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 – 14.95% × 8,921 = 537
The analysis of economic value creation reveals a volatile but overall improving trajectory between 2019 and 2023. While the organization experienced intermittent periods of value destruction where the cost of capital exceeded returns, the most recent fiscal year demonstrates a significant acceleration in economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trend in NOPAT is observed, increasing from 984 million US dollars in 2019 to 1,871 million US dollars in 2023. Although a contraction occurred in 2022, where NOPAT fell to 1,222 million US dollars, the subsequent recovery in 2023 represents a substantial growth in operating profitability.
- Invested Capital and Cost of Capital
- Invested capital has expanded consistently over the five-year period, rising from 6,887 million US dollars in 2019 to 8,921 million US dollars in 2023. During this same interval, the cost of capital remained relatively stable but showed a gradual increase, moving from 14.32% in 2019 to 14.95% in 2023, thereby raising the threshold for value creation.
- Economic Profit Performance
- Economic profit has been characterized by inconsistency. Negative values were recorded in 2019 (-2 million US dollars) and 2022 (-13 million US dollars), indicating that the operating returns were insufficient to cover the cost of invested capital during those years. However, these troughs were offset by strong gains in 2020 and 2021, culminating in a peak of 537 million US dollars in 2023. This suggests that recent operational gains have significantly outpaced the growth of the capital base and the rising cost of capital.
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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.
A consistent upward trajectory is observed in both net earnings and Net Operating Profit After Taxes (NOPAT) over the five-year period from 2019 to 2023. While net earnings exhibited steady year-over-year growth, NOPAT demonstrated greater volatility, characterized by a significant contraction in 2022 followed by a substantial recovery in 2023.
- Net Earnings Growth
- Net earnings attributable to the company grew from 868 million US$ in 2019 to 1,709 million US$ by 2023. This represents a total increase of approximately 96.8% over the period. The growth was most pronounced between 2020 and 2021, where earnings rose by approximately 31%.
- NOPAT Performance and Volatility
- NOPAT increased from 984 million US$ in 2019 to a peak of 1,409 million US$ in 2021. A deviation occurred in 2022, where NOPAT declined by approximately 13.3% to 1,222 million US$, despite the continued growth in net earnings during the same period. However, a sharp recovery occurred in 2023, with NOPAT rising to 1,871 million US$, reflecting a year-over-year increase of roughly 53%.
- Comparison Between NOPAT and Net Earnings
- NOPAT remained consistently higher than net earnings across all reported years. This indicates that the operational profitability of the company exceeds its bottom-line net income, suggesting that non-operating expenses, such as interest payments on debt, have a moderating effect on net earnings. The gap between these two metrics widened significantly in 2023, where NOPAT exceeded net earnings by 162 million US$.
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Cash Operating Taxes
Motorola Solutions Inc., cash operating taxes calculation
US$ 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 analysis of tax obligations reveals a divergence between accrual-based income tax expenses and actual cash tax outflows. While income tax expenses exhibited significant volatility, cash operating taxes followed a more pronounced upward trajectory, remaining consistently higher than the recognized expense throughout the period.
- Income Tax Expense Trends
- Income tax expense demonstrated a non-linear growth pattern over the five-year period. An initial increase was observed from 2019 to 2021, rising from 130 million to 302 million. This was followed by a sharp contraction in 2022 to 148 million, before reaching a peak of 432 million in 2023.
- Cash Operating Taxes Trends
- Cash operating taxes exhibited a steady upward trend from 2019 through 2022. Starting at 265 million, outflows grew consistently to 315 million by 2021, followed by a substantial increase to 534 million in 2022. A slight decrease to 514 million occurred in 2023, though the figure remained significantly elevated compared to the 2019 baseline.
- Analysis of Tax Divergence
- A persistent gap exists where cash operating taxes consistently exceed the recognized income tax expense. This variance was most acute in 2022, when cash taxes were more than three times the recorded tax expense. This divergence indicates that the actual cash liquidity required to satisfy tax obligations has grown more rapidly than the accounting tax expense, which is a critical consideration for the calculation of Economic Value Added (EVA) as it affects the adjusted net operating profit after tax.
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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.
Invested capital has exhibited a consistent upward trajectory from 2019 to 2023, increasing from 6,887 million USD to 8,921 million USD. This growth represents a steady expansion of the capital base employed to generate operational returns over the analyzed five-year period.
- Invested Capital Trends
- The total invested capital grew by approximately 29.5% between 2019 and 2023. The most pronounced year-over-year increase occurred between 2020 and 2021, where invested capital rose by 881 million USD, reflecting a significant expansion in the company's capital deployment.
- Stockholders' Equity Evolution
- A critical shift is observed in the equity position, which transitioned from a substantial deficit of 700 million USD in 2019 to a positive balance of 724 million USD by 2023. This recovery indicates a reversal of the equity deficit and a strengthening of the net asset position over the period.
- Debt and Lease Obligations
- Total reported debt and leases showed a general increase from 5,748 million USD in 2019 to 6,550 million USD in 2023. While debt levels rose steadily through 2022, the figures remained virtually unchanged between 2022 and 2023, suggesting a period of stabilization in borrowing and lease obligations.
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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 | × | 16.47% | = | 14.59% | ||
| 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 | 14.95% | ||||||||||
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 | × | 16.47% | = | 14.40% | ||
| 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 | 14.79% | ||||||||||
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 | × | 16.47% | = | 13.97% | ||
| 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 | 14.42% | ||||||||||
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 | × | 16.47% | = | 13.65% | ||
| 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 | 14.17% | ||||||||||
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 | × | 16.47% | = | 13.79% | ||
| 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 | 14.32% | ||||||||||
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 | 537) | (13) | 276) | 140) | (2) | |
| Invested capital2 | 8,921) | 8,350) | 7,857) | 6,976) | 6,887) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 6.02% | -0.16% | 3.51% | 2.01% | -0.02% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 138.73% | 200.23% | 196.59% | — | — | |
| Arista Networks Inc. | 20.64% | 16.17% | 31.22% | — | — | |
| Cisco Systems Inc. | 3.38% | 3.36% | 2.60% | — | — | |
| Dell Technologies Inc. | -0.70% | 3.17% | -1.36% | — | — | |
| Lumentum Holdings Inc. | -19.00% | -6.33% | 5.99% | — | — | |
| Super Micro Computer Inc. | -1.42% | -9.62% | -18.07% | — | — | |
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 × 537 ÷ 8,921 = 6.02%
4 Click competitor name to see calculations.
The financial performance over the five-year period from 2019 to 2023 demonstrates a volatile but generally upward trajectory in economic value creation, underpinned by a consistent expansion of the capital base.
- Invested Capital Growth
- A steady upward trend is observed in invested capital, which increased from 6,887 million US dollars in 2019 to 8,921 million US dollars by 2023. This continuous growth indicates a persistent deployment of resources into the business operations over the analyzed timeframe.
- Economic Profit Volatility
- Economic profit exhibited significant fluctuations throughout the period. A marginal deficit of 2 million US dollars in 2019 was followed by a period of growth, reaching 276 million US dollars by 2021. A subsequent contraction occurred in 2022, resulting in an economic loss of 13 million US dollars, before a substantial recovery in 2023, where economic profit peaked at 537 million US dollars.
- Economic Spread Ratio Analysis
- The economic spread ratio closely correlates with the trends observed in economic profit, reflecting the company's ability to generate returns in excess of its cost of capital. The ratio began at -0.02% in 2019, rose to 3.51% in 2021, and dipped to -0.16% in 2022. The period concludes with a significant expansion to 6.02% in 2023, marking the highest level of capital efficiency and value creation within the five-year window.
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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 | 537) | (13) | 276) | 140) | (2) | |
| Net sales | 9,978) | 9,112) | 8,171) | 7,414) | 7,887) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 5.39% | -0.14% | 3.38% | 1.89% | -0.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.82% | 23.66% | 22.84% | — | — | |
| Arista Networks Inc. | 15.58% | 11.14% | 18.28% | — | — | |
| Cisco Systems Inc. | 3.37% | 3.77% | 2.90% | — | — | |
| Dell Technologies Inc. | -0.39% | 1.66% | -1.17% | — | — | |
| Lumentum Holdings Inc. | -31.18% | -9.25% | 6.75% | — | — | |
| Super Micro Computer Inc. | -0.48% | -4.09% | -6.51% | — | — | |
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 × 537 ÷ 9,978 = 5.39%
3 Click competitor name to see calculations.
The analysis of the five-year period from 2019 to 2023 reveals a volatile but generally expanding capacity to generate economic value above the cost of capital. While top-line revenue exhibited steady growth after a brief contraction in 2020, economic profit experienced significant fluctuations, characterized by a substantial peak in the final year of the period.
- Net Sales Trajectory
- A sustained upward trend in net sales is observed from 2020 to 2023, with revenues increasing from 7,414 million US$ to 9,978 million US$. This indicates a consistent expansion of the revenue base, with an overall increase of approximately 26.5% from 2019 levels.
- Economic Profit Volatility
- Economic profit demonstrated instability, starting at -2 million US$ in 2019 and fluctuating through 2022 before reaching a period high of 537 million US$ in 2023. A notable divergence occurred in 2022, where economic profit fell to -13 million US$ despite the continued growth in net sales, suggesting a temporary misalignment between operational growth and the cost of capital.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of absolute economic profit. After improving from -0.02% in 2019 to 3.38% in 2021, the margin contracted to -0.14% in 2022. The subsequent recovery in 2023 to a margin of 5.39% represents the strongest performance in the analyzed timeframe, indicating a significant improvement in the efficiency of value creation relative to sales volume.
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