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 – 17.76% × 21,926 = -2,626
Analysis of the financial data from 2018 to 2022 reveals a persistent state of negative economic profit, indicating that the company did not generate sufficient net operating profit after taxes (NOPAT) to cover its cost of capital during this period. While there were significant fluctuations in operating profitability, the overall result remained a destruction of economic value.
- Net Operating Profit After Taxes (NOPAT)
- A substantial growth trajectory is observed in NOPAT, which rose from 444 million USD in 2018 to a peak of 1,678 million USD in 2021. This represents a significant increase in operating efficiency or revenue growth during that interval. However, a contraction occurred in 2022, with NOPAT declining to 1,268 million USD, although this figure remained considerably higher than the levels recorded between 2018 and 2020.
- Cost of Capital and Invested Capital
- The cost of capital exhibited a steady upward trend, increasing every year from 16.55% in 2018 to 17.76% by 2022. Concurrently, invested capital grew from 20,458 million USD in 2018 to 21,926 million USD in 2022. The simultaneous rise in both the capital base and the percentage cost of that capital effectively increased the financial hurdle required to achieve positive economic profit.
- Economic Profit Trends
- Economic profit remained negative throughout the entire five-year sequence. The deficit was most pronounced in 2018 at -2,941 million USD. A notable improvement occurred in 2021, where the economic loss narrowed to -2,055 million USD, directly correlating with the peak in NOPAT. However, this recovery was not sustained, as the economic profit declined again to -2,626 million USD in 2022, driven by the combination of lower NOPAT and a higher cost of capital.
In summary, the data indicates that while operational profitability improved significantly by 2021, the scale of invested capital and the rising cost of capital continued to outweigh the operating gains, preventing the company from achieving a positive economic value added status.
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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 | × | 22.11% | = | 16.94% | ||
| 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 | 17.76% | ||||||||||
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 | × | 22.11% | = | 17.12% | ||
| 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 | 17.57% | ||||||||||
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 | × | 22.11% | = | 16.22% | ||
| 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 | 16.81% | ||||||||||
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 | × | 22.11% | = | 15.89% | ||
| 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 | 16.62% | ||||||||||
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 | × | 22.11% | = | 15.68% | ||
| 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 | 16.55% | ||||||||||
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 | (2,626) | (2,055) | (2,832) | (2,928) | (2,941) | |
| Invested capital2 | 21,926) | 21,241) | 21,108) | 20,313) | 20,458) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -11.98% | -9.68% | -13.41% | -14.41% | -14.38% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 5.70% | 5.06% | — | — | — | |
| Amgen Inc. | 6.98% | 6.97% | — | — | — | |
| Bristol-Myers Squibb Co. | -0.98% | 1.29% | — | — | — | |
| Danaher Corp. | -6.54% | -5.71% | — | — | — | |
| Eli Lilly & Co. | 8.76% | 10.42% | — | — | — | |
| Gilead Sciences Inc. | -0.06% | 6.94% | — | — | — | |
| Johnson & Johnson | 5.53% | 10.59% | — | — | — | |
| Merck & Co. Inc. | 11.50% | 11.65% | — | — | — | |
| Pfizer Inc. | 18.17% | 11.33% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 19.04% | 62.79% | — | — | — | |
| Thermo Fisher Scientific Inc. | -6.88% | -4.86% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 14.11% | 15.32% | — | — | — | |
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 × -2,626 ÷ 21,926 = -11.98%
4 Click competitor name to see calculations.
An analysis of the five-year period ending December 31, 2022, reveals a consistent inability to generate positive economic value. The entity has operated with a persistent negative economic profit, indicating that the returns generated on invested capital have remained below the weighted average cost of capital throughout the observed timeframe.
- Economic Profit Performance
- Economic profit remained negative from 2018 through 2022. A gradual improvement was observed between 2018 and 2021, with the deficit narrowing from -2,941 million USD to a peak of -2,055 million USD. However, this positive trajectory was reversed in 2022, as economic profit declined again to -2,626 million USD, erasing a significant portion of the previous gains.
- Invested Capital Trends
- Invested capital demonstrates a general upward trend, expanding from 20,458 million USD in 2018 to 21,926 million USD by the end of 2022. Aside from a marginal decrease in 2019, the capital base has grown steadily, suggesting continued investment in the business despite the negative economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative across the entire period, reflecting a structural gap between the return on invested capital and the cost of capital. The ratio reached its lowest point in 2019 at -14.41%. A recovery phase followed, with the ratio improving to -9.68% in 2021. Similar to the economic profit trend, 2022 saw a deterioration in this metric, with the spread widening to -11.98%.
In summary, while there was a notable improvement in economic efficiency leading up to 2021, the subsequent downturn in 2022 indicates a lack of stability in achieving a positive economic spread. The simultaneous increase in invested capital and the return to a wider negative spread in the final year suggests that capital expansions have not yet translated into economic value creation.
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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 | (2,626) | (2,055) | (2,832) | (2,928) | (2,941) | |
| 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 | -18.26% | -14.23% | -24.42% | -26.39% | -28.19% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 8.06% | 8.64% | — | — | — | |
| Amgen Inc. | 11.18% | 11.55% | — | — | — | |
| Bristol-Myers Squibb Co. | -1.53% | 2.24% | — | — | — | |
| Danaher Corp. | -16.24% | -14.27% | — | — | — | |
| Eli Lilly & Co. | 7.46% | 9.61% | — | — | — | |
| Gilead Sciences Inc. | -0.10% | 12.28% | — | — | — | |
| Johnson & Johnson | 6.63% | 11.08% | — | — | — | |
| Merck & Co. Inc. | 14.34% | 16.91% | — | — | — | |
| Pfizer Inc. | 19.89% | 12.10% | — | — | — | |
| Regeneron Pharmaceuticals Inc. | 19.17% | 42.46% | — | — | — | |
| Thermo Fisher Scientific Inc. | -12.68% | -9.89% | — | — | — | |
| Vertex Pharmaceuticals Inc. | 20.82% | 18.98% | — | — | — | |
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 × -2,626 ÷ 14,382 = -18.26%
3 Click competitor name to see calculations.
The financial performance regarding economic value added from 2018 to 2022 is characterized by persistent negative economic profit, indicating that the entity's net operating profit after taxes did not exceed its cost of capital during this timeframe. Despite the consistent negative values, a trend of margin improvement occurred between 2018 and 2021, followed by a moderate regression in 2022.
- Economic Profit Trends
- Economic profit remained negative throughout the observed period, beginning at -2,941 million USD in 2018. A gradual reduction in economic loss was observed through 2021, where the deficit narrowed to -2,055 million USD, before widening again to -2,626 million USD in 2022. This pattern demonstrates a struggle to achieve a positive spread over the required return on capital.
- Adjusted Revenue Trajectory
- Adjusted revenues exhibited a general upward trajectory, increasing from 10,434 million USD in 2018 to a peak of 14,447 million USD in 2021. This growth in the scale of operations served as a primary driver in narrowing the negative economic profit margin during the middle of the analyzed period, although revenues plateaued in 2022 at 14,382 million USD.
- Economic Profit Margin Dynamics
- The economic profit margin showed a steady corrective trend from 2018 (-28.19%) to 2021 (-14.23%), suggesting an improvement in capital efficiency relative to revenue generation. However, this progress was partially reversed in 2022, as the margin deteriorated to -18.26%, coinciding with the stagnation of revenues and the increase in the economic profit deficit.
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