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
Kimberly-Clark Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,602 – 9.87% × 12,877 = 1,332
The analysis of economic value added between 2016 and 2020 reveals a consistent ability to generate economic profit, although the performance was marked by a significant contraction in 2018 followed by a steady recovery.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility during the period, starting at 2,399 million US$ in 2016 and peaking at 2,602 million US$ by 2020. A notable decline occurred in 2018, where profit dropped to 1,883 million US$, representing the lowest point in the five-year sequence. However, a strong recovery trend followed, with growth resuming in 2019 and accelerating into 2020.
- Cost of Capital
- The cost of capital remained remarkably stable, fluctuating within a narrow range between 9.87% and 10.20%. This stability suggests a consistent risk profile and a steady cost of funding throughout the analyzed timeframe, providing a predictable baseline for calculating economic value.
- Invested Capital
- Invested capital remained relatively stable from 2016 to 2019, hovering between 11,239 million US$ and 11,929 million US$. A significant increase is observed in 2020, where invested capital rose to 12,877 million US$, indicating a substantial expansion of the capital base in the final year of the period.
- Economic Profit Trends
- Economic profit followed the trajectory of NOPAT, maintaining positive values across all years. The profit declined from 1,281 million US$ in 2017 to 758 million US$ in 2018, coinciding with the dip in operating profit. Subsequent growth led to a period high of 1,332 million US$ in 2020. The fact that economic profit reached its peak in 2020, despite a simultaneous increase in invested capital, indicates that the growth in NOPAT more than offset the increased capital charge.
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Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
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 restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Kimberly-Clark Corporation.
6 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 556 × 3.55% = 20
7 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 272 × 21.00% = 57
8 Addition of after taxes interest expense to net income attributable to Kimberly-Clark Corporation.
9 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8 × 21.00% = 2
10 Elimination of after taxes investment income.
The financial performance between 2016 and 2020 is characterized by a period of relative stability, a significant contraction in 2018, and a subsequent recovery that led to peak profitability in 2020. Both net income and net operating profit after taxes (NOPAT) exhibit a synchronized trend, indicating that operational fluctuations were the primary drivers of the bottom-line results.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT demonstrated a moderate increase from US$ 2,399 million in 2016 to US$ 2,464 million in 2017. This was followed by a notable decline to US$ 1,883 million in 2018, representing a sharp dip in operational profitability. However, the metric rebounded strongly in the following years, increasing to US$ 2,321 million in 2019 and reaching a five-year peak of US$ 2,602 million by December 31, 2020.
- Net Income Trajectory
- Net income attributable to the corporation mirrored the NOPAT trend but experienced higher volatility. After rising from US$ 2,166 million in 2016 to US$ 2,278 million in 2017, it fell sharply to US$ 1,410 million in 2018, a more pronounced decrease than that seen in operational profit. The recovery was robust, with net income climbing to US$ 2,157 million in 2019 and peaking at US$ 2,352 million in 2020.
- Comparative Analysis of Operational vs. Net Profitability
- NOPAT remained consistently higher than net income across the entire five-year period. This persistent variance indicates that the company's core operations generate more value than what is captured in the final net income, reflecting the impact of non-operating items, such as interest expenses and other financing costs. The synchronized recovery of both metrics suggests that the improvement in the company's economic value added was driven primarily by a restoration of core operational efficiency.
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Cash Operating Taxes
Kimberly-Clark Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
An analysis of the tax expenditures from 2016 to 2020 reveals a distinct U-shaped trajectory in both the provision for income taxes and actual cash operating taxes. After a period of significant decline reaching a trough in 2018, both metrics experienced a steady recovery through 2020.
- Cash Operating Tax Trends
- Cash operating taxes exhibited a sharp downward trend in the first three years of the period, falling from 1,053 million US dollars in 2016 to 526 million US dollars in 2018, representing a total reduction of approximately 50%. This decline was followed by a two-year period of growth, with expenditures rising to 604 million US dollars in 2019 and further increasing to 686 million US dollars by the end of 2020.
- Correlation Between Provision and Cash Payments
- There is a high degree of positive correlation between the provision for income taxes and cash operating taxes. The provision for income taxes followed a nearly identical pattern, decreasing from 922 million US dollars in 2016 to 471 million US dollars in 2018, before climbing back to 676 million US dollars in 2020. This synchronization suggests that the factors driving the accounting tax expense were closely aligned with the actual cash outflows for taxes during this period.
- Convergence of Tax Metrics
- A notable trend is the narrowing variance between the provision for income taxes and the cash operating taxes paid. In 2016, cash taxes exceeded the provision by 131 million US dollars. By 2020, this gap had reduced significantly to 10 million US dollars. This convergence indicates a tightening alignment between the company's estimated tax liabilities and its actual cash settlements over the five-year window.
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Invested Capital
Kimberly-Clark Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
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 restructuring liabilities.
6 Addition of equity equivalents to total Kimberly-Clark Corporation stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
Invested capital exhibited relative stability between 2016 and 2019, followed by a notable increase in 2020. The total invested capital fluctuated within a narrow range of approximately US$11.2 billion to US$11.9 billion for the first four years of the period before rising to US$12.877 billion by the end of 2020.
- Total Reported Debt and Leases
- Debt levels remained consistent from 2016 through 2018, hovering around US$8 billion. A gradual upward trend began in 2019, culminating in a significant increase to US$8.920 billion in 2020. This indicates an expansion of leverage toward the end of the observed period.
- Stockholders' Equity
- Equity positions demonstrated extreme volatility, fluctuating between negative and positive values. Deficits were recorded in 2016, 2018, and 2019, while positive equity was reported in 2017 and 2020. This pattern suggests a capital structure characterized by aggressive returns to shareholders or significant treasury stock activity that periodically offset retained earnings.
- Invested Capital Components and Trends
- The growth in invested capital in 2020 was driven by a simultaneous increase in both reported debt and a return to positive stockholders' equity. While the capital base decreased slightly in 2018 to its period low of US$11.239 billion, the subsequent recovery and surge in 2020 represent a substantial expansion of the resources employed in the business operations.
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Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,694) | 44,694) | ÷ | 55,100) | = | 0.81 | 0.81 | × | 11.56% | = | 9.38% | ||
| Debt3 | 9,850) | 9,850) | ÷ | 55,100) | = | 0.18 | 0.18 | × | 3.27% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 556) | 556) | ÷ | 55,100) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 55,100) | 1.00 | 9.87% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,472) | 49,472) | ÷ | 58,528) | = | 0.85 | 0.85 | × | 11.56% | = | 9.77% | ||
| Debt3 | 8,652) | 8,652) | ÷ | 58,528) | = | 0.15 | 0.15 | × | 3.47% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 404) | 404) | ÷ | 58,528) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 58,528) | 1.00 | 10.20% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,045) | 39,045) | ÷ | 47,223) | = | 0.83 | 0.83 | × | 11.56% | = | 9.56% | ||
| Debt3 | 7,687) | 7,687) | ÷ | 47,223) | = | 0.16 | 0.16 | × | 3.28% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 491) | 491) | ÷ | 47,223) | = | 0.01 | 0.01 | × | 3.28% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 47,223) | 1.00 | 10.01% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,170) | 39,170) | ÷ | 47,663) | = | 0.82 | 0.82 | × | 11.56% | = | 9.50% | ||
| Debt3 | 7,945) | 7,945) | ÷ | 47,663) | = | 0.17 | 0.17 | × | 3.64% × (1 – 35.00%) | = | 0.39% | ||
| Operating lease liability4 | 548) | 548) | ÷ | 47,663) | = | 0.01 | 0.01 | × | 3.64% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 47,663) | 1.00 | 9.92% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,797) | 43,797) | ÷ | 52,387) | = | 0.84 | 0.84 | × | 11.56% | = | 9.66% | ||
| Debt3 | 8,056) | 8,056) | ÷ | 52,387) | = | 0.15 | 0.15 | × | 4.16% × (1 – 35.00%) | = | 0.42% | ||
| Operating lease liability4 | 534) | 534) | ÷ | 52,387) | = | 0.01 | 0.01 | × | 4.16% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 52,387) | 1.00 | 10.11% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kimberly-Clark Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,332) | 1,158) | 758) | 1,281) | 1,208) | |
| Invested capital2 | 12,877) | 11,405) | 11,239) | 11,929) | 11,778) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 10.34% | 10.15% | 6.74% | 10.74% | 10.26% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,332 ÷ 12,877 = 10.34%
4 Click competitor name to see calculations.
The financial performance from 2016 to 2020 is characterized by a general stability in economic value creation, interrupted by a significant contraction in 2018 followed by a robust recovery. The economic spread ratio, which measures the excess return over the cost of capital, remained consistently positive throughout the period, indicating that the organization successfully generated value above its required return.
- Economic Spread Ratio Volatility
- The economic spread ratio began at 10.26% in 2016 and peaked at 10.74% in 2017. A sharp decline occurred in 2018, where the ratio fell to 6.74%, representing the lowest point of efficiency in capital utilization during the five-year period. However, a strong recovery followed, with the ratio returning to 10.15% in 2019 and further improving to 10.34% by 2020.
- Economic Profit Trends
- Economic profit followed a trajectory closely aligned with the spread ratio. After an initial increase to 1,281 million US$ in 2017, there was a substantial decrease to 758 million US$ in 2018. This downward movement was reversed in the subsequent two years, with profit rising to 1,158 million US$ in 2019 and reaching a period high of 1,332 million US$ in 2020.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2016 and 2019, fluctuating within a narrow range between 11,239 million US$ and 11,929 million US$. A notable expansion occurred in 2020, with invested capital increasing to 12,877 million US$. Despite this increase in the capital base, the economic spread ratio maintained its upward trajectory, suggesting that the additional capital was deployed effectively to drive higher economic profit.
The correlation between economic profit and the spread ratio suggests that the 2018 decline was primarily driven by a reduction in earnings rather than an expansion of the capital base, as invested capital actually decreased during that year. The subsequent recovery and the 2020 results indicate an improved ability to scale value creation alongside an expanding capital investment.
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Economic Profit Margin
Kimberly-Clark Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,332) | 1,158) | 758) | 1,281) | 1,208) | |
| Net sales | 19,140) | 18,450) | 18,486) | 18,259) | 18,202) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 6.96% | 6.28% | 4.10% | 7.01% | 6.64% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Economic profit. See details »
2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,332 ÷ 19,140 = 6.96%
3 Click competitor name to see calculations.
The analysis of economic value added between 2016 and 2020 reveals a period of volatility in economic profit despite relatively stable and growing net sales. While net sales exhibited a consistent upward trend, economic profit experienced a significant contraction in 2018 before recovering to a five-year peak by the end of 2020.
- Net Sales Performance
- Net sales demonstrated steady growth, rising from 18,202 million USD in 2016 to 19,140 million USD in 2020. The growth was generally consistent, with only a marginal decrease observed between 2018 and 2019, indicating a stable revenue base throughout the analyzed period.
- Economic Profit Volatility
- Economic profit showed significant fluctuations, starting at 1,208 million USD in 2016 and peaking at 1,332 million USD in 2020. A notable decline occurred in 2018, where profit dropped to 758 million USD, representing a substantial deviation from the surrounding years before returning to growth in 2019 and 2020.
- Economic Profit Margin Trends
- The economic profit margin closely mirrored the volatility of the absolute economic profit. The margin increased from 6.64% in 2016 to 7.01% in 2017, followed by a sharp contraction to 4.10% in 2018. This decline occurred despite an increase in net sales for that year, suggesting that the cost of capital or operating expenses disproportionately affected value creation during that period. A strong recovery followed, with the margin climbing to 6.28% in 2019 and reaching 6.96% in 2020, effectively restoring the margin to levels seen in 2017.
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