Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Linde plc (NYSE:LIN)

Economic Value Added (EVA)

Advanced level

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

Linde plc, economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1 2,216  4,257  1,441  1,676  1,801 
Cost of capital2 8.36% 8.18% 7.88% 7.54% 7.38%
Invested capital3 78,333  85,089  21,265  21,200  20,302 
 
Economic profit4 (4,331) (2,707) (235) 79  303 

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,2168.36% × 78,333 = -4,331

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Linde plc’s economic profit decreased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Linde plc, NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income, Linde plc 2,285  4,381  1,247  1,500  1,547 
Deferred income tax expense (benefit)1 (303) (186) (13) 99 
Increase (decrease) in allowance for doubtful accounts2 194  (25) 17  20  (1)
Increase (decrease) in equity equivalents3 (109) (211) 20  98 
Interest expense 150  282  202  190  161 
Interest expense, operating lease liability4 29  26  13  12  11 
Adjusted interest expense 179  308  215  202  172 
Tax benefit of interest expense5 (38) (65) (75) (71) (60)
Adjusted interest expense, after taxes6 141  243  140  131  112 
Interest income (112) (80) (41) —  — 
Investment income, before taxes (112) (80) (41) —  — 
Tax expense (benefit) of investment income7 24  17  14  —  — 
Investment income, after taxes8 (88) (63) (27) —  — 
(Income) loss from discontinued operations, net of tax9 (109) (117) —  —  — 
Net income (loss) attributable to noncontrolling interest 96  24  61  38  44 
Net operating profit after taxes (NOPAT) 2,216  4,257  1,441  1,676  1,801 

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in equity equivalents to net income, Linde plc.

4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 976 × 2.97% = 29

5 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 179 × 21.00% = 38

6 Addition of after taxes interest expense to net income, Linde plc.

7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 112 × 21.00% = 24

8 Elimination of after taxes investment income.

9 Elimination of discontinued operations.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Linde plc’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Cash Operating Taxes

Linde plc, cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Provision for income taxes 769  817  1,026  551  612 
Less: Deferred income tax expense (benefit) (303) (186) (13) 99 
Add: Tax savings from interest expense 38  65  75  71  60 
Less: Tax imposed on investment income 24  17  14  —  — 
Cash operating taxes 1,086  1,051  1,084  635  573 

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Linde plc’s cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Invested Capital

Linde plc, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Short-term debt 1,732  1,485  238  434  250 
Current portion of long-term debt 1,531  1,523  979  164 
Long-term debt, excluding current portion 10,693  12,288  7,783  8,917  8,975 
Operating lease liability1 976  1,206  538  488  442 
Total reported debt & leases 14,932  16,502  9,538  10,003  9,673 
Total Linde plc shareholders’ equity 49,074  51,596  6,018  5,021  4,389 
Net deferred tax (assets) liabilities2 6,646  6,922  969  1,024  1,026 
Allowance for doubtful accounts3 306  113  138  121  101 
Equity equivalents4 6,952  7,035  1,107  1,145  1,127 
Accumulated other comprehensive (income) loss, net of tax5 4,814  4,456  4,098  4,600  4,596 
Redeemable noncontrolling interests 113  16  11  11  113 
Noncontrolling interests 2,448  5,484  493  420  404 
Adjusted total Linde plc shareholders’ equity 63,401  68,587  11,727  11,197  10,629 
Invested capital 78,333  85,089  21,265  21,200  20,302 

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

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 equity equivalents to total Linde plc shareholders’ equity.

5 Removal of accumulated other comprehensive income.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Linde plc’s invested capital increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Cost of Capital

Linde plc, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 105,606  105,606  ÷ 120,689  = 0.88 0.88 × 9.31% = 8.14%
Debt3 14,107  14,107  ÷ 120,689  = 0.12 0.12 × 2.11% × (1 – 21.00%) = 0.19%
Operating lease liability4 976  976  ÷ 120,689  = 0.01 0.01 × 2.97% × (1 – 21.00%) = 0.02%
Total: 120,689  1.00 8.36%

Based on: 10-K (filing date: 2020-03-02).

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 95,114  95,114  ÷ 111,530  = 0.85 0.85 × 9.31% = 7.94%
Debt3 15,210  15,210  ÷ 111,530  = 0.14 0.14 × 2.12% × (1 – 21.00%) = 0.23%
Operating lease liability4 1,206  1,206  ÷ 111,530  = 0.01 0.01 × 2.12% × (1 – 21.00%) = 0.02%
Total: 111,530  1.00 8.18%

Based on: 10-K (filing date: 2019-03-18).

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 42,999  42,999  ÷ 52,744  = 0.82 0.82 × 9.31% = 7.59%
Debt3 9,207  9,207  ÷ 52,744  = 0.17 0.17 × 2.46% × (1 – 35.00%) = 0.28%
Operating lease liability4 538  538  ÷ 52,744  = 0.01 0.01 × 2.46% × (1 – 35.00%) = 0.02%
Total: 52,744  1.00 7.88%

Based on: 10-K (filing date: 2018-02-28).

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 34,311  34,311  ÷ 44,451  = 0.77 0.77 × 9.31% = 7.18%
Debt3 9,652  9,652  ÷ 44,451  = 0.22 0.22 × 2.37% × (1 – 35.00%) = 0.33%
Operating lease liability4 488  488  ÷ 44,451  = 0.01 0.01 × 2.37% × (1 – 35.00%) = 0.02%
Total: 44,451  1.00 7.54%

Based on: 10-K (filing date: 2017-03-01).

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 29,022  29,022  ÷ 38,783  = 0.75 0.75 × 9.31% = 6.96%
Debt3 9,319  9,319  ÷ 38,783  = 0.24 0.24 × 2.53% × (1 – 35.00%) = 0.40%
Operating lease liability4 442  442  ÷ 38,783  = 0.01 0.01 × 2.53% × (1 – 35.00%) = 0.02%
Total: 38,783  1.00 7.38%

Based on: 10-K (filing date: 2016-02-24).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Linde plc, economic spread ratio calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (4,331) (2,707) (235) 79  303 
Invested capital2 78,333  85,089  21,265  21,200  20,302 
Performance Ratio
Economic spread ratio3 -5.53% -3.18% -1.11% 0.37% 1.49%
Benchmarks
Economic Spread Ratio, Competitors4
Air Products & Chemicals Inc. 1.59% -1.30% -1.91% 1.50% 0.57%
Ecolab Inc. 0.57% 1.00% -0.67% -0.75% -2.81%

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -4,331 ÷ 78,333 = -5.53%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Linde plc’s economic spread ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Economic Profit Margin

Linde plc, economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1 (4,331) (2,707) (235) 79  303 
Sales 28,228  14,900  11,437  10,534  10,776 
Performance Ratio
Economic profit margin2 -15.34% -18.17% -2.06% 0.75% 2.81%
Benchmarks
Economic Profit Margin, Competitors3
Air Products & Chemicals Inc. 3.01% -2.43% -3.66% 2.39% 0.82%
Ecolab Inc. 0.69% 1.21% -0.84% -0.93% -3.31%

Based on: 10-K (filing date: 2020-03-02), 10-K (filing date: 2019-03-18), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-24).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × -4,331 ÷ 28,228 = -15.34%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Linde plc’s economic profit margin deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.