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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2006
- Net Profit Margin since 2006
- Operating Profit Margin since 2006
- Current Ratio since 2006
- Total Asset Turnover since 2006
- Price to Book Value (P/BV) since 2006
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Economic Profit
Mastercard Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a generally upward trend from 2018 to 2022, starting at $5,750 million and increasing to $9,638 million. There was a notable dip in 2020, where NOPAT decreased to $6,937 million from $8,254 million in 2019, but the figure rebounded strongly in subsequent years.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating slightly between 15.31% and 15.52%. The consistency of the cost of capital suggests a stable risk profile and capital structure over these years.
- Invested Capital
- Invested capital showed a steady increase from 2018 until 2021, growing from $11,243 million to $22,365 million. However, in 2022, there was a marginal decline to $21,548 million, indicating a slight reduction in the assets deployed or capital investment at that time.
- Economic Profit
- Economic profit followed a pattern similar to NOPAT, with overall growth from $4,008 million in 2018 to $6,316 million in 2022. A decrease was observed in 2020, dropping to $3,897 million, but economic profit recovered robustly thereafter, reaching a peak of $6,316 million in the latest period.
- Overall Trends and Insights
- The financial data reflects resilience and growth in profitability over the five-year period despite the downturn in 2020. The dip in profitability and economic profit in 2020 likely reflects external challenges impacting operational performance. The steady cost of capital implies maintained confidence in the company's financial risk. The stabilization and slight reduction in invested capital in 2022 may suggest a strategic adjustment or optimization of asset utilization. The strong rebound in both NOPAT and economic profit after 2020 indicates effective management and recovery efforts.
Net Operating Profit after Taxes (NOPAT)
Mastercard Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
- Net Income
- The net income exhibited a general upward trend over the five-year period. Starting at $5,859 million in 2018, it increased notably to $8,118 million in 2019. Following this peak, there was a decline to $6,411 million in 2020. However, the net income recovered in the subsequent years, reaching $8,687 million in 2021 and further increasing to $9,930 million by the end of 2022. This suggests a strong recovery and growth trajectory after a dip in 2020.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values similarly reflect a pattern consistent with net income. It rose from $5,750 million in 2018 to $8,254 million in 2019. A decline was observed in 2020, with NOPAT reducing to $6,937 million. Subsequently, there was a steady increase across 2021 and 2022, reaching $9,129 million and $9,638 million respectively. The data show a comparable recovery and expansion post-2020, indicating operational efficiency improvements alongside profitability growth.
- Overall Insights
- Both net income and NOPAT demonstrate resilience and growth over the observed period, despite a contraction in 2020, which may be attributable to broader economic factors impacting that year. The recovery in 2021 and continued growth through 2022 imply effective management strategies and operational execution. The consistency between net income and NOPAT trends highlights alignment between overall profitability and core operating performance.
Cash Operating Taxes
Mastercard Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
- Income tax expense
- The income tax expense demonstrated moderate fluctuations over the five-year period. Beginning at $1,345 million in 2018, it increased notably to $1,613 million in 2019, suggesting a rise in taxable income or a change in tax policies. In 2020, the expense decreased to $1,349 million, potentially reflecting decreased profitability or tax adjustments during that year. Subsequently, it rose again to $1,620 million in 2021 and further to $1,802 million in 2022, indicating a consistent upward trend in tax obligations in the latter years.
- Cash operating taxes
- Cash operating taxes exhibited some variability with a clear upward trend toward the end of the period. Starting at $1,606 million in 2018, the figure edged up slightly to $1,651 million in 2019 before dropping to $1,356 million in 2020. This reduction might be indicative of lower taxable cash operating profits or tax deferrals. However, a substantial increase occurred in 2021, with cash operating taxes reaching $1,782 million, followed by a significant spike to $2,543 million in 2022. This sharp rise in the last year suggests increased taxable cash flow or changes in tax payment timing or rates.
Invested Capital
Mastercard Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to total Mastercard Incorporated stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of marketable securities.
The financial data indicates several notable trends over the five-year period ending December 31, 2022. First, total reported debt and leases have consistently increased year over year, rising from $6,916 million in 2018 to $14,793 million in 2022. This near doubling suggests an increasing reliance on debt financing or lease obligations.
In contrast, total stockholders’ equity showed a generally positive trend until 2021, moving from $5,395 million in 2018 to a peak of $7,312 million in 2021. However, there was a decline in equity in 2022 to $6,298 million, indicating a potential erosion of owners' residual interest in the company during that final year.
Invested capital, which encompasses the total of debt and equity invested in the company, rose steadily from $11,243 million in 2018 to a high of $22,365 million in 2021. This represents almost a doubling over the period. In 2022, a slight decrease to $21,548 million was observed, consistent with the drop in stockholders’ equity and the stabilization of total debt.
- Total Reported Debt & Leases
- Exhibits a clear upward trend, increasing by approximately 114% over five years, reflecting increased leverage or funding through leases.
- Total Stockholders’ Equity
- Generally increased from 2018 through 2021, rising by about 36%, but declined by 14% in 2022, possibly signaling reduced retained earnings or share repurchases.
- Invested Capital
- More than doubled from 2018 to 2021, then experienced a minor decrease in the final year, suggesting a peak in invested resources followed by slight contraction.
Overall, the data indicate that the entity has progressively expanded its capital base driven mostly by increasing debt and leases, with equity contributing to growth until 2021. The partial reversal in equity and invested capital levels in 2022 may warrant further examination to understand the underlying causes, such as market conditions, operational performance, or capital structure adjustments.
Cost of Capital
Mastercard Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including the current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including the current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including the current portion3 | ÷ | = | × | × (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 Long-term debt, including the current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including the current portion3 | ÷ | = | × | × (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 Long-term debt, including the current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including the current portion3 | ÷ | = | × | × (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 Long-term debt, including the current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including the current portion3 | ÷ | = | × | × (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 Long-term debt, including the current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Mastercard Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited fluctuations between 2018 and 2022. It increased from 4008 million USD in 2018 to a peak of 5976 million USD in 2019. Following this, there was a notable decline to 3897 million USD in 2020, likely reflecting challenges during that period. The economic profit recovered thereafter, reaching 5699 million USD in 2021 and further increasing to 6316 million USD in 2022, surpassing prior peaks.
- Invested Capital
- The invested capital showed a consistent upward trend initially, rising steadily from 11243 million USD in 2018 to 22365 million USD in 2021. In 2022, however, there was a slight decrease to 21548 million USD. Overall, the invested capital more than doubled across the five-year span, indicating substantial investment growth with minor contraction at the end.
- Economic Spread Ratio
- The economic spread ratio, which illustrates the return relative to invested capital, followed a varied pattern. It increased from 35.65% in 2018 to a peak of 40.73% in 2019 before dropping sharply to 19.63% in 2020. This marked decrease coincides with the economic profit dip during the same year. The ratio then improved, rising to 25.48% in 2021 and 29.31% in 2022, signaling a recovery in profitability efficiency but remaining below the earlier peak.
- Summary
- Overall, the data reflect a period of growth punctuated by a significant downturn in 2020, affecting profitability measures. The invested capital grew substantially, suggesting increased resource commitments despite fluctuations in economic profit and spread ratio. The recovery in 2021 and 2022 indicates resilience and improved economic returns following the downturn, although the spread ratio has not yet returned to its pre-2020 highs.
Economic Profit Margin
Mastercard Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited fluctuations over the examined period. It increased from 4008 million US dollars in 2018 to a peak of 5976 million in 2019, then declined to 3897 million in 2020. Subsequently, it recovered to 5699 million in 2021 and further increased to 6316 million in 2022, indicating overall growth despite the downturn in 2020.
- Adjusted Net Revenue
- Adjusted net revenue showed an upward trend overall. Starting at 15022 million US dollars in 2018, it rose to 16908 million in 2019. There was a slight decline to 15455 million in 2020, followed by a notable increase to 19048 million in 2021, and reaching the highest value of 22257 million in 2022. This suggests strong revenue growth, particularly in the last two years.
- Economic Profit Margin
- The economic profit margin fluctuated during the period. It increased from 26.68% in 2018 to 35.34% in 2019, reflecting improved profitability. It then declined sharply to 25.21% in 2020, indicating reduced efficiency or higher costs relative to revenue. The margin recovered to 29.92% in 2021 but slightly decreased to 28.38% in 2022. Despite the variability, the margin remained relatively stable above 25% after 2020.
- Overall Observations
- The data reveals a pattern of initial growth in both economic profit and revenue until 2019, a setback in 2020 likely due to external factors, and a resilient recovery in 2021 and 2022. The economic profit margin trends corroborate these observations, showing both increased profitability before 2020 and a subsequent recovery phase. The company maintained positive economic profit throughout the period, with 2022's figures highlighting strong financial performance.