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
IQVIA Holdings Inc., economic profit calculation
US$ in millions
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
= 1,268 – 17.84% × 21,926 = -2,643
An analysis of the financial performance from 2018 to 2022 reveals a consistent trend of negative economic profit, indicating that the entity did not generate sufficient operating returns to cover its cost of capital during this period. While there was a notable improvement in operational profitability peaking in 2021, the magnitude of the invested capital and the rising cost of capital continued to result in the destruction of economic value.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility and an overall upward trajectory for the majority of the period. After remaining relatively stagnant between 2018 and 2019, NOPAT rose to 718 million USD in 2020 and peaked at 1,678 million USD in 2021. A subsequent decline to 1,268 million USD was observed in 2022, although this figure remained substantially higher than the levels recorded prior to 2021.
- Cost of Capital and Invested Capital
- The cost of capital demonstrated a steady and uninterrupted increase, rising from 16.62% in 2018 to 17.84% by 2022. Simultaneously, invested capital remained relatively stable with a slight upward trend, increasing from 20,458 million USD in 2018 to 21,926 million USD in 2022. The combination of a growing capital base and an increasing percentage cost of capital expanded the total capital charge required to achieve a positive economic profit.
- Economic Profit Trends
- Economic profit remained negative throughout the five-year window. The most significant reduction in economic loss occurred in 2021, where the deficit narrowed to -2,072 million USD, coinciding with the peak in NOPAT. However, this improvement was temporary; by 2022, the economic profit declined again to -2,643 million USD. The persistent gap between NOPAT and the capital charge suggests that the returns on invested capital have consistently fallen below the weighted average cost of capital.
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Net Operating Profit after Taxes (NOPAT)
IQVIA Holdings Inc., NOPAT calculation
US$ in millions
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 unearned income.
4 Addition of increase (decrease) in restructuring reserve.
5 Addition of increase (decrease) in equity equivalents to net income attributable to IQVIA Holdings Inc..
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 375 × 3.12% = 12
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 428 × 21.00% = 90
8 Addition of after taxes interest expense to net income attributable to IQVIA Holdings Inc..
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 13 × 21.00% = 3
10 Elimination of after taxes investment income.
- Net Income Attributable to IQVIA Holdings Inc.
- The net income exhibited a fluctuating trend over the reviewed period. Starting at 259 million US dollars in 2018, there was a decline to 191 million in 2019. This was followed by an increase to 279 million in 2020. The year 2021 marked a significant spike in net income, reaching 966 million, the highest during the period. In 2022, net income continued to rise, although at a slower pace, reaching 1,091 million US dollars.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a general upward trajectory with some variability. It started at 444 million US dollars in 2018 and remained relatively stable in 2019 with a marginal increase to 449 million. A more pronounced growth occurred in 2020, with NOPAT rising to 718 million. In 2021, the figure more than doubled compared to the previous year, reaching 1,678 million. However, in 2022, NOPAT decreased to 1,268 million, reflecting a contraction compared to 2021 but remaining significantly higher than the values before 2021.
- Overall Observations
- The data indicates that both net income and NOPAT experienced substantial growth particularly in 2021. However, while net income maintained an upward trend into 2022, NOPAT showed a decrease in the last year. This divergence may suggest changes in operational efficiency or tax impact in the most recent period. The significant increase in 2021 could be indicative of strong operational performance or other one-time factors contributing to profitability during that year.
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Cash Operating Taxes
IQVIA Holdings Inc., cash operating taxes calculation
US$ in millions
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 analysis of the income tax expense and cash operating taxes over the five-year period reveals a clear upward trend for both financial items.
- Income Tax Expense
- The income tax expense exhibited fluctuations in the initial years but showed a significant increase toward the end of the period. Starting at 59 million USD in 2018, the expense nearly doubled in 2019 to 116 million USD, then decreased to 72 million USD in 2020. However, there was a notable rise in subsequent years, reaching 163 million USD in 2021 and peaking at 260 million USD by the end of 2022. This pattern indicates increasing tax liabilities, especially in the last two years under review.
- Cash Operating Taxes
- Cash operating taxes also followed an upward trajectory, albeit with more stability year-over-year. From 340 million USD in 2018, the amount increased modestly to 356 million USD in 2019, followed by a slight dip to 334 million USD in 2020. Afterwards, there was a steady increase, with cash taxes rising to 390 million USD in 2021 and further climbing to 469 million USD in 2022. This steady growth highlights increasing cash tax payments, which may reflect higher taxable income or changes in tax legislation or business operations.
Overall, both the income tax expense and cash operating taxes have trended upward over the five-year span, with the largest increases occurring in the most recent years. This suggests a rising tax burden, which could impact net profitability and cash flows. The disparity between the income tax expense and cash operating taxes in absolute terms may also suggest timing differences or adjustments in deferred tax accounting.
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Invested Capital
IQVIA Holdings Inc., invested capital calculation (financing approach)
US$ in millions
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 unearned income.
5 Addition of restructuring reserve.
6 Addition of equity equivalents to equity attributable to IQVIA Holdings Inc.’s stockholders.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
- Total reported debt & leases
-
The total reported debt and leases show a general increasing trend over the observed period. Starting at 11,620 million US dollars at the end of 2018, the amount increased steadily, reaching 13,351 million US dollars by the end of 2022. Despite a slight decrease in 2021 compared to 2020, the overall trajectory indicates a rising debt and lease liability commitment.
- Equity attributable to IQVIA Holdings Inc.’s stockholders
-
Equity attributable to the company’s stockholders exhibits a declining pattern through the period. Beginning at 6,714 million US dollars in 2018, equity decreased to 6,003 million in 2019 and remained relatively flat through 2020 and 2021 around the 6,000 million mark. By the end of 2022, equity further dropped to 5,765 million dollars. This downward trend suggests a reduction in net assets available to shareholders over these years.
- Invested capital
-
Invested capital shows a modest but consistent upward trend from 20,458 million US dollars at the end of 2018 to 21,926 million US dollars by the end of 2022. This increase is gradual and steady, reflecting a growth in the total sources of funding, including both debt and equity, utilized by the company in its operations.
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Cost of Capital
IQVIA Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,165) | 42,165) | ÷ | 55,050) | = | 0.77 | 0.77 | × | 22.21% | = | 17.01% | ||
| Long-term debt and finance lease liabilities3 | 12,510) | 12,510) | ÷ | 55,050) | = | 0.23 | 0.23 | × | 4.48% × (1 – 21.00%) | = | 0.80% | ||
| Operating lease liability4 | 375) | 375) | ÷ | 55,050) | = | 0.01 | 0.01 | × | 3.12% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 55,050) | 1.00 | 17.84% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,227) | 44,227) | ÷ | 57,121) | = | 0.77 | 0.77 | × | 22.21% | = | 17.20% | ||
| Long-term debt and finance lease liabilities3 | 12,441) | 12,441) | ÷ | 57,121) | = | 0.22 | 0.22 | × | 2.50% × (1 – 21.00%) | = | 0.43% | ||
| Operating lease liability4 | 453) | 453) | ÷ | 57,121) | = | 0.01 | 0.01 | × | 3.36% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 57,121) | 1.00 | 17.65% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 36,852) | 36,852) | ÷ | 50,247) | = | 0.73 | 0.73 | × | 22.21% | = | 16.29% | ||
| Long-term debt and finance lease liabilities3 | 12,868) | 12,868) | ÷ | 50,247) | = | 0.26 | 0.26 | × | 2.79% × (1 – 21.00%) | = | 0.56% | ||
| Operating lease liability4 | 527) | 527) | ÷ | 50,247) | = | 0.01 | 0.01 | × | 3.78% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 50,247) | 1.00 | 16.89% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,817) | 31,817) | ÷ | 44,291) | = | 0.72 | 0.72 | × | 22.21% | = | 15.96% | ||
| Long-term debt and finance lease liabilities3 | 11,925) | 11,925) | ÷ | 44,291) | = | 0.27 | 0.27 | × | 3.28% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 549) | 549) | ÷ | 44,291) | = | 0.01 | 0.01 | × | 4.22% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 44,291) | 1.00 | 16.70% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,958) | 27,958) | ÷ | 39,421) | = | 0.71 | 0.71 | × | 22.21% | = | 15.75% | ||
| Long-term debt and finance lease liabilities3 | 10,850) | 10,850) | ÷ | 39,421) | = | 0.28 | 0.28 | × | 3.75% × (1 – 21.00%) | = | 0.82% | ||
| Operating lease liability4 | 613) | 613) | ÷ | 39,421) | = | 0.02 | 0.02 | × | 3.75% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 39,421) | 1.00 | 16.62% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
IQVIA Holdings 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 millions) | ||||||
| Economic profit1 | (2,643) | (2,072) | (2,847) | (2,942) | (2,955) | |
| Invested capital2 | 21,926) | 21,241) | 21,108) | 20,313) | 20,458) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -12.05% | -9.75% | -13.49% | -14.48% | -14.45% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 5.50% | 4.88% | — | — | — | |
| Amgen Inc. | 6.80% | 6.80% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.19% | 1.10% | — | — | — | |
| Danaher Corp. | -6.68% | -5.85% | — | — | — | |
| Eli Lilly & Co. | 8.53% | 10.20% | — | — | — | |
| Gilead Sciences Inc. | -0.26% | 6.76% | — | — | — | |
| Johnson & Johnson | 5.30% | 10.36% | — | — | — | |
| Merck & Co. Inc. | 11.26% | 11.43% | — | — | — | |
| Pfizer Inc. | 17.97% | 11.14% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 18.81% | 62.56% | — | — | — | |
| Thermo Fisher Scientific Inc. | -7.02% | -5.00% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 13.86% | 15.07% | — | — | — | |
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 × -2,643 ÷ 21,926 = -12.05%
4 Click competitor name to see calculations.
The financial analysis indicates a consistent failure to generate positive economic value added over the observed five-year period. The company has operated with a persistent negative economic profit and a negative economic spread ratio, signaling that the returns generated on invested capital have remained below the required cost of capital.
- Economic Profit Trends
- Economic profit remained negative throughout the period, reflecting a continuous destruction of shareholder value. A gradual trend of improvement was evident between 2018 and 2021, with losses narrowing from 2,955 million US$ to a peak of 2,072 million US$. However, this recovery was not sustained, as 2022 experienced a regression to a loss of 2,643 million US$.
- Invested Capital Growth
- Invested capital exhibited a general upward trajectory after a slight dip in 2019. From a low of 20,313 million US$ in 2019, the capital base expanded steadily to 21,926 million US$ by 2022. This increase in the capital base occurred while economic profit remained negative, suggesting that additional capital infusions have not yet translated into value-creating returns.
- Economic Spread Ratio Performance
- The economic spread ratio confirms the inability to cover the cost of capital. The ratio remained relatively stagnant between 2018 and 2019 at approximately -14.4%. A notable improvement occurred by 2021, when the ratio reached its highest point at -9.75%. This positive momentum was reversed in 2022, with the ratio declining to -12.05%, indicating a deterioration in the efficiency of capital utilization relative to its cost.
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Economic Profit Margin
IQVIA Holdings 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 millions) | ||||||
| Economic profit1 | (2,643) | (2,072) | (2,847) | (2,942) | (2,955) | |
| Revenues | 14,410) | 13,874) | 11,359) | 11,088) | 10,412) | |
| Add: Increase (decrease) in unearned income | (28) | 573) | 238) | 7) | 22) | |
| Adjusted revenues | 14,382) | 14,447) | 11,597) | 11,095) | 10,434) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -18.38% | -14.34% | -24.55% | -26.52% | -28.32% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 7.78% | 8.32% | — | — | — | |
| Amgen Inc. | 10.89% | 11.26% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.85% | 1.91% | — | — | — | |
| Danaher Corp. | -16.61% | -14.62% | — | — | — | |
| Eli Lilly & Co. | 7.26% | 9.40% | — | — | — | |
| Gilead Sciences Inc. | -0.45% | 11.96% | — | — | — | |
| Johnson & Johnson | 6.35% | 10.84% | — | — | — | |
| Merck & Co. Inc. | 14.04% | 16.59% | — | — | — | |
| Pfizer Inc. | 19.67% | 11.89% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 18.94% | 42.30% | — | — | — | |
| Thermo Fisher Scientific Inc. | -12.94% | -10.17% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 20.45% | 18.67% | — | — | — | |
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 revenues
= 100 × -2,643 ÷ 14,382 = -18.38%
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a consistent inability to generate positive economic value, as economic profit remained negative throughout the period. Despite this, there is a observable correlation between revenue expansion and a temporary improvement in economic efficiency.
- Revenue Growth Trends
- Adjusted revenues demonstrated a consistent upward trajectory, rising from US$ 10,434 million in 2018 to a peak of US$ 14,447 million in 2021. This growth indicates a significant expansion in operational scale, although a slight contraction occurred in 2022, with revenues settling at US$ 14,382 million.
- Economic Profit Performance
- Economic profit remained negative across all reporting years. A narrowing of losses was observed from 2018 through 2021, with the deficit decreasing from US$ 2,955 million to US$ 2,072 million. This trend of improvement was interrupted in 2022, when economic profit declined again to US$ 2,643 million, signaling a reversal in value creation progress.
- Economic Profit Margin Analysis
- The economic profit margin showed steady improvement from -28.32% in 2018 to -14.34% in 2021, suggesting that revenue growth was outpacing the cost of capital during this window. However, the margin deteriorated to -18.38% in 2022, reflecting a decline in the entity's ability to convert adjusted revenues into economic value.
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