% by the end of 2022. While the margin remains negative, the upward trend suggests an increasing ability to cover the cost of capital relative to sales volume.