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:
- 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 financial data reveals several notable trends over the five-year period from 2016 through 2020 regarding profitability, capital costs, invested capital, and economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows an overall increasing trend with some fluctuations. It increased from $2,399 million in 2016 to $2,464 million in 2017, then dropped significantly to $1,883 million in 2018. Following this dip, NOPAT recovered in 2019 to $2,321 million and further increased to $2,602 million in 2020, reaching the highest value in the observed period. This suggests a recovery and strengthening in operational profitability after the downturn seen in 2018.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating mildly between 8.59% and 8.88%. The highest cost of capital was observed in 2019 at 8.88%, and the lowest in 2020 at 8.59%. This small variation indicates stability in the company's capital cost environment across the years, with a slight decreasing trend towards the end of the period.
- Invested Capital
- Invested capital experienced some variation but generally showed an upward trend by the end of the period. Initially, it increased slightly from $11,778 million in 2016 to $11,929 million in 2017, then decreased to $11,239 million in 2018. It modestly rose again in 2019 to $11,405 million and saw a more pronounced increase in 2020, reaching $12,877 million, the highest in the data set. This suggests increased capital investment or asset base expansion, particularly in the final year.
- Economic Profit
- Economic profit, which accounts for the cost of capital, followed a trend similar to NOPAT but with marked fluctuations. It grew from $1,363 million in 2016 to $1,434 million in 2017, then declined substantially to $904 million in 2018. A rebound occurred in 2019, with economic profit rising to $1,309 million and increasing further to $1,496 million in 2020, indicating improved value creation by the company. The level of economic profit suggests efficient management of capital despite the variations in invested capital and cost of capital charges.
In summary, the company experienced a noticeable dip in both profitability and economic profit in 2018, followed by gradual recovery and growth through 2020. The cost of capital was relatively stable, and invested capital showed a general upward trajectory, especially in the last year, likely supporting the recovery and growth in economic profit and NOPAT. These patterns indicate a resilient financial performance with effective capital management over the examined period.
Net Operating Profit after Taxes (NOPAT)
Kimberly-Clark Corp., NOPAT calculation
US$ 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.
- Economic Profit
- The economic profit exhibited fluctuations over the five-year period. It started at 1,363 million US dollars in 2016, increased to 1,434 million in 2017, declined significantly to 904 million in 2018, before recovering to 1,309 million in 2019 and further increasing to 1,496 million in 2020. This pattern indicates a temporary dip in 2018, followed by a robust recovery and growth in the subsequent years.
- Invested Capital
- The invested capital demonstrated minor volatility, beginning at 11,778 million US dollars in 2016 and slightly increasing to 11,929 million in 2017. It then decreased to 11,239 million in 2018 and slightly rebounded to 11,405 million in 2019. In 2020, the invested capital rose substantially to 12,877 million. Overall, this suggests a cautious approach to capital investment until 2019, followed by a notable increase in 2020.
- Economic Spread Ratio
- The economic spread ratio followed a similar trend to the economic profit. Starting at 11.57% in 2016, it increased to 12.02% in 2017, then dropped significantly to 8.04% in 2018. The ratio recovered to 11.48% in 2019 and slightly improved to 11.61% in 2020. This indicates a temporary reduction in profitability efficiency during 2018, with subsequent recovery to previously high levels.
- Overall Analysis
- The data reveals a notable dip in performance metrics during 2018 across economic profit and economic spread ratio, suggesting a challenging year impacting profitability despite a reduction in invested capital. The recovery in 2019 and further improvement in 2020 reflect a return to stronger economic performance and increased capital investment. The economic spread ratio's recovery indicates improving returns on invested capital. The significant increase in invested capital in 2020 may denote strategic growth or expansion initiatives following stabilization of profitability.
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 over the five-year horizon reveals several key trends and fluctuations in economic profit, net sales, and economic profit margin.
- Economic Profit
- The economic profit exhibits variability throughout the period. Starting at 1,363 million USD in 2016, there is a moderate increase to 1,434 million USD in 2017. This is followed by a notable decline to 904 million USD in 2018, indicating a challenging year with reduced profitability. Subsequently, the economic profit recovers, rising to 1,309 million USD in 2019 and further to 1,496 million USD in 2020, surpassing all previous years within the range. This suggests a strong rebound and improvement in value creation during the latter years.
- Net Sales
- Net sales remain relatively stable from 2016 through 2019, fluctuating narrowly within the 18,200 to 18,500 million USD range. Specifically, net sales show a marginal increase from 18,202 million USD in 2016 to 18,259 million USD in 2017, then a slight rise to 18,486 million USD in 2018, followed by a small decrease to 18,450 million USD in 2019. In 2020, net sales increase more noticeably to 19,140 million USD, representing a positive growth trajectory in the most recent year examined.
- Economic Profit Margin
- The economic profit margin follows a pattern broadly similar to that of economic profit, illustrating fluctuations in profitability relative to sales. Beginning at 7.49% in 2016, it slightly improves to 7.86% in 2017 and then experiences a significant drop to 4.89% in 2018, reflecting lower earnings efficiency. Subsequently, the margin recovers to 7.09% in 2019 and almost returns to its prior peak at 7.81% in 2020. This cyclical behavior indicates sensitivity to operational or market factors affecting profit generation efficiency amid relatively stable sales.
Overall, the period is characterized by a relatively stable sales base with a dip in profitability and margin during 2018, followed by a strong recovery in 2019 and 2020. This indicates that while revenue generation remained consistent, profitability experienced temporal challenges but improved substantially towards the end of the considered timeframe.