Stock Analysis on Net

Medtronic PLC (NYSE:MDT)

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Medtronic PLC, economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Net operating profit after taxes (NOPAT)1 4,151 4,888 4,049 4,408 5,457 2,708
Cost of capital2 9.53% 9.43% 9.59% 9.33% 9.54% 9.45%
Invested capital3 70,505 69,629 72,405 71,146 72,690 70,880
 
Economic profit4 (2,567) (1,676) (2,893) (2,228) (1,481) (3,988)

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

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
= 4,1519.53% × 70,505 = -2,567

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. Medtronic PLC economic profit increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Net Operating Profit after Taxes (NOPAT)

Medtronic PLC, NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Net income attributable to Medtronic 3,758 5,039 3,606 4,789 4,631 3,104
Deferred income tax expense (benefit)1 (253) (611) (461) (1,277) (438) (1,115)
Increase (decrease) in allowance for doubtful accounts2 (54) (11) 33 18 (3) 38
Increase (decrease) in deferred revenue3 6 31 65 (12) 26
Increase (decrease) in restructuring reserve4 120 (36) 34 (10) 19 (124)
Increase (decrease) in equity equivalents5 (181) (627) (329) (1,281) (396) (1,201)
Interest expense, net 636 553 925 1,092 1,444 1,146
Interest expense, operating lease liability6 25 17 23 28 35 30
Adjusted interest expense, net 661 570 948 1,120 1,479 1,176
Tax benefit of interest expense, net7 (139) (120) (199) (235) (311) (359)
Adjusted interest expense, net, after taxes8 522 451 749 885 1,169 817
(Gain) loss on marketable securities 33 3 (1) (3) 44 (5)
Investment income, before taxes 33 3 (1) (3) 44 (5)
Tax expense (benefit) of investment income9 (7) (1) 1 (9) 2
Investment income, after taxes10 26 2 (1) (2) 35 (3)
Net income (loss) attributable to noncontrolling interest 26 23 24 17 19 (9)
Net operating profit after taxes (NOPAT) 4,151 4,888 4,049 4,408 5,457 2,708

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

1 Elimination of deferred tax expense. See details »

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

3 Addition of increase (decrease) in deferred revenue.

4 Addition of increase (decrease) in restructuring reserve.

5 Addition of increase (decrease) in equity equivalents to net income attributable to Medtronic.

6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,049 × 2.40% = 25

7 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 661 × 21.00% = 139

8 Addition of after taxes interest expense to net income attributable to Medtronic.

9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= -33 × 21.00% = -7

10 Elimination of after taxes investment income.

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. Medtronic PLC NOPAT increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Cash Operating Taxes

Medtronic PLC, cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Income tax provision (benefit) 1,580 455 265 (751) 547 2,580
Less: Deferred income tax expense (benefit) (253) (611) (461) (1,277) (438) (1,115)
Add: Tax savings from interest expense, net 139 120 199 235 311 359
Less: Tax imposed on investment income (7) (1) 1 (9) 2
Cash operating taxes 1,979 1,186 925 761 1,305 4,052

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

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

Invested Capital

Medtronic PLC, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Current debt obligations 20 3,742 11 2,776 838 2,058
Long-term debt 24,344 20,372 26,378 22,021 24,486 23,699
Operating lease liability1 1,049 870 1,015 945 553 671
Total reported debt & leases 25,413 24,984 27,404 25,742 25,877 26,428
Shareholders’ equity 51,483 52,551 51,428 50,737 50,091 50,720
Net deferred tax (assets) liabilities2 (2,680) (2,452) (2,086) (1,608) (191) 17
Allowance for doubtful accounts3 176 230 241 208 190 193
Deferred revenue4 405 399 368 303 315 289
Restructuring reserve5 230 110 146 112 186 167
Equity equivalents6 (1,869) (1,713) (1,331) (985) 500 666
Accumulated other comprehensive (income) loss, net of tax7 3,499 2,265 3,485 3,560 2,711 1,786
Noncontrolling interests 182 171 174 135 121 102
Adjusted shareholders’ equity 53,295 53,274 53,756 53,447 53,423 53,274
Construction in progress8 (1,754) (1,737) (1,498) (1,202) (1,111) (1,058)
Available-for-sale debt securities9 (6,449) (6,892) (7,257) (6,841) (5,499) (7,764)
Invested capital 70,505 69,629 72,405 71,146 72,690 70,880

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

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 deferred revenue.

5 Addition of restructuring reserve.

6 Addition of equity equivalents to shareholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 Subtraction of available-for-sale debt securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Medtronic PLC invested capital decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Cost of Capital

Medtronic PLC, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 116,291 116,291 ÷ 139,117 = 0.84 0.84 × 11.01% = 9.20%
Debt3 21,777 21,777 ÷ 139,117 = 0.16 0.16 × 2.53% × (1 – 21.00%) = 0.31%
Operating lease liability4 1,049 1,049 ÷ 139,117 = 0.01 0.01 × 2.40% × (1 – 21.00%) = 0.01%
Total: 139,117 1.00 9.53%

Based on: 10-K (reporting date: 2023-04-28).

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 117,817 117,817 ÷ 141,661 = 0.83 0.83 × 11.01% = 9.16%
Debt3 22,974 22,974 ÷ 141,661 = 0.16 0.16 × 2.05% × (1 – 21.00%) = 0.26%
Operating lease liability4 870 870 ÷ 141,661 = 0.01 0.01 × 2.00% × (1 – 21.00%) = 0.01%
Total: 141,661 1.00 9.43%

Based on: 10-K (reporting date: 2022-04-29).

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 167,894 167,894 ÷ 197,582 = 0.85 0.85 × 11.01% = 9.35%
Debt3 28,673 28,673 ÷ 197,582 = 0.15 0.15 × 1.96% × (1 – 21.00%) = 0.22%
Operating lease liability4 1,015 1,015 ÷ 197,582 = 0.01 0.01 × 2.30% × (1 – 21.00%) = 0.01%
Total: 197,582 1.00 9.59%

Based on: 10-K (reporting date: 2021-04-30).

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 125,961 125,961 ÷ 154,436 = 0.82 0.82 × 11.01% = 8.98%
Debt3 27,530 27,530 ÷ 154,436 = 0.18 0.18 × 2.37% × (1 – 21.00%) = 0.33%
Operating lease liability4 945 945 ÷ 154,436 = 0.01 0.01 × 3.00% × (1 – 21.00%) = 0.01%
Total: 154,436 1.00 9.33%

Based on: 10-K (reporting date: 2020-04-24).

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 133,284 133,284 ÷ 160,468 = 0.83 0.83 × 11.01% = 9.14%
Debt3 26,631 26,631 ÷ 160,468 = 0.17 0.17 × 2.93% × (1 – 21.00%) = 0.38%
Operating lease liability4 553 553 ÷ 160,468 = 0.00 0.00 × 6.39% × (1 – 21.00%) = 0.02%
Total: 160,468 1.00 9.54%

Based on: 10-K (reporting date: 2019-04-26).

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 117,342 117,342 ÷ 143,619 = 0.82 0.82 × 11.01% = 8.99%
Debt3 25,606 25,606 ÷ 143,619 = 0.18 0.18 × 3.54% × (1 – 30.50%) = 0.44%
Operating lease liability4 671 671 ÷ 143,619 = 0.00 0.00 × 4.46% × (1 – 30.50%) = 0.01%
Total: 143,619 1.00 9.45%

Based on: 10-K (reporting date: 2018-04-27).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Medtronic PLC, economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Selected Financial Data (US$ in millions)
Economic profit1 (2,567) (1,676) (2,893) (2,228) (1,481) (3,988)
Invested capital2 70,505 69,629 72,405 71,146 72,690 70,880
Performance Ratio
Economic spread ratio3 -3.64% -2.41% -4.00% -3.13% -2.04% -5.63%
Benchmarks
Economic Spread Ratio, Competitors4
Abbott Laboratories -1.81% 0.39% 0.84% -2.43% -3.75%
Cigna Group -2.10% 0.93% -0.07% 2.82% -0.39%
CVS Health Corp. 0.56% -3.87% 0.10% 0.52% -0.25%
Danaher Corp. -7.58% -2.64% -1.99% -3.39% -6.79%
Elevance Health Inc. -0.86% -0.04% 1.23% -0.76% 0.08%
Humana Inc. 1.29% 2.53% 2.86% 9.73% 7.87%
Intuitive Surgical Inc. 5.43% 5.15% 20.76% 8.75% 25.43%
UnitedHealth Group Inc. 5.85% 4.90% 4.75% 5.32% 5.35%

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,567 ÷ 70,505 = -3.64%

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. Medtronic PLC economic spread ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023 not reaching 2021 level.

Economic Profit Margin

Medtronic PLC, economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Apr 28, 2023 Apr 29, 2022 Apr 30, 2021 Apr 24, 2020 Apr 26, 2019 Apr 27, 2018
Selected Financial Data (US$ in millions)
Economic profit1 (2,567) (1,676) (2,893) (2,228) (1,481) (3,988)
 
Net sales 31,227 31,686 30,117 28,913 30,557 29,953
Add: Increase (decrease) in deferred revenue 6 31 65 (12) 26
Adjusted net sales 31,233 31,717 30,182 28,901 30,583 29,953
Performance Ratio
Economic profit margin2 -8.22% -5.28% -9.58% -7.71% -4.84% -13.31%
Benchmarks
Economic Profit Margin, Competitors3
Abbott Laboratories -2.70% 0.55% 1.21% -4.24% -6.84%
Cigna Group -0.93% 0.45% -0.04% 1.66% -0.24%
CVS Health Corp. 0.21% -1.49% 0.05% 0.27% -0.14%
Danaher Corp. -24.90% -6.55% -4.97% -9.93% -22.02%
Elevance Health Inc. -0.35% -0.02% 0.58% -0.36% 0.04%
Humana Inc. 0.37% 0.80% 1.06% 2.80% 2.31%
Intuitive Surgical Inc. 5.42% 4.45% 16.34% 8.97% 18.84%
UnitedHealth Group Inc. 2.91% 2.51% 2.33% 2.71% 2.61%

Based on: 10-K (reporting date: 2023-04-28), 10-K (reporting date: 2022-04-29), 10-K (reporting date: 2021-04-30), 10-K (reporting date: 2020-04-24), 10-K (reporting date: 2019-04-26), 10-K (reporting date: 2018-04-27).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -2,567 ÷ 31,233 = -8.22%

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 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. Medtronic PLC economic profit margin improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023 not reaching 2021 level.