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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Kimberly-Clark Corp. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Economic Profit
Kimberly-Clark Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) exhibited initial growth followed by a decline and subsequent recovery. The cost of capital remained relatively stable, while invested capital showed an overall increasing trend. These factors combined to produce varying levels of economic profit throughout the analyzed timeframe.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$2,399 million in 2016 to US$2,464 million in 2017, representing a modest gain. A significant decrease was then observed in 2018, with NOPAT falling to US$1,883 million. The following year, 2019, saw a partial recovery to US$2,321 million, and further growth occurred in 2020, reaching US$2,602 million. This indicates a cyclical pattern with a notable dip in 2018.
- Cost of Capital
- The cost of capital remained consistently between 8.72% and 9.01% throughout the period. It began at 8.92% in 2016, decreased slightly to 8.76% in 2017, increased to 8.84% in 2018 and 9.01% in 2019, before decreasing again to 8.72% in 2020. These fluctuations were relatively minor and did not appear to have a substantial impact on economic profit.
- Invested Capital
- Invested capital generally increased over the five-year period. It rose from US$11,778 million in 2016 to US$11,929 million in 2017. A slight decrease occurred in 2018 to US$11,239 million, followed by increases in 2019 (US$11,405 million) and a more substantial increase in 2020, reaching US$12,877 million. This suggests a growing capital base.
- Economic Profit
- Economic profit mirrored the trends in NOPAT, though with some moderation due to the cost of capital. It increased from US$1,348 million in 2016 to US$1,419 million in 2017. A decline was observed in 2018, falling to US$890 million. Economic profit then recovered to US$1,294 million in 2019 and continued to rise to US$1,480 million in 2020, reaching its highest point in the analyzed period. The largest absolute change occurred between 2018 and 2019.
Overall, the economic profit demonstrates a recovery from the low point in 2018, driven by increases in NOPAT and a stable cost of capital. The increasing invested capital base did not appear to hinder economic profit growth in the later years of the period.
Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ 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
= × =
7 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
10 Elimination of after taxes investment income.
The analysis of the annual financial data over the five-year period reveals several notable trends regarding the company's profitability metrics.
- Net Income Attributable to Kimberly-Clark Corporation (US$ in millions)
- Over the period from 2016 to 2020, net income shows some volatility with an overall upward trend. Net income started at 2,166 million USD in 2016, increased to 2,278 million USD in 2017, then experienced a significant decline in 2018 to 1,410 million USD. Following this decline, net income recovered considerably, reaching 2,157 million USD in 2019 and further increasing to 2,352 million USD in 2020. This pattern suggests a temporary setback in 2018, followed by a strong recovery and growth in the subsequent years.
- Net Operating Profit After Taxes (NOPAT) (US$ in millions)
- NOPAT exhibits a similar pattern to net income, indicating a correlation between operational efficiency and overall profitability. The values start at 2,399 million USD in 2016, rise slightly in 2017 to 2,464 million USD, then decline sharply in 2018 to 1,883 million USD. From 2018 onwards, NOPAT increased steadily to 2,321 million USD in 2019 and 2,602 million USD in 2020, surpassing the initial levels reported at the start of the period. This trend shows an initial operational challenge in 2018, followed by a robust performance improvement.
Overall, the data indicates that the company faced a period of decreased profitability in 2018, reflected in both net income and NOPAT, likely due to operational or market challenges. However, the subsequent years demonstrated effective recovery strategies and strong financial performance, with profitability exceeding prior peak levels by 2020. The close alignment between net income and NOPAT trends suggests that operational improvements directly influenced the bottom line.
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).
- Provision for income taxes
- The provision for income taxes shows a downward trend from 2016 to 2018, declining from 922 million US dollars to 471 million US dollars. This is followed by an increase in the subsequent years, rising to 576 million US dollars in 2019 and further to 676 million US dollars in 2020. Overall, the provision decreased initially but then experienced a moderate recovery, ending lower in 2020 than the initial 2016 figure.
- Cash operating taxes
- Cash operating taxes exhibit a similar trend to the provision for income taxes, starting at 1,053 million US dollars in 2016 and declining steadily to 526 million US dollars in 2018. From 2018 onward, cash operating taxes increased each year, reaching 604 million US dollars in 2019 and 686 million US dollars in 2020. Although the amounts increased after 2018, the 2020 value remained below the initial 2016 level.
- Overall tax-related trends
- Both provision for income taxes and cash operating taxes show a clear pattern of decline during the period 2016 to 2018, followed by a partial rebound from 2019 to 2020. The recovery phase, however, does not fully restore the tax figures to their peak 2016 levels. This pattern may suggest changes in taxable income, tax planning strategies, or other tax-related factors impacting the reported amounts over time.
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.
- Debt Levels
- The total reported debt and leases demonstrate relative stability from 2016 through 2019, fluctuating between approximately $7.9 billion and $8.1 billion. There is a notable increase in 2020, where the debt rises to $8.92 billion, indicating an increased leverage or possibly additional financing taken during that year.
- Stockholders' Equity
- Stockholders’ equity shows considerable volatility over the five-year period. The figures reveal negative values in most years, with a drastic decline in 2017 reaching -$287 million. A recovery trend appears afterward with values improving to -$33 million in 2019 and then increasing sharply to $626 million in 2020, suggesting a significant improvement in net assets or changes in accounting treatment or capital structure.
- Invested Capital
- Invested capital remains relatively consistent between 2016 and 2019, ranging from $11.2 billion to $11.9 billion. In 2020, there is a marked increase to $12.88 billion, which corresponds with the rise in total debt and equity changes, indicating increased total resources committed to the business. This growth in invested capital may reflect expansion efforts or new investments.
- Overall Trends and Insights
- The data suggest that while debt levels remained steady initially, the company took on more debt in 2020. The stockholders’ equity, although negative for much of the period, shows signs of improvement in the last year, which could reflect enhanced profitability, asset revaluation, or capital restructuring. The rise in invested capital alongside debt and equity changes implies an overall expansion in the financial base of the company during 2020. These trends point to a possible strategic shift or response to external conditions impacting capital structure and financing.
Cost of Capital
Kimberly-Clark Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| 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 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates fluctuating, yet generally positive, economic performance. Economic profit exhibited an initial increase followed by a decline and subsequent recovery. Invested capital generally increased over the period, with a notable jump in the final year. The economic spread ratio, a key indicator of value creation, showed variability but remained largely positive.
- Economic Profit
- Economic profit increased from US$1,348 million in 2016 to US$1,419 million in 2017, representing a growth of approximately 5.2%. A subsequent decrease was observed in 2018, with economic profit falling to US$890 million. The figure then recovered to US$1,294 million in 2019 and further increased to US$1,480 million in 2020, exceeding the 2017 peak.
- Invested Capital
- Invested capital experienced a modest increase from US$11,778 million in 2016 to US$11,929 million in 2017. A decrease was noted in 2018, with invested capital reaching US$11,239 million. It then rose to US$11,405 million in 2019 before a more substantial increase to US$12,877 million in 2020. This final year increase suggests a significant reinvestment or acquisition activity.
- Economic Spread Ratio
- The economic spread ratio began at 11.44% in 2016 and increased to 11.90% in 2017, indicating improved efficiency in generating returns on invested capital. A substantial decline occurred in 2018, with the ratio falling to 7.92%. The ratio then rebounded to 11.35% in 2019 and further increased to 11.49% in 2020, returning to levels comparable to the initial period. The fluctuations in this ratio closely mirror the changes in economic profit, suggesting a strong correlation between profitability and the efficiency of capital utilization.
Overall, the organization demonstrated an ability to generate economic profit despite fluctuations. The increase in invested capital in 2020, coupled with a maintained economic spread ratio, suggests that recent investments are contributing positively to value creation.
Economic Profit Margin
Kimberly-Clark Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| 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 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited fluctuations over the five-year period, while net sales demonstrated a generally increasing trend. The economic profit margin, calculated as economic profit divided by net sales, reveals the proportion of each sales dollar contributing to economic profit. Analysis of this margin provides insight into the company’s efficiency in generating returns above its cost of capital.
- Economic Profit
- Economic profit increased from US$1,348 million in 2016 to US$1,419 million in 2017, representing a growth of approximately 5.2%. A subsequent decline was observed in 2018, with economic profit falling to US$890 million. It then recovered to US$1,294 million in 2019 and further increased to US$1,480 million in 2020, reaching its highest point in the observed period.
- Net Sales
- Net sales remained relatively stable between 2016 and 2019, fluctuating around the US$18 billion mark. A noticeable increase occurred in 2020, with net sales reaching US$19,140 million, representing a growth of approximately 3.7% compared to the previous year. This suggests a potential expansion in market share or increased demand for the company’s products.
- Economic Profit Margin
- The economic profit margin peaked at 7.77% in 2017, coinciding with the increase in economic profit. A significant decrease to 4.81% was recorded in 2018, attributable to the substantial decline in economic profit despite a slight increase in net sales. The margin partially recovered to 7.02% in 2019, and then increased to 7.73% in 2020, mirroring the rise in economic profit and net sales. The margin in 2020 matched its highest level observed during the period, indicating improved profitability relative to sales.
The fluctuations in economic profit margin suggest a sensitivity to changes in both profitability and sales volume. While net sales generally trended upward, the economic profit margin’s performance was more heavily influenced by the variations in economic profit itself. The strong performance in 2017 and 2020, as indicated by the higher margins, suggests periods of efficient capital allocation and strong returns on investment.