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
Motorola Solutions Inc., economic profit 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 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
= 1,871 – 14.99% × 8,921 = 533
The financial performance from 2019 to 2023 is characterized by a general expansion in operational scale and a notable improvement in the capacity to generate economic value. While the trajectory of value creation has been volatile, the period concludes with a significant increase in economic profit, indicating that operational returns have substantially surpassed the cost of capital.
- Net Operating Profit After Taxes (NOPAT) and Invested Capital
- A strong upward trend in NOPAT is observed, rising from 984 million US$ in 2019 to 1,871 million US$ in 2023, despite a temporary contraction in 2022. This growth in profitability occurred alongside a consistent increase in invested capital, which grew from 6,887 million US$ to 8,921 million US$ over the same period. The parallel increase suggests a strategy of expanding the asset base to drive higher absolute operating profits.
- Cost of Capital
- The cost of capital remained relatively stable but exhibited a gradual increase, moving from 14.36% in 2019 to 14.99% in 2023. This incremental rise indicates a slightly higher threshold for value creation, meaning the company required higher operating returns to avoid destroying shareholder value as the period progressed.
- Economic Profit Trends
- Economic profit experienced fluctuations, alternating between value destruction and value creation. Negative values were recorded in 2019 (-5 million US$) and 2022 (-17 million US$), signaling periods where NOPAT was insufficient to cover the imputed cost of capital. These troughs were offset by periods of positive economic profit, peaking in 2023 at 533 million US$. The substantial jump in 2023 suggests a significant improvement in capital efficiency and operational leverage.
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Net Operating Profit after Taxes (NOPAT)
Motorola Solutions Inc., NOPAT calculation
US$ 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 credit losses.
3 Addition of increase (decrease) in reorganization of businesses accruals.
4 Addition of increase (decrease) in equity equivalents to net earnings attributable to Motorola Solutions, Inc..
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 532 × 4.34% = 23
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 272 × 21.00% = 57
7 Addition of after taxes interest expense to net earnings attributable to Motorola Solutions, Inc..
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 33 × 21.00% = 7
9 Elimination of after taxes investment income.
- Net earnings attributable to Motorola Solutions, Inc.
- The net earnings demonstrate a consistent upward trend throughout the five-year period. Starting at 868 million US dollars in 2019, the figure increased each year, reaching 1709 million US dollars by 2023. This growth suggests a steady enhancement of profitability and successful operational execution over the years.
- Net operating profit after taxes (NOPAT)
- The NOPAT values generally follow an increasing pattern from 2019 to 2023. Beginning at 984 million US dollars in 2019, NOPAT peaked at 1409 million US dollars in 2021 before experiencing a decline to 1222 million US dollars in 2022. It then rose sharply to 1871 million US dollars in 2023, indicating a strong recovery and improved operational efficiency in the latest period. The fluctuation observed in 2022 may warrant further analysis to understand the causes behind the temporary dip.
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Cash Operating Taxes
Motorola Solutions Inc., 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).
The financial data reflects the annual trends in income tax expense and cash operating taxes over the five-year period ending in 2023.
- Income Tax Expense
- Between 2019 and 2021, there was a consistent upward trend, with the income tax expense increasing from 130 million USD in 2019 to 302 million USD in 2021. However, in 2022, this figure experienced a significant decline to 148 million USD. Subsequently, it surged markedly to 432 million USD in 2023, representing the highest value in the reported period.
- Cash Operating Taxes
- Cash operating taxes also exhibited an upward trajectory from 265 million USD in 2019 to 315 million USD in 2021. In 2022, this amount rose sharply to 534 million USD, followed by a slight decrease to 514 million USD in 2023. Despite this minor reduction in the final year, cash operating taxes remained substantially elevated compared to the earlier years.
Overall, the data indicates that both income tax expense and cash operating taxes generally increased over the period, with notable fluctuations in the last two years. Income tax expense demonstrated volatility with a sharp decrease followed by a substantial increase, whereas cash operating taxes showed a strong upward spike in 2022 and then a moderate decline in 2023. These patterns suggest changing tax liabilities or operational circumstances impacting taxable income and actual cash tax payments.
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Invested Capital
Motorola Solutions Inc., 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 reorganization of businesses accruals.
5 Addition of equity equivalents to total Motorola Solutions, Inc. stockholders’ equity (deficit).
6 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases exhibited a generally increasing trend over the analyzed period. Starting at $5,748 million in 2019, debt slightly decreased to $5,703 million in 2020, then rose to $6,130 million in 2021. This upward momentum continued in 2022 reaching $6,551 million and remained nearly stable at $6,550 million in 2023. Overall, the data suggests a gradual increase in debt levels, particularly from 2020 onward, indicating a potential expansion or capital investment strategy funded through increased leverage.
- Total Motorola Solutions, Inc. stockholders’ equity (deficit)
- Stockholders’ equity showed significant improvement throughout the period. Initially in a deficit of $700 million in 2019, the negative equity reduced consistently each year, moving to a deficit of $558 million in 2020 and further narrowing to a near break-even position with a $40 million deficit in 2021. By 2022, the company achieved positive equity of $116 million, which substantially increased to $724 million by 2023. This positive trend indicates strengthening financial stability and improved capital structure, reflecting enhanced retained earnings, reduced losses, or equity injections.
- Invested capital
- Invested capital demonstrated steady growth over the five-year period. Starting at $6,887 million in 2019, the total capital invested increased incrementally each year, reaching $6,976 million in 2020, $7,857 million in 2021, $8,350 million in 2022, and culminating at $8,921 million in 2023. The continuous rise in invested capital aligns with the increased debt levels and improving equity, suggesting ongoing investment in operational assets or expansion initiatives funded through a combination of debt and equity resources.
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Cost of Capital
Motorola Solutions Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 53,810) | 53,810) | ÷ | 60,742) | = | 0.89 | 0.89 | × | 16.52% | = | 14.64% | ||
| Long-term debt3 | 6,400) | 6,400) | ÷ | 60,742) | = | 0.11 | 0.11 | × | 3.94% × (1 – 21.00%) | = | 0.33% | ||
| Operating lease liability4 | 532) | 532) | ÷ | 60,742) | = | 0.01 | 0.01 | × | 4.34% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 60,742) | 1.00 | 14.99% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,716) | 44,716) | ÷ | 51,153) | = | 0.87 | 0.87 | × | 16.52% | = | 14.44% | ||
| Long-term debt3 | 5,900) | 5,900) | ÷ | 51,153) | = | 0.12 | 0.12 | × | 3.94% × (1 – 21.00%) | = | 0.36% | ||
| Operating lease liability4 | 537) | 537) | ÷ | 51,153) | = | 0.01 | 0.01 | × | 4.07% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 51,153) | 1.00 | 14.84% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,174) | 37,174) | ÷ | 43,811) | = | 0.85 | 0.85 | × | 16.52% | = | 14.02% | ||
| Long-term debt3 | 6,200) | 6,200) | ÷ | 43,811) | = | 0.14 | 0.14 | × | 3.77% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 437) | 437) | ÷ | 43,811) | = | 0.01 | 0.01 | × | 3.11% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 43,811) | 1.00 | 14.47% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,606) | 30,606) | ÷ | 36,934) | = | 0.83 | 0.83 | × | 16.52% | = | 13.69% | ||
| Long-term debt3 | 5,800) | 5,800) | ÷ | 36,934) | = | 0.16 | 0.16 | × | 3.92% × (1 – 21.00%) | = | 0.49% | ||
| Operating lease liability4 | 528) | 528) | ÷ | 36,934) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 36,934) | 1.00 | 14.22% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,456) | 31,456) | ÷ | 37,575) | = | 0.84 | 0.84 | × | 16.52% | = | 13.83% | ||
| Long-term debt3 | 5,500) | 5,500) | ÷ | 37,575) | = | 0.15 | 0.15 | × | 4.17% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 619) | 619) | ÷ | 37,575) | = | 0.02 | 0.02 | × | 3.61% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 37,575) | 1.00 | 14.36% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Motorola Solutions Inc., 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 | 533) | (17) | 273) | 137) | (5) | |
| Invested capital2 | 8,921) | 8,350) | 7,857) | 6,976) | 6,887) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 5.98% | -0.20% | 3.47% | 1.96% | -0.07% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 137.50% | 199.01% | 195.38% | 143.35% | — | |
| Arista Networks Inc. | 20.53% | 16.06% | 31.11% | — | — | |
| Cisco Systems Inc. | 6.28% | 6.20% | 5.45% | 9.76% | — | |
| Dell Technologies Inc. | -0.73% | 3.13% | -1.39% | — | — | |
| Lumentum Holdings Inc. | -17.24% | -5.33% | 7.09% | -4.40% | — | |
| Super Micro Computer Inc. | 4.14% | -4.76% | -12.73% | -15.68% | — | |
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 × 533 ÷ 8,921 = 5.98%
4 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a steady expansion of the capital base accompanied by volatile but ultimately positive movements in economic value creation.
- Invested Capital Growth
- A consistent upward trajectory is observed in invested capital, which increased from 6,887 million USD in 2019 to 8,921 million USD by the end of 2023. This represents a sustained increase in the total resources deployed to generate operational returns over the five-year period.
- Economic Profit Volatility
- Economic profit demonstrated significant fluctuations. Following a marginal loss of 5 million USD in 2019, the figure rose to 273 million USD by 2021. A reversal occurred in 2022, resulting in a loss of 17 million USD, before a substantial recovery in 2023, where economic profit reached a period peak of 533 million USD.
- Economic Spread Ratio Trends
- The economic spread ratio mirrors the volatility seen in economic profit, reflecting the margin by which the return on invested capital exceeds the cost of capital. The ratio moved from -0.07% in 2019 to 3.47% in 2021, retracted to -0.20% in 2022, and expanded significantly to 5.98% in 2023.
The correlation between the expanded invested capital and the sharp increase in the economic spread ratio in 2023 indicates that the company has successfully scaled its operations while improving its ability to generate value above its cost of capital.
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Economic Profit Margin
Motorola Solutions Inc., 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 | 533) | (17) | 273) | 137) | (5) | |
| Net sales | 9,978) | 9,112) | 8,171) | 7,414) | 7,887) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 5.34% | -0.19% | 3.34% | 1.85% | -0.06% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.63% | 23.52% | 22.70% | 18.79% | — | |
| Arista Networks Inc. | 15.50% | 11.06% | 18.22% | — | — | |
| Cisco Systems Inc. | 6.25% | 6.96% | 6.08% | 10.19% | — | |
| Dell Technologies Inc. | -0.40% | 1.64% | -1.19% | — | — | |
| Lumentum Holdings Inc. | -28.29% | -7.78% | 8.00% | -4.19% | — | |
| Super Micro Computer Inc. | 1.40% | -2.02% | -4.59% | -5.82% | — | |
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 ÷ Net sales
= 100 × 533 ÷ 9,978 = 5.34%
3 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 indicates a general expansion in scale accompanied by significant volatility in value creation above the cost of capital. While net sales demonstrated a consistent upward trend over the five-year period, economic profit experienced fluctuations, characterized by alternating periods of value destruction and value creation.
- Revenue Growth Trends
- Net sales exhibited a resilient growth pattern, increasing from 7,887 million US$ in 2019 to 9,978 million US$ by 2023. Despite a marginal contraction in 2020 to 7,414 million US$, the subsequent three years showed accelerated growth, with the most significant annual increase occurring between 2021 and 2022.
- Economic Profit Volatility
- Economic profit demonstrated an unstable trend, beginning with a slight deficit of -5 million US$ in 2019. A period of growth followed, peaking at 273 million US$ in 2021, before reverting to a negative value of -17 million US$ in 2022. A substantial recovery occurred in 2023, where economic profit reached a five-year high of 533 million US$, indicating a strong capacity to generate returns exceeding the company's cost of capital.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrored the volatility of the absolute economic profit figures. The margin shifted from -0.06% in 2019 to a peak of 3.34% in 2021. The dip to -0.19% in 2022 is particularly notable as it occurred during a year of increasing net sales, suggesting that the cost of capital or invested capital increased more rapidly than the operating profit during that interval. However, the margin expanded sharply to 5.34% in 2023, marking the highest efficiency in economic value generation within the observed timeframe.
Overall, the data suggests that while the company has successfully expanded its top-line revenue, its ability to translate that growth into economic profit has been inconsistent. The sharp increase in the economic profit margin in 2023 represents a significant improvement in capital efficiency and value creation compared to the preceding years.
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