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 Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Earnings (P/E) since 2005
- Analysis of Debt
- Aggregate Accruals
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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 financial data over the period from 2016 to 2020 reveals several noteworthy trends in the company's profitability and capital efficiency.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT experienced fluctuations across the five-year span. Beginning at 2,399 million USD in 2016, it slightly increased to 2,464 million USD in 2017. However, 2018 saw a notable decline to 1,883 million USD, followed by a recovery to 2,321 million USD in 2019 and further growth to 2,602 million USD in 2020. Overall, the NOPAT in 2020 surpassed the initial level in 2016, indicating a positive recovery trend after 2018.
- Cost of Capital
- The cost of capital remained relatively stable throughout the years, fluctuating within a narrow range between 8.57% and 8.86%. This stability suggests consistent capital market conditions or company risk profile during the period under review.
- Invested Capital
- Invested capital showed some variability with a slight decrease from 11,778 million USD in 2016 to 11,239 million USD in 2018. It then increased gradually reaching 12,877 million USD in 2020. The growth in invested capital in the latter years may indicate expansions, acquisitions, or reinvestments into the business.
- Economic Profit
- The economic profit, which measures value creation over the cost of capital, mirrored the trend seen in NOPAT. Starting at 1,365 million USD in 2016, it increased to 1,437 million USD in 2017, then dropped significantly to 906 million USD in 2018. It rebounded to 1,311 million USD in 2019 and reached its highest point in the series at 1,498 million USD in 2020. This pattern suggests that despite the dip in 2018, the company managed to enhance its value creation substantially by the end of the period.
In summary, the company faced a challenging year in 2018 with declines in profitability and economic profit; however, subsequent years show a clear recovery and growth. The stable cost of capital paired with rising invested capital and improved economic profit by 2020 indicates effective capital management and enhanced operational performance over the long term.
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 financial data reveals several noteworthy trends over the five-year period from 2016 to 2020.
- Economic Profit
-
The economic profit fluctuated throughout the period. It increased from $1,365 million in 2016 to $1,437 million in 2017, then experienced a significant decline to $906 million in 2018. Following this dip, the economic profit recovered strongly, rising to $1,311 million in 2019 and further increasing to $1,498 million in 2020, reaching its highest level in the observed timeframe. This suggests a period of volatility but overall growth in economic profit by the end of 2020.
- Invested Capital
-
Invested capital remained relatively stable from 2016 to 2019, with minor fluctuations around the 11,000 to 12,000 million dollar range. Specifically, it started at $11,778 million in 2016 and peaked slightly at $11,929 million in 2017 before declining to $11,239 million in 2018, and climbing back to $11,405 million in 2019. In 2020, invested capital increased more notably to $12,877 million. The increase in 2020 might be related to business expansion or additional investments, reflecting a strategic shift or capital allocation decision.
- Economic Spread Ratio
-
The economic spread ratio shows a pattern closely aligned with economic profit. It increased from 11.59% in 2016 to 12.04% in 2017, demonstrating effective utilization of invested capital to generate returns. The ratio then dropped sharply to 8.06% in 2018, paralleling the decline in economic profit. Subsequently, the ratio rebounded to 11.5% in 2019 and slightly improved to 11.63% in 2020. The recovery in the economic spread ratio indicates improved profitability and efficiency after 2018's downturn.
Overall, the data reflect a period of volatility around 2018, with a notable dip in both economic profit and spread ratio. However, the company demonstrated a strong recovery in the subsequent years, achieving higher economic profit levels and maintaining a healthy economic spread ratio. The increased invested capital in 2020 suggests a strategic investment that may support future growth. The alignment between economic profit and economic spread ratio trends indicates a consistent relationship between profitability and capital efficiency.
Economic Profit Margin
Kimberly-Clark Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
- Economic Profit
- The economic profit showed fluctuations over the observed period. It increased from $1,365 million at the end of 2016 to $1,437 million in 2017, indicating growth. However, there was a noticeable decline in 2018, with economic profit dropping to $906 million. This reduction suggests some challenges or increased costs during that year. Following this dip, economic profit rebounded in 2019 to $1,311 million and further improved to $1,498 million by the end of 2020, reflecting a recovery and strengthening profitability.
- Net Sales
- Net sales exhibited a generally stable yet upward trend across the five years. Starting at $18,202 million in 2016, sales increased marginally to $18,259 million in 2017 and continued to grow slightly to $18,486 million in 2018. A slight decline occurred in 2019 to $18,450 million, but this was followed by a more substantial increase to $19,140 million in 2020. Overall, the data indicates relatively consistent sales with gradual growth, particularly in the final year analyzed.
- Economic Profit Margin
- The economic profit margin mirrored the pattern of economic profit with some variability. It rose from 7.5% in 2016 to 7.87% in 2017, denoting improved operating efficiency or profitability relative to sales. A significant dip followed in 2018 to 4.9%, implying reduced profitability efficiency. The margin then recovered to 7.11% in 2019 and further to 7.83% in 2020, aligning closely with earlier higher levels and indicating restored profitability relative to sales.
- Summary Insights
- The data suggests that while net sales remained relatively steady with slight growth, profitability as reflected by economic profit and its margin experienced more pronounced fluctuations. The dip in both economic profit and margin in 2018 may indicate one-off challenges or cost pressures that temporarily compressed profitability. The subsequent recovery in 2019 and 2020 highlights the company’s ability to regain and enhance economic returns, emphasizing improved cost management or pricing strategies. Overall, the trends point to stable revenue generation with varying degrees of economic profitability influenced by internal or external factors during the period under review.