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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- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2005
- Price to Book Value (P/BV) 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 the financial data over the five-year period reveals several notable trends and insights regarding the company's operational efficiency and capital management.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values have shown fluctuation throughout the period. Starting at approximately 591.7 million USD in 2018, there was a decline in the next two years, reaching a low of around 403.3 million USD in 2020. Subsequently, NOPAT improved in 2021 and notably increased in 2022 to approximately 597.8 million USD, reaching a level that slightly exceeds the initial figure in 2018. This suggests a recovery and improvement in operational profitability in the most recent year.
- Cost of Capital
- The cost of capital has generally risen each year, starting at 12.81% in 2018 and increasing steadily to 14.34% by 2022. This upward trend indicates a higher expected return requirement by investors or increased risk perception associated with the company’s capital funding over time.
- Invested Capital
- Invested capital showed a modest increase from about 4.21 billion USD in 2018 to approximately 4.5 billion USD in 2022. The changes were relatively stable with slight fluctuations, but the overall trend reflects gradual growth in capital investment over the period, possibly indicating ongoing asset acquisitions or reinvestments to support the company’s operations.
- Economic Profit
- The economic profit metric, reflecting the net value created beyond the cost of capital, presents a contrasting story to NOPAT. While economic profit was positive in 2018 at roughly 52.7 million USD, it turned negative in 2019 and remained so through 2022. The largest negative economic profit occurred in 2020 at about -176.7 million USD, followed by a partial improvement but still negative values in subsequent years, with the least negative point in 2022 at approximately -48.2 million USD. This consistent negative economic profit despite the NOPAT recovery signals that the returns generated were insufficient to cover the increasing cost of capital, indicating challenges in value creation relative to capital employed.
In summary, the company's operating profit recovered strongly in the latest year following a period of decline. However, the rising cost of capital and steadily increasing invested capital have resulted in sustained negative economic profit throughout most of the period. This suggests that while operational performance improved, the company has not yet achieved value creation beyond its capital costs, highlighting a potential area for financial strategy review and operational efficiency improvements.
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.
- Economic Profit
- The economic profit exhibited significant volatility over the observed period. It started with a positive figure of 52,749 thousand US dollars at the end of 2018. However, this was followed by a marked decline, turning negative in 2019 with a loss of 89,813 thousand US dollars. This downward trend intensified in 2020, reaching a peak loss of 176,702 thousand US dollars. While losses decreased somewhat in 2021 and 2022, the values remained negative at 135,158 and 48,169 thousand US dollars respectively, indicating persistent challenges in generating economic profit during these years.
- Invested Capital
- Invested capital showed a generally increasing trend throughout the period. Starting at 4,206,535 thousand US dollars in 2018, the figure slightly increased to 4,209,500 thousand in 2019. It continued to rise to 4,325,800 thousand in 2020, then slightly declined in 2021 to 4,298,100 thousand. By 2022, invested capital reached the highest value in the period, at 4,504,100 thousand US dollars. This indicates ongoing investment and capital deployment activities despite fluctuations in profitability.
- Economic Spread Ratio
- The economic spread ratio showed a downward trend, starting at a positive 1.25% in 2018 and turning negative from 2019 onward, indicating a decline in the return on invested capital relative to the cost of capital. The ratio worsened substantially to -2.13% in 2019 and further to -4.08% in 2020. Although it improved somewhat in 2021 and 2022, reaching -3.14% and -1.07% respectively, it remained below zero, suggesting the company was consistently not covering its cost of capital during these years.
- Summary of Trends and Insights
- Over the analyzed period, the company experienced a marked deterioration in economic profit, shifting from profitability in 2018 to sustained economic losses through to 2022. Despite increasing levels of invested capital, the returns generated failed to exceed costs, as evidenced by the persistently negative economic spread ratios from 2019 onwards. The gradual improvement in economic spread ratio and reduction in losses by 2022 may indicate early signs of recovery or better cost management, though economic profit remained negative. The data reflect operational and financial challenges impacting value creation, underscoring the need for strategic initiatives to enhance profitability and capital efficiency.
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.
- Adjusted Net Sales
- Over the observed period, adjusted net sales exhibited a fluctuating trend. Starting at approximately 4.5 billion US dollars at the end of 2018, sales increased slightly in 2019, then experienced a decline in 2020 and 2021, reaching a low near 4.18 billion US dollars. However, in 2022, there was a significant recovery, with sales rising sharply to nearly 5 billion US dollars, exceeding previous years and indicating a strong rebound.
- Economic Profit
- The economic profit shows a distinct downward trajectory initially, moving from a positive figure of over 52 million US dollars in 2018 to negative territory in all subsequent years. The losses peaked in 2020 at approximately -177 million US dollars. While there was some improvement in 2021 and 2022, the economic profit remained negative by the end of the period, with losses narrowing to around -48 million US dollars in 2022. This indicates ongoing challenges in achieving profitability despite fluctuations in sales.
- Economic Profit Margin
- The economic profit margin mirrors the pattern seen in economic profit, starting positive at around 1.17% in 2018, then sharply declining into negative percentages for the following years. The lowest margin was recorded in 2020 at about -4.22%. Although the margin improved somewhat in the subsequent years, reaching -0.97% by the end of 2022, it remained below zero throughout this timeframe. This suggests that despite the recovery in sales, the company struggled to generate returns exceeding its cost of capital.
- Overall Analysis
- The data indicates that while there was a notable recovery in adjusted net sales towards the end of the period, this did not translate into a positive economic profit or margin. The company faced considerable profitability challenges from 2019 to 2022, with losses peaking in 2020 and gradually lessening thereafter. The persistent negative economic profit margins suggest ongoing operational or cost-related difficulties, which may require strategic focus to enhance profitability despite growing sales.