Economic Value Added (EVA)
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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:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) 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 data reveals several notable trends in the financial performance and capital efficiency over the analyzed five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT demonstrates an overall growing trend from 2016 through 2020, increasing from $2,399 million to $2,602 million. Despite a dip in 2018 to $1,883 million, the profit rebounded strongly in subsequent years, reaching its highest level in 2020. This indicates the company has generally improved its operational profitability.
- Cost of Capital
- The cost of capital remains relatively stable over the period, fluctuating slightly within a narrow range of 8.6% to 8.88%. This consistency suggests that the risk profile and financing costs for the company have remained fairly steady without significant external volatility.
- Invested Capital
- Invested capital shows modest variability, starting at $11,778 million in 2016, peaking near $12,000 million in 2017, declining to a low of $11,239 million in 2018, and then rising again to $12,877 million by 2020. The increase in the last year suggests renewed investment or expansion activities.
- Economic Profit
- Economic profit, which accounts for the cost of capital, generally follows the direction of NOPAT but with more pronounced fluctuations. After a peak of $1,434 million in 2017, it dipped notably to $903 million in 2018, then demonstrated a recovery to $1,495 million in 2020. The upward trend towards the end of the period indicates improving value creation beyond the cost of capital.
In summary, the company shows resilience and progressive growth in operational profitability and value creation despite some setbacks in 2018. Invested capital has increased moderately, supported by stable financing costs, contributing to stronger economic profit in the latest year.
Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ 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.
- Economic Profit
- Economic profit experienced fluctuations over the five-year period. Starting from 1,362 million US dollars in 2016, it rose to 1,434 million in 2017, indicating growth. However, there was a notable decline to 903 million in 2018. The economic profit then recovered, reaching 1,308 million in 2019 and further increasing to 1,495 million in 2020, the highest value in the given period.
- Invested Capital
- The invested capital showed relatively stable figures from 2016 to 2019, fluctuating slightly between 11,239 and 11,929 million US dollars. In 2020, there was a significant increase to 12,877 million US dollars, indicating additional investments or capital allocation in that year.
- Economic Spread Ratio
- The economic spread ratio, expressed as a percentage, demonstrated a pattern similar to economic profit. Initially, it grew from 11.56% in 2016 to 12.02% in 2017. This was followed by a decrease to 8.04% in 2018, reflecting a contraction in economic profitability. The ratio then improved to 11.47% in 2019 and slightly increased to 11.61% in 2020, reflecting stabilization and recovery in economic performance.
- Overall Analysis
- Over the five-year span, the company showed resilience by rebounding from a dip in 2018 in both economic profit and economic spread ratio. The increase in invested capital in the final year suggests strategic investments which might support future growth. The economic spread ratio, despite fluctuations, remained mostly above 8%, indicating the company managed to generate returns exceeding its cost of capital throughout the period, with a marked improvement towards the end.
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 financial data reveals several important trends over the five-year period ending December 31, 2020. Net sales remained relatively stable, showing only a modest increase overall, moving from approximately 18.2 billion to 19.1 billion US dollars. This indicates a stable revenue base with limited growth.
Economic profit experienced fluctuations, initially increasing from 1.36 billion to 1.43 billion US dollars between 2016 and 2017, then declining to 903 million in 2018. A recovery is observed in the following years, with economic profit rising to 1.31 billion in 2019 and further to 1.50 billion in 2020, surpassing earlier levels.
The economic profit margin mirrors these fluctuations closely. Starting at 7.48% in 2016, it increased slightly in 2017, then dropped substantially in 2018 to 4.89%, indicating reduced profitability relative to sales that year. The margin rebounded to 7.09% in 2019 and nearly returned to previous highs at 7.81% in 2020.
- Net Sales
- Relatively flat with slight growth over the period, signaling stable market demand and revenue consistency.
- Economic Profit
- Demonstrated volatility, with a notable dip in 2018 followed by a strong recovery, reflecting changes in operational efficiency or cost structures impacting value creation.
- Economic Profit Margin
- Shows a similar pattern to economic profit, emphasizing profitability fluctuations as a percentage of net sales, with a marked decrease in 2018 and full recovery by 2020.
Overall, the company maintained stable sales volumes while experiencing cyclical variations in profitability, likely related to internal or external factors affecting cost efficiency and value generation. The recovery in economic profit and margin after 2018 suggests successful corrective measures or favorable market conditions in the later years.