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:
- Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Present Value of Free Cash Flow to Equity (FCFE)
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
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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 value added indicates that the organization failed to generate a positive economic profit between 2018 and 2022, suggesting that the net operating profit after taxes was consistently insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a V-shaped trend over the period. A significant decline occurred from US$ 591.65 million in 2018 to a low of US$ 403.27 million in 2020. Following this trough, a recovery phase was observed, with NOPAT rising to US$ 597.80 million by the end of 2022, effectively returning to and slightly exceeding 2018 levels.
- Cost of Capital
- A consistent upward trajectory is observed in the cost of capital, which rose every year from 14.87% in 2018 to 16.71% in 2022. This steady increase raised the minimum required return on invested capital, thereby increasing the pressure on operating profitability to create economic value.
- Invested Capital
- Invested capital remained relatively stable from 2018 through 2021, fluctuating within a narrow range between US$ 4.20 billion and US$ 4.33 billion. However, a notable increase occurred in 2022, with invested capital rising to US$ 4.50 billion, indicating an expansion of the asset base used to generate profits.
- Economic Profit Trajectory
- Economic profit remained negative throughout the entire analyzed period, confirming continuous value destruction. The deficit deepened significantly from -US$ 33.72 million in 2018 to a peak loss of -US$ 271.21 million in 2020. While the economic loss narrowed in 2021 and 2022, ending at -US$ 154.93 million, the company has yet to reach the break-even point where NOPAT exceeds the capital charge.
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.
An analysis of the economic value added metrics from 2018 to 2022 reveals a consistent period of negative economic profit, indicating that the return on invested capital did not exceed the company's cost of capital during this timeframe. While a significant deterioration occurred between 2018 and 2020, a trend toward recovery is evident in the subsequent two years.
- Economic Profit Trends
- Economic profit remained negative throughout the entire five-year period. The deficit expanded rapidly from -33,719 thousand US dollars in 2018 to a peak loss of -271,207 thousand US dollars in 2020. Following this trough, the negative value moderated to -232,501 thousand US dollars in 2021 and further improved to -154,933 thousand US dollars by December 31, 2022.
- Invested Capital Stability
- The capital base remained relatively stable between 2018 and 2021, fluctuating within a narrow range between 4,206,535 thousand and 4,325,800 thousand US dollars. A notable increase in invested capital occurred in 2022, where the figure rose to 4,504,100 thousand US dollars, representing the highest capital allocation in the observed period.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects the divergence between the actual return on capital and the required rate of return. The ratio declined sharply from -0.80% in 2018 to -6.27% in 2020, signaling a widening gap in value destruction. Since 2020, the ratio has steadily improved, moving to -5.41% in 2021 and -3.44% in 2022, suggesting a gradual alignment toward a positive economic spread.
The convergence of the economic spread ratio and the reduction in negative economic profit since 2020 suggests an improvement in operational efficiency or a reduction in the relative cost of capital, despite the overall increase in invested capital 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 financial performance from 2018 to 2022 indicates a period of negative economic value added, as the company consistently failed to generate returns exceeding its cost of capital. A significant deterioration in economic efficiency occurred between 2018 and 2020, followed by a phased recovery through 2022.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed period. The deficit expanded from -33,719 thousand US dollars in 2018 to a peak loss of -271,207 thousand US dollars in 2020. A recovery trend began in 2021 and continued into 2022, with the economic profit deficit narrowing to -154,933 thousand US dollars.
- Adjusted Net Sales Analysis
- Revenue exhibited fluctuations, with a slight increase in 2019 to 4,594,300 thousand US dollars, followed by a decline to approximately 4,181,000 thousand US dollars by 2021. A sharp rebound occurred in 2022, where adjusted net sales reached a period high of 4,977,000 thousand US dollars, suggesting that the improvement in economic profit was supported by strong top-line growth.
- Economic Profit Margin Performance
- The economic profit margin mirrors the trajectory of the absolute economic profit, sliding from -0.75% in 2018 to a low of -6.48% in 2020. The margin subsequently improved to -5.56% in 2021 and further to -3.11% in 2022. While this indicates a recovery in the relationship between sales and economic profit, the margin remained negative, confirming that the company did not achieve a positive economic return relative to its sales during this timeframe.