Microsoft Excel LibreOffice Calc

Medtronic PLC (NYSE:MDT)

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Economic Value Added (EVA)

Advanced level

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

Medtronic PLC, economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

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’s economic profit decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Net Operating Profit after Taxes (NOPAT)

Medtronic PLC, NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Net income attributable to Medtronic
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts2
Increase (decrease) in deferred revenue3
Increase (decrease) in restructuring reserve4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease liability6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

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 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

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

9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

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’s NOPAT decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Cash Operating Taxes

Medtronic PLC, cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Income tax provision
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

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’s cash operating taxes increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Invested Capital

Medtronic PLC, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Current debt obligations
Long-term debt
Operating lease liability1
Total reported debt & leases
Shareholders’ equity
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts3
Deferred revenue4
Restructuring reserve5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Noncontrolling interests
Adjusted shareholders’ equity
Construction in progress8
Available-for-sale securities9
Invested capital

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

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 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’s invested capital decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Cost of Capital

Medtronic PLC, 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 (filing date: 2019-06-21).

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 – 30.50%) =
Operating lease liability4 ÷ = × × (1 – 30.50%) =
Total:

Based on: 10-K (filing date: 2018-06-22).

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 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-06-27).

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 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-06-28).

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 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2015-06-23).

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 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2014-06-20).

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 LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Becton, Dickinson & Co.
Boston Scientific Corp.
Danaher Corp.
Intuitive Surgical Inc.
Stryker Corp.
Thermo Fisher Scientific Inc.
UnitedHealth Group Inc.

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

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’s economic spread ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Economic Profit Margin

Medtronic PLC, economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Apr 26, 2019 Apr 27, 2018 Apr 28, 2017 Apr 29, 2016 Apr 24, 2015 Apr 25, 2014
Selected Financial Data (US$ in millions)
Economic profit1
 
Net sales
Add: Increase (decrease) in deferred revenue
Adjusted net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Becton, Dickinson & Co.
Boston Scientific Corp.
Danaher Corp.
Intuitive Surgical Inc.
Stryker Corp.
Thermo Fisher Scientific Inc.
UnitedHealth Group Inc.

Based on: 10-K (filing date: 2019-06-21), 10-K (filing date: 2018-06-22), 10-K (filing date: 2017-06-27), 10-K (filing date: 2016-06-28), 10-K (filing date: 2015-06-23), 10-K (filing date: 2014-06-20).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =

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’s 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’s economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.