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.
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Motorola Solutions Inc. pages available for free this week:
- Cash Flow Statement
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Motorola Solutions Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial trajectory from 2019 to 2023 is characterized by a general expansion in operational profitability and invested capital, although the resulting economic profit exhibited significant volatility, including a brief period of value destruction.
- Net Operating Profit After Taxes (NOPAT) and Invested Capital
- A strong upward trend in NOPAT is observed, growing from 984 million USD in 2019 to 1,871 million USD in 2023. While a temporary decline occurred in 2022, the subsequent recovery in 2023 represents a substantial increase in operational efficiency. Parallel to this, invested capital increased consistently every year, rising from 6,887 million USD in 2019 to 8,921 million USD in 2023, indicating a sustained commitment to capital expansion.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, with a slight overall increase. Following a minor dip to 14.08% in 2020, the rate climbed steadily over the next three years, reaching 14.85% by the end of 2023.
- Economic Profit Analysis
- Economic profit showed an inconsistent pattern of growth. From 2019 to 2021, there was a marked increase from 5 million USD to 284 million USD. However, this trend reversed in 2022, with economic profit falling to -5 million USD, suggesting that the operating profit for that year failed to exceed the required return on invested capital. The period concluded with a sharp recovery in 2023, as economic profit surged to 546 million USD, marking the highest level of value creation within the analyzed timeframe.
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
= × =
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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.
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.
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 $8,921 million in 2023. The continuous rise in invested capital aligns with the increased debt levels and improving equity, suggesting ongoing investment in operational assets or expansion initiatives funded through a combination of debt and equity resources.
Cost of Capital
Motorola Solutions Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The analysis of economic value added metrics from 2019 to 2023 reveals a period of volatility in value creation, contrasted by a steady and consistent expansion of the invested capital base.
- Economic Spread Ratio
- The economic spread ratio exhibited a fluctuating trajectory over the five-year period. After starting at a marginal 0.07% in 2019, the ratio climbed steadily to 3.61% by 2021. A brief reversal occurred in 2022, when the ratio dipped to -0.06%, suggesting that the return on capital failed to exceed the cost of capital during that fiscal year. A significant recovery was observed in 2023, with the ratio reaching a peak of 6.13%, indicating a substantial improvement in the efficiency of value generation.
- Economic Profit
- Economic profit patterns closely mirrored the movements of the spread ratio. Values increased from 5 million USD in 2019 to 284 million USD in 2021. A marginal deficit of 5 million USD was recorded in 2022, aligning with the negative spread ratio of the same year. This was followed by a sharp increase in 2023, where economic profit reached 546 million USD, marking the highest level of absolute value creation within the analyzed timeframe.
- Invested Capital
- A consistent upward trend is observed in invested capital, which grew annually from 6,887 million USD in 2019 to 8,921 million USD in 2023. This indicates a continuous increase in the capital deployed into the business. While the economic profit and spread ratio experienced volatility, the growth in invested capital remained linear, suggesting a sustained strategic commitment to expanding the asset base.
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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by a general expansion in top-line revenue accompanied by significant volatility in economic value creation. While net sales demonstrated a consistent upward trajectory over the long term, the ability to generate profit above the cost of capital fluctuated, culminating in a peak efficiency level by the end of the period.
- Net Sales Growth
- A positive growth trend is observed in net sales, which increased from 7,887 million US dollars in 2019 to 9,978 million US dollars in 2023. Despite a slight contraction in 2020, the revenue stream expanded steadily from 2021 onward, indicating a broadening market presence or increased pricing power.
- Economic Profit Volatility
- Economic profit exhibited substantial variance throughout the five-year period. After starting at a marginal 5 million US dollars in 2019, the figure rose to 284 million US dollars by 2021. A sharp reversal occurred in 2022, where economic profit dipped to -5 million US dollars, signaling a period where returns did not cover the cost of capital. However, a significant recovery followed in 2023, with economic profit reaching its highest point at 546 million US dollars.
- Economic Profit Margin Trends
- The economic profit margin reflects the efficiency of value creation relative to sales. The margin expanded from 0.06% in 2019 to 3.47% in 2021, before falling to -0.05% in 2022. The subsequent surge to 5.48% in 2023 indicates a substantial improvement in the company's ability to generate economic value per dollar of sales, suggesting optimized operational efficiency or a reduction in the weighted average cost of capital relative to returns.
The divergence between the steady growth of net sales and the erratic movement of economic profit suggests that value creation was not linearly tied to revenue growth. The negative margin in 2022 represents a temporary breach in economic viability, which was aggressively corrected in 2023, resulting in the strongest value-creation performance of the analyzed period.