Stock Analysis on Net

Linde plc (NASDAQ:LIN)

Economic Value Added (EVA)

Microsoft Excel

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
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net operating profit after taxes (NOPAT)1 6,386 3,833 3,800 2,699 2,416
Cost of capital2 11.99% 11.85% 11.76% 11.46% 11.45%
Invested capital3 73,409 72,341 72,560 78,771 78,533
 
Economic profit4 (2,413) (4,736) (4,731) (6,326) (6,579)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 6,38611.99% × 73,409 = -2,413

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 economic profit decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Net Operating Profit after Taxes (NOPAT)

Linde plc, NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income, Linde plc 6,199 4,147 3,826 2,501 2,285
Deferred income tax expense (benefit)1 (84) (383) (254) (368) (303)
Increase (decrease) in allowance for expected credit losses2 52 (66) 165 194
Increase (decrease) in cost reduction programs3 (106) (133) 84 169 200
Increase (decrease) in equity equivalents4 (138) (516) (236) (34) 91
Interest expense 397 180 117 170 150
Interest expense, operating lease liability5 31 24 24 26 29
Adjusted interest expense 428 204 141 196 179
Tax benefit of interest expense6 (90) (43) (30) (41) (38)
Adjusted interest expense, after taxes7 338 161 112 155 141
Interest income (197) (117) (40) (55) (112)
Investment income, before taxes (197) (117) (40) (55) (112)
Tax expense (benefit) of investment income8 41 25 8 12 24
Investment income, after taxes9 (156) (92) (32) (43) (88)
(Income) loss from discontinued operations, net of tax10 (5) (4) (109)
Net income (loss) attributable to noncontrolling interest 142 134 135 125 96
Net operating profit after taxes (NOPAT) 6,386 3,833 3,800 2,699 2,416

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for expected credit losses.

3 Addition of increase (decrease) in cost reduction programs.

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

5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 749 × 4.19% = 31

6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 428 × 21.00% = 90

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

8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 197 × 21.00% = 41

9 Elimination of after taxes investment income.

10 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 NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Cash Operating Taxes

Linde plc, cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Provision for income taxes 1,814 1,434 1,262 847 769
Less: Deferred income tax expense (benefit) (84) (383) (254) (368) (303)
Add: Tax savings from interest expense 90 43 30 41 38
Less: Tax imposed on investment income 41 25 8 12 24
Cash operating taxes 1,947 1,835 1,537 1,245 1,086

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Invested Capital

Linde plc, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Short-term debt 4,713 4,117 1,163 3,251 1,732
Current portion of long-term debt 1,263 1,599 1,709 751 1,531
Current finance lease liabilities 50 42 47 38
Long-term debt, excluding current portion 13,397 12,198 11,335 12,152 10,693
Long-term finance lease liabilities 143 114 129 125
Operating lease liability1 749 721 833 906 976
Total reported debt & leases 20,315 18,791 15,216 17,223 14,932
Total Linde plc shareholders’ equity 39,720 40,028 44,035 47,317 49,074
Net deferred tax (assets) liabilities2 5,523 5,656 5,997 6,436 6,646
Allowance for expected credit losses3 457 405 405 471 306
Cost reduction programs4 214 320 453 369 200
Equity equivalents5 6,194 6,381 6,855 7,276 7,152
Accumulated other comprehensive (income) loss, net of tax6 5,805 5,782 5,048 4,690 4,814
Redeemable noncontrolling interests 13 13 13 13 113
Noncontrolling interests 1,362 1,346 1,393 2,252 2,448
Adjusted total Linde plc shareholders’ equity 53,094 53,550 57,344 61,548 63,601
Invested capital 73,409 72,341 72,560 78,771 78,533

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 cost reduction programs.

5 Addition of equity equivalents to total Linde plc shareholders’ equity.

6 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 invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Cost of Capital

Linde plc, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 217,287 217,287 ÷ 236,279 = 0.92 0.92 × 12.85% = 11.81%
Debt and finance lease liabilities3 18,243 18,243 ÷ 236,279 = 0.08 0.08 × 2.67% × (1 – 21.00%) = 0.16%
Operating lease liability4 749 749 ÷ 236,279 = 0.00 0.00 × 4.19% × (1 – 21.00%) = 0.01%
Total: 236,279 1.00 11.99%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 171,454 171,454 ÷ 188,442 = 0.91 0.91 × 12.85% = 11.69%
Debt and finance lease liabilities3 16,267 16,267 ÷ 188,442 = 0.09 0.09 × 2.18% × (1 – 21.00%) = 0.15%
Operating lease liability4 721 721 ÷ 188,442 = 0.00 0.00 × 3.26% × (1 – 21.00%) = 0.01%
Total: 188,442 1.00 11.85%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 148,891 148,891 ÷ 164,282 = 0.91 0.91 × 12.85% = 11.64%
Debt and finance lease liabilities3 14,558 14,558 ÷ 164,282 = 0.09 0.09 × 1.48% × (1 – 21.00%) = 0.10%
Operating lease liability4 833 833 ÷ 164,282 = 0.01 0.01 × 2.91% × (1 – 21.00%) = 0.01%
Total: 164,282 1.00 11.76%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 131,488 131,488 ÷ 149,419 = 0.88 0.88 × 12.85% = 11.30%
Debt and finance lease liabilities3 17,025 17,025 ÷ 149,419 = 0.11 0.11 × 1.55% × (1 – 21.00%) = 0.14%
Operating lease liability4 906 906 ÷ 149,419 = 0.01 0.01 × 2.83% × (1 – 21.00%) = 0.01%
Total: 149,419 1.00 11.46%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 105,606 105,606 ÷ 120,689 = 0.88 0.88 × 12.85% = 11.24%
Debt and finance lease liabilities3 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 11.45%

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Linde plc, economic spread ratio calculation

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit1 (2,413) (4,736) (4,731) (6,326) (6,579)
Invested capital2 73,409 72,341 72,560 78,771 78,533
Performance Ratio
Economic spread ratio3 -3.29% -6.55% -6.52% -8.03% -8.38%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,413 ÷ 73,409 = -3.29%

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 economic spread ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

Economic Profit Margin

Linde plc, economic profit margin calculation

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit1 (2,413) (4,736) (4,731) (6,326) (6,579)
Sales 32,854 33,364 30,793 27,243 28,228
Performance Ratio
Economic profit margin2 -7.35% -14.20% -15.36% -23.22% -23.31%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × -2,413 ÷ 32,854 = -7.35%

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company 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 economic profit margin improved from 2021 to 2022 and from 2022 to 2023.