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.
Economic Profit
Mastercard Inc., economic profit 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 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
= 9,638 – 17.89% × 21,548 = 5,783
The analysis of economic value added indicates a consistent capacity for value creation, as economic profit remained positive throughout the five-year period from 2018 to 2022. Despite a significant volatility event in 2020, the overall trajectory demonstrates resilience and an expanding ability to generate returns above the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trend, increasing from US$ 5,750 million in 2018 to US$ 9,638 million in 2022. A temporary contraction occurred in 2020, where profit fell to US$ 6,937 million, before rebounding strongly in 2021 and 2022. This suggests a robust recovery in operating efficiency and revenue generation following the 2020 downturn.
- Cost of Capital
- The cost of capital remained remarkably stable over the analyzed period, fluctuating within a narrow range between 17.77% and 18.02%. This stability indicates a consistent risk profile and a steady hurdle rate required to satisfy investors and creditors, providing a reliable baseline for evaluating economic profit.
- Invested Capital
- Invested capital showed substantial growth, rising from US$ 11,243 million in 2018 to a peak of US$ 22,365 million in 2021. A slight reduction to US$ 21,548 million was observed in 2022, indicating a transition from aggressive capital expansion toward a phase of capital optimization or more disciplined asset management.
- Economic Profit
- Economic profit followed a non-linear growth path, starting at US$ 3,728 million in 2018 and ending at US$ 5,783 million in 2022. The most significant decline occurred in 2020, when economic profit dropped to US$ 3,409 million; this was the result of the dual impact of decreasing NOPAT and increasing invested capital. However, the subsequent recovery to US$ 5,783 million by 2022 confirms that the growth in operating profit has outpaced the cost of the capital employed.
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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
= 770 × 2.50% = 19
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 490 × 21.00% = 103
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
= 61 × 21.00% = 13
8 Elimination of after taxes investment income.
The financial performance from 2018 to 2022 exhibits a general upward trajectory in profitability, interrupted by a notable contraction in 2020. A robust recovery followed this decline, with both key metrics reaching their five-year peaks by the end of 2022.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced significant growth between 2018 and 2019, increasing from 5,750 million to 8,254 million. A subsequent decline occurred in 2020, with NOPAT falling to 6,937 million. The following two years showed a sustained recovery, with figures rising to 9,129 million in 2021 and peaking at 9,638 million in 2022.
- Net Income Analysis
- Net income followed a trajectory closely aligned with NOPAT. Starting at 5,859 million in 2018, it rose to 8,118 million in 2019 before dropping to 6,411 million in 2020. The metric then rebounded strongly, climbing to 8,687 million in 2021 and reaching 9,930 million by December 31, 2022.
- Comparative Correlation
- A high degree of correlation is evident between NOPAT and net income. Between 2019 and 2021, NOPAT consistently exceeded net income, which may indicate the impact of non-operating expenses or interest costs on the final net result. In contrast, for the years 2018 and 2022, net income surpassed NOPAT, suggesting a shift in the influence of non-operating income or financing activities during those specific periods.
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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).
An analysis of tax-related expenditures from 2018 to 2022 reveals a general upward trajectory in both accrued income tax expenses and actual cash operating taxes, punctuated by a synchronized decline in 2020.
- Cash Operating Tax Trends
- Cash operating taxes exhibited a compound growth pattern, rising from 1,606 million US$ in 2018 to 2,543 million US$ by 2022. A notable contraction occurred in 2020, where payments fell to 1,356 million US$, before accelerating sharply in the final two years of the period.
- Income Tax Expense Patterns
- The accrued income tax expense followed a similar path, starting at 1,345 million US$ in 2018 and reaching 1,802 million US$ in 2022. The 2020 dip to 1,349 million US$ aligns with the reduction seen in cash payments, suggesting a correlation between accounting profit and taxable obligations during that fiscal year.
- Divergence Between Cash and Accrual Taxes
- A widening gap is observed between cash operating taxes and income tax expenses over time. While the two figures were nearly identical in 2020, the variance increased significantly by 2022, with cash taxes exceeding accrued expenses by 741 million US$. This indicates that cash outflows for taxes grew at a substantially faster rate than the reported tax expense in the latter part of the period.
- Relative Growth Analysis
- Between 2021 and 2022, income tax expense increased by approximately 11.2%, whereas cash operating taxes surged by approximately 42.3%. This acceleration in cash disbursements relative to accrued expenses suggests a potential settlement of deferred tax liabilities or a shift in the timing of tax payments.
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Invested Capital
Mastercard Inc., invested capital calculation (financing approach)
US$ 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.
Between 2018 and 2022, invested capital exhibited a strong upward trajectory, peaking in 2021 before experiencing a marginal contraction in 2022. Total invested capital grew from 11,243 million US$ to 21,548 million US$ over the period, representing a significant expansion of the capital base utilized to generate economic value.
- Debt and Lease Obligations
- A consistent and substantial increase in total reported debt and leases is observed from 2018 through 2022. The most pronounced growth occurred between 2019 and 2020, during which obligations rose from 9,289 million US$ to 13,523 million US$. By 2022, debt levels stabilized at 14,793 million US$, indicating a period of aggressive leverage expansion followed by stabilization.
- Stockholders' Equity Trends
- Equity showed a steady increase from 5,395 million US$ in 2018 to a peak of 7,312 million US$ in 2021. This trend reversed in 2022, with equity declining to 6,298 million US$. This reduction in the equity component contributed to the overall slight decrease in total invested capital during the final year of the analyzed period.
- Capital Composition and Drivers
- The expansion of invested capital was predominantly driven by the increase in debt and leases rather than equity growth. While equity increased by approximately 16% between 2018 and 2022, reported debt more than doubled. This shift indicates a strategic transition toward a more debt-weighted capital structure to fund operations and growth.
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Cost of Capital
Mastercard Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 352,662) | 352,662) | ÷ | 366,132) | = | 0.96 | 0.96 | × | 18.48% | = | 17.80% | ||
| Long-term debt, including the current portion3 | 12,700) | 12,700) | ÷ | 366,132) | = | 0.03 | 0.03 | × | 3.17% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 770) | 770) | ÷ | 366,132) | = | 0.00 | 0.00 | × | 2.50% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 366,132) | 1.00 | 17.89% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | 361,441) | 361,441) | ÷ | 377,513) | = | 0.96 | 0.96 | × | 18.48% | = | 17.69% | ||
| Long-term debt, including the current portion3 | 15,300) | 15,300) | ÷ | 377,513) | = | 0.04 | 0.04 | × | 3.06% × (1 – 21.00%) | = | 0.10% | ||
| Operating lease liability4 | 772) | 772) | ÷ | 377,513) | = | 0.00 | 0.00 | × | 2.60% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 377,513) | 1.00 | 17.80% | ||||||||||
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 | 338,737) | 338,737) | ÷ | 354,388) | = | 0.96 | 0.96 | × | 18.48% | = | 17.67% | ||
| Long-term debt, including the current portion3 | 14,800) | 14,800) | ÷ | 354,388) | = | 0.04 | 0.04 | × | 3.12% × (1 – 21.00%) | = | 0.10% | ||
| Operating lease liability4 | 851) | 851) | ÷ | 354,388) | = | 0.00 | 0.00 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 354,388) | 1.00 | 17.77% | ||||||||||
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 | 342,692) | 342,692) | ÷ | 352,654) | = | 0.97 | 0.97 | × | 18.48% | = | 17.96% | ||
| Long-term debt, including the current portion3 | 9,200) | 9,200) | ÷ | 352,654) | = | 0.03 | 0.03 | × | 2.91% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 762) | 762) | ÷ | 352,654) | = | 0.00 | 0.00 | × | 2.90% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 352,654) | 1.00 | 18.02% | ||||||||||
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 | 226,254) | 226,254) | ÷ | 233,336) | = | 0.97 | 0.97 | × | 18.48% | = | 17.92% | ||
| Long-term debt, including the current portion3 | 6,500) | 6,500) | ÷ | 233,336) | = | 0.03 | 0.03 | × | 2.80% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 582) | 582) | ÷ | 233,336) | = | 0.00 | 0.00 | × | 2.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 233,336) | 1.00 | 17.99% | ||||||||||
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 | 5,783) | 5,148) | 3,409) | 5,609) | 3,728) | |
| Invested capital2 | 21,548) | 22,365) | 19,854) | 14,672) | 11,243) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 26.84% | 23.02% | 17.17% | 38.23% | 33.16% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 3.99% | 5.81% | 6.41% | — | — | |
| Adobe Inc. | 6.58% | 8.97% | 1.25% | — | — | |
| AppLovin Corp. | -26.37% | -29.58% | — | — | — | |
| Cadence Design Systems Inc. | 6.59% | 6.80% | — | — | — | |
| Datadog Inc. | -11.70% | -3.88% | — | — | — | |
| International Business Machines Corp. | -11.36% | -6.21% | — | — | — | |
| Intuit Inc. | -7.52% | 0.11% | — | — | — | |
| Microsoft Corp. | 18.54% | 27.58% | — | — | — | |
| Oracle Corp. | -7.56% | 0.65% | — | — | — | |
| Palantir Technologies Inc. | -32.50% | -39.96% | — | — | — | |
| Palo Alto Networks Inc. | 3.53% | -5.17% | — | — | — | |
| Salesforce Inc. | -14.50% | -12.36% | — | — | — | |
| ServiceNow Inc. | 0.73% | 1.94% | — | — | — | |
| Synopsys Inc. | -0.84% | -6.86% | -6.67% | — | — | |
| Workday Inc. | -13.98% | -19.23% | — | — | — | |
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 × 5,783 ÷ 21,548 = 26.84%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a significant volatility event in 2020 followed by a consistent period of recovery and stabilization. While both economic profit and invested capital trended generally upward over the five-year horizon, the efficiency of capital deployment fluctuated markedly.
- Economic Profit
- Economic profit exhibited a growth phase reaching 5,609 million USD in 2019, followed by a sharp contraction to 3,409 million USD in 2020. A strong recovery trend ensued over the subsequent two years, with profit levels climbing to 5,148 million USD in 2021 and reaching a five-year peak of 5,783 million USD by the end of 2022.
- Invested Capital
- Invested capital showed a sustained increase from 11,243 million USD in 2018 to a peak of 22,365 million USD in 2021. A slight reduction was observed in 2022, where the figure moderated to 21,548 million USD, suggesting a transition toward more optimized capital utilization.
- Economic Spread Ratio
- The economic spread ratio experienced a notable decline, dropping from a peak of 38.23% in 2019 to a low of 17.17% in 2020. This contraction indicates a period of diminished returns on invested capital. However, the ratio demonstrated a steady rebound in 2021 and 2022, ending the period at 26.84%.
The convergence of increasing economic profit and decreasing invested capital in 2022 contributed to the recovery of the economic spread ratio. The data indicates that after a significant dip in capital efficiency in 2020, the company successfully improved its ability to generate economic value relative to its capital base.
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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 | 5,783) | 5,148) | 3,409) | 5,609) | 3,728) | |
| Net revenue | 22,237) | 18,884) | 15,301) | 16,883) | 14,950) | |
| Add: Increase (decrease) in deferred revenue | 20) | 164) | 154) | 25) | 72) | |
| Adjusted net revenue | 22,257) | 19,048) | 15,455) | 16,908) | 15,022) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 25.98% | 27.03% | 22.06% | 33.18% | 24.82% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | 1.92% | 2.98% | 3.26% | — | — | |
| Adobe Inc. | 7.67% | 11.17% | 1.79% | — | — | |
| AppLovin Corp. | -49.38% | -59.23% | — | — | — | |
| Cadence Design Systems Inc. | 6.57% | 6.91% | — | — | — | |
| Datadog Inc. | -8.10% | -3.08% | — | — | — | |
| International Business Machines Corp. | -19.67% | -11.82% | — | — | — | |
| Intuit Inc. | -14.48% | 0.14% | — | — | — | |
| Microsoft Corp. | 17.77% | 22.89% | — | — | — | |
| Oracle Corp. | -13.87% | 1.29% | — | — | — | |
| Palantir Technologies Inc. | -54.53% | -65.82% | — | — | — | |
| Palo Alto Networks Inc. | 4.11% | -6.95% | — | — | — | |
| Salesforce Inc. | -40.27% | -28.34% | — | — | — | |
| ServiceNow Inc. | 0.58% | 1.68% | — | — | — | |
| Synopsys Inc. | -1.18% | -10.92% | -11.45% | — | — | |
| Workday Inc. | -18.95% | -25.09% | — | — | — | |
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 × 5,783 ÷ 22,257 = 25.98%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2018 to 2022 reveals a general upward trajectory in absolute value generation, interrupted by a notable contraction in 2020. While both adjusted net revenue and economic profit reached their five-year peaks in 2022, the efficiency of converting revenue into economic profit exhibited significant volatility.
- Adjusted Net Revenue Trends
- Adjusted net revenue grew from 15,022 million US dollars in 2018 to 22,257 million US dollars by 2022. A brief decline occurred in 2020, where revenue fell to 15,455 million US dollars, before rebounding strongly in 2021 and 2022.
- Economic Profit Performance
- Economic profit demonstrated substantial fluctuations over the period. After increasing from 3,728 million US dollars in 2018 to 5,609 million US dollars in 2019, it dropped to a period low of 3,409 million US dollars in 2020. A recovery followed, with economic profit rising to 5,148 million US dollars in 2021 and reaching a maximum of 5,783 million US dollars in 2022.
- Economic Profit Margin Analysis
- The economic profit margin showed a non-linear trend, peaking at 33.18% in 2019. A sharp contraction was observed in 2020, with the margin falling to 22.06%. Although the margin recovered to 27.03% in 2021, it experienced a slight compression to 25.98% in 2022, despite the record highs in absolute revenue and profit. This suggests that revenue growth in the final year slightly outpaced the growth in economic profit.
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