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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Marathon Petroleum Corp. pages available for free this week:
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2011
- Return on Equity (ROE) since 2011
- Price to Book Value (P/BV) since 2011
- Aggregate Accruals
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Economic Profit
Marathon Petroleum Corp., economic profit calculation
US$ in millions
| 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 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The period under review demonstrates significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) experienced substantial volatility, beginning with a positive value in 2019, followed by a large negative value in 2020, recovery in 2021 and 2022, and a decline in 2023. Concurrently, the cost of capital exhibited an increasing trend throughout the period, while invested capital generally decreased from 2019 to 2021 before showing a slight increase in 2022 and then decreasing again in 2023.
- Economic Profit Trend
- Economic profit was negative in 2019, 2020, and 2021, indicating that returns did not exceed the cost of capital. The largest negative economic profit occurred in 2020, coinciding with the negative NOPAT. A positive economic profit was achieved in 2022, but this was not sustained, as economic profit turned negative again in 2023, albeit to a lesser extent than in the earlier negative years.
- NOPAT Analysis
- NOPAT decreased substantially in 2020, resulting in a significant loss. The subsequent recovery in 2021 and strong performance in 2022 suggest a rebound in operational efficiency or market conditions. However, the decline in NOPAT in 2023 contributed to the return of negative economic profit.
- Cost of Capital Impact
- The cost of capital increased steadily from 13.39% in 2019 to 17.58% in 2023. This increasing cost of capital placed greater pressure on generating sufficient returns to achieve positive economic profit. The higher cost of capital in later years likely contributed to the negative economic profit observed in 2021 and 2023, despite improvements in NOPAT in 2021 and 2022.
- Invested Capital Observations
- Invested capital decreased from 2019 through 2021, potentially reflecting divestitures, reduced capital expenditures, or asset impairments. The slight increase in 2022 may indicate renewed investment, but this was followed by a further decrease in 2023. The relationship between changes in invested capital and economic profit is complex, but the decreasing trend in invested capital did not fully offset the increasing cost of capital and NOPAT volatility.
Overall, the period was characterized by instability in economic profit, driven by fluctuations in NOPAT and a rising cost of capital. While a period of positive economic profit was achieved in 2022, it was not sustained, highlighting the challenges in consistently generating returns exceeding the cost of capital.
Net Operating Profit after Taxes (NOPAT)
Marathon Petroleum Corp., NOPAT calculation
US$ in millions
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 doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring reserve.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to MPC.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2023 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income (loss) attributable to MPC.
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The analyzed financial data reveals significant fluctuations in key profitability indicators over the five-year period ending December 31, 2023.
- Net Income (Loss) Attributable to MPC
- Net income exhibited pronounced volatility. The figure fell from a positive $2,637 million in 2019 to a substantial loss of $9,826 million in 2020, indicating a severe downturn, likely driven by adverse market or operational factors during that year. Recovery occurred in 2021 with net income rising sharply to $9,738 million, surpassing the 2019 level. This upward momentum continued into 2022, reaching a peak of $14,516 million, followed by a decline in 2023 to $9,681 million. Overall, the net income reflected substantial cyclical variation, with a drastic loss followed by strong recovery and subsequent moderation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored the pattern shown by net income, experiencing a significant negative shift in 2020 where it dropped to -$10,978 million from $6,182 million in 2019. The following years saw a robust recovery with NOPAT increasing to $6,187 million in 2021, nearly returning to the 2019 level, and then peaking at $17,951 million in 2022, which notably exceeded prior peaks in both net income and NOPAT. In 2023, NOPAT decreased to $10,783 million, indicating a moderation but remaining well above pre-2020 levels.
These trends suggest that the company was affected by a significant adverse event or market condition in 2020 leading to large losses and negative operating profit. However, the subsequent two years showed a robust rebound and profitability expansion beyond pre-2020 figures, implying possible operational improvements or favorable market conditions. The slight decline in both net income and NOPAT in 2023 could indicate some normalization or emerging challenges following exceptional performance in 2022.
Cash Operating Taxes
Marathon Petroleum Corp., cash operating taxes calculation
US$ in millions
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).
- Income Tax Provision (Benefit)
- The income tax provision experienced significant volatility over the analyzed period. It started with a positive provision of 1,074 million USD at the end of 2019, followed by a substantial tax benefit of -2,430 million USD in 2020, indicating a reversal or tax credit situation. In 2021, the provision reverted to a modest positive value of 264 million USD. A notable increase occurred in 2022, reaching 4,491 million USD, before declining to 2,817 million USD at the end of 2023. This pattern suggests considerable fluctuations in taxable income or tax planning strategies leading to large swings in tax expense provisions.
- Cash Operating Taxes
- Cash operating taxes mirrored the overall trend of the income tax provision but with more pronounced changes. The 2019 figure stood at 324 million USD, then sharply decreased to a cash inflow (negative tax payment) of -1,899 million USD in 2020, reflecting adjustments or refunds. In 2021, cash taxes surged to 705 million USD, climbed dramatically to 4,421 million USD in 2022—the peak value in the period—and subsequently dropped to 3,010 million USD in 2023. These fluctuations align with variations in operational profitability and tax settlement timings, indicating an erratic but generally increasing cash tax burden post-2020.
Invested Capital
Marathon Petroleum Corp., invested capital calculation (financing approach)
US$ in millions
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 LIFO reserve. See details »
5 Addition of restructuring reserve.
6 Addition of equity equivalents to total MPC stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of short-term investments.
The financial data reveals several key trends in the capital structure and investment base over the five-year period ending in 2023.
- Total reported debt & leases
- The total reported debt and leases experienced some fluctuations. Initially, it increased from 31,317 million USD in 2019 to a peak of 33,095 million USD in 2020. This was followed by a notable decline in 2021 to 26,904 million USD. Subsequently, a moderate rise occurred over the next two years, reaching 28,501 million USD in 2023. Overall, the debt levels show some volatility but remained below the 2019 level by the end of 2023.
- Total MPC stockholders’ equity
- Stockholders’ equity showed a declining trend over the period. Starting at 33,694 million USD in 2019, equity sharply decreased to 22,199 million USD in 2020. Although it buoyantly recovered to 26,206 million USD in 2021 and further increased to 27,715 million USD in 2022, equity declined again to 24,404 million USD in 2023. Despite recovery attempts, equity in 2023 remained significantly below the 2019 level, indicating possible challenges affecting retained earnings or other components of equity.
- Invested capital
- The invested capital consistently trended downward from 82,004 million USD in 2019 to 63,897 million USD in 2023, with intermediate fluctuations. It dropped to 70,186 million USD in 2020 and further to 63,579 million USD in 2021. A recovery occurred in 2022, reaching 69,547 million USD, followed by a decline again to 63,897 million USD in 2023. This pattern suggests variability in capital investment levels or changes in capital employed over the timeframe.
In summary, the data indicates that the company experienced a general reduction in invested capital and equity levels over the five years, paired with fluctuating debt levels that ultimately ended slightly below the initial value. The changes in equity and invested capital might reflect operational or strategic adjustments impacting the capital structure.
Cost of Capital
Marathon Petroleum 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: 2023-12-31).
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: 2022-12-31).
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: 2021-12-31).
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: 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 »
Economic Spread Ratio
Marathon Petroleum Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited significant fluctuations between 2019 and 2023. Initially negative, the ratio demonstrated a substantial decline in 2020 before recovering to positive territory in 2022, followed by a return to negative values in 2023. This volatility suggests a dynamic relationship between economic profit and invested capital.
- Economic Spread Ratio
- In 2019, the economic spread ratio was -5.85%. This indicates that the return generated on invested capital was below the cost of that capital. A dramatic decrease was observed in 2020, with the ratio falling to -29.12%, signifying a considerably larger shortfall between returns and the cost of capital. The ratio improved significantly in 2021 to -5.64%, suggesting some recovery in profitability relative to invested capital.
- A substantial positive shift occurred in 2022, with the economic spread ratio reaching 8.34%. This indicates that the company generated returns exceeding the cost of its invested capital during that year. However, this positive performance did not sustain, as the ratio decreased to -0.70% in 2023, indicating a near-breakeven situation between returns and the cost of capital.
The economic spread ratio’s movement closely mirrors the trends in economic profit. The largest negative economic profit in 2020 corresponded with the most negative economic spread ratio. While economic profit became positive in 2022, the magnitude of the profit was not sufficient to maintain a substantial positive economic spread ratio in the subsequent year.
- Invested Capital
- Invested capital decreased from US$82,004 million in 2019 to US$70,186 million in 2020, and continued to decline to US$63,579 million in 2021. A modest increase to US$69,547 million was seen in 2022, followed by a decrease to US$63,897 million in 2023. This suggests a period of capital reduction followed by a slight reinvestment, and then further reduction.
The interplay between the decreasing invested capital and fluctuating economic profit significantly influenced the economic spread ratio. The substantial decline in invested capital in 2020 and 2021, while not fully offsetting the large negative economic profit, contributed to a less negative economic spread ratio in 2021 compared to 2020. The return to a negative economic spread ratio in 2023, despite a decrease in invested capital from 2022, indicates that the decline in economic profit outweighed the impact of the capital reduction.
Economic Profit Margin
Marathon Petroleum Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales and other operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuations between 2019 and 2023. Initially negative, it experienced a substantial decline in 2020 before recovering and then declining again in the most recent period. This analysis details the observed trends in economic profit and its relationship to sales and other operating revenues.
- Economic Profit Margin Trend
- In 2019, the economic profit margin stood at -3.87%. This indicates that the company’s economic profit was 3.87% of sales and other operating revenues. A dramatic decrease was observed in 2020, with the margin falling to -29.29%, representing a significant erosion in economic profitability. The margin improved considerably in 2021, reaching -2.99%, suggesting a partial recovery in economic performance. Further improvement occurred in 2022, with the margin turning positive at 3.27%, indicating the company generated economic profit equivalent to 3.27% of sales. However, this positive trend reversed in 2023, as the economic profit margin declined to -0.30%, signaling a return to economic loss, albeit a smaller loss than observed in 2019 and 2020.
- Relationship to Sales and Revenues
- Sales and other operating revenues decreased substantially in 2020, from US$123,949 million in 2019 to US$69,779 million. This decline likely contributed to the significant deterioration in the economic profit margin during that year. Revenues rebounded strongly in 2021 and 2022, reaching US$119,983 million and US$177,453 million respectively. The 2022 revenue increase coincided with the positive economic profit margin. A decrease in sales to US$148,379 million in 2023, coupled with a negative economic profit of US$-450 million, resulted in a negative economic profit margin for the period.
- Economic Profit
- Economic profit itself was negative in 2019, 2020, and 2023. The largest negative economic profit occurred in 2020, at US$-20,439 million. A substantial improvement was seen in 2022, with a positive economic profit of US$5,802 million. However, economic profit turned negative again in 2023, reaching US$-450 million. The fluctuations in economic profit directly correlate with the changes in the economic profit margin, demonstrating the impact of profitability on the overall economic performance.
The observed volatility in both economic profit and the economic profit margin suggests sensitivity to external factors or internal operational changes. The shift from negative to positive economic profit in 2022, and the subsequent return to negative territory in 2023, warrants further investigation to understand the underlying drivers of these changes.