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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ONEOK Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
ONEOK Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
An analysis of economic profit from 2018 to 2022 reveals a consistent failure to generate value above the cost of capital, as economic profit remained negative throughout the entire five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a general upward trajectory despite a significant contraction in 2020. Starting at US$ 1,887,822 thousand in 2018, profits peaked at US$ 2,721,886 thousand by 2022. The dip to US$ 1,365,278 thousand in 2020 represents a temporary decline before a strong recovery in 2021 and 2022.
- Invested Capital and Cost of Capital
- Invested capital increased steadily from US$ 16,415,008 thousand in 2018 to US$ 22,064,152 thousand in 2022, indicating an expansion of the asset base. During this time, the cost of capital fluctuated, decreasing from 20.18% in 2018 to a low of 16.10% in 2020, before rising again to 19.31% by the end of 2022.
- Economic Profit Performance
- Economic profit remained in negative territory for all reported years, signifying that the returns generated were insufficient to cover the cost of the capital employed. The economic loss widened from US$ 1,425,315 thousand in 2018 to its maximum deficit of US$ 2,117,422 thousand in 2020. Although a recovery was observed in 2021 with a reduced loss of US$ 1,331,372 thousand, the economic profit declined again in 2022 to negative US$ 1,539,390 thousand.
The data indicates that while NOPAT has grown significantly in recent years, this growth has not been sufficient to offset the high cost of capital relative to the increasing amount of invested capital. The persistence of negative economic profit suggests that the company has not achieved a positive economic value added (EVA) during the period analyzed.
Net Operating Profit after Taxes (NOPAT)
ONEOK Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income attributable to ONEOK.
3 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
4 2022 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
5 Addition of after taxes interest expense to net income attributable to ONEOK.
The financial data reveals notable trends in the profitability metrics over the five-year period.
- Net income attributable to ONEOK
- The net income demonstrates fluctuations within the observed timeframe. It increased from 1,151,703 thousand USD in 2018 to 1,278,577 thousand USD in 2019, representing moderate growth. In 2020, there was a significant decline to 612,809 thousand USD, indicating a considerable reduction in profitability. However, the trend reversed in the subsequent years, with net income rising sharply to 1,499,706 thousand USD in 2021 and further increasing to 1,722,221 thousand USD in 2022. This rebound suggests a recovery and improvement in operational performance post-2020.
- Net operating profit after taxes (NOPAT)
- NOPAT followed a pattern similar to net income but with higher absolute values, reflecting operating efficiency post-tax adjustments. Starting at 1,887,822 thousand USD in 2018, it rose to 2,040,364 thousand USD in 2019. A decline was again observed in 2020, dropping to 1,365,278 thousand USD, which parallels the dip in net income during the same year. Subsequently, NOPAT experienced a strong recovery, reaching 2,553,175 thousand USD in 2021 and rising further to 2,721,886 thousand USD in 2022. This trajectory indicates improvements in operating profitability and effective tax management after 2020.
Overall, both net income and NOPAT reveal a downturn in 2020, likely attributable to adverse economic or operational conditions during that period, followed by considerable recovery and growth in the following years. The magnitude of increase post-2020 surpasses the pre-2020 levels, implying strengthened financial performance and resilience.
Cash Operating Taxes
ONEOK Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
The financial data reveals a notable pattern in the provision for income taxes and cash operating taxes from 2018 to 2022.
- Provision for Income Taxes
- The provision for income taxes experienced a decline from 2018 (US$ 362,903 thousand) to 2020 (US$ 189,507 thousand). This drop was followed by a sharp increase in 2021 (US$ 484,498 thousand) and continued to rise in 2022, reaching US$ 527,424 thousand. This trend indicates a significant fluctuation, with the provision nearly tripling between 2020 and 2022.
- Cash Operating Taxes
- Cash operating taxes showed a steady upward trend over the entire period. Beginning at US$ 100,721 thousand in 2018, the amount increased each year, reaching US$ 206,551 thousand in 2022. The growth rate appears consistent, indicating increasing cash outflows related to operating taxes year over year.
Overall, the provision for income taxes showed volatility with a sharp recovery and growth after 2020, while cash operating taxes steadily increased throughout the observed periods. This may suggest changes in tax liabilities or profitability affecting the provisions, coupled with a consistent increase in actual cash taxes paid.
Invested Capital
ONEOK Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to total ONEOK shareholders’ equity.
4 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases have shown an overall increasing trend from 2018 to 2020, rising sharply from approximately 9.4 billion US dollars to around 14.36 billion US dollars. Thereafter, it experienced a slight decrease in 2021, followed by stabilization in 2022 at approximately 13.7 billion US dollars.
- Total ONEOK shareholders’ equity
- Shareholders’ equity declined steadily from about 6.58 billion US dollars in 2018 to around 6 billion US dollars in 2021, indicating a gradual reduction in net assets relative to common shareholders. However, in 2022, equity saw a moderate increase to roughly 6.49 billion US dollars, reversing the prior downward trend.
- Invested capital
- Invested capital expanded significantly over the observed period. Starting from approximately 16.4 billion US dollars in 2018, it increased nearly continuously to about 22.06 billion US dollars by 2022. A peak occurred in 2020 at around 21.63 billion US dollars, followed by a marginal dip in 2021 before rising again in 2022.
Cost of Capital
ONEOK Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Series E Preferred Stock | ÷ | = | × | = | |||||||||
| Debt and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Series E Preferred Stock | ÷ | = | × | = | |||||||||
| Debt and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Series E Preferred Stock | ÷ | = | × | = | |||||||||
| Debt and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Series E Preferred Stock | ÷ | = | × | = | |||||||||
| Debt and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Series E Preferred Stock | ÷ | = | × | = | |||||||||
| Debt and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ONEOK Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analyzed period is characterized by a consistent failure to generate positive economic value, as evidenced by the persistent negative values in economic profit and the economic spread ratio. The organization has consistently operated below its cost of capital, indicating that the returns generated on invested capital were insufficient to cover the required rate of return for its stakeholders.
- Invested Capital Growth
- A steady upward trajectory in invested capital is observed from 2018 through 2020, with the base expanding from $16.4 billion to $21.6 billion. Following this period of growth, capital levels stabilized, maintaining a range between $21.4 billion and $22.1 billion through the end of 2022.
- Economic Profit Volatility
- Economic profit remained negative throughout the five-year window. The deficit expanded annually from 2018, reaching its most severe point in 2020 with a negative value of $2.1 billion. A notable recovery occurred in 2021, where the deficit narrowed to $1.3 billion, before widening again to $1.5 billion in 2022.
- Economic Spread Ratio Trends
- The economic spread ratio mirrored the trends seen in economic profit, remaining negative across the entire period. The ratio deteriorated from -8.68% in 2018 to a trough of -9.79% in 2020. Although a significant improvement was recorded in 2021, bringing the ratio to -6.22%, this progress was partially reversed in 2022, with the ratio slipping to -6.98%.
Overall, the data indicates a period of capital expansion that did not translate into economic value creation. The peak inefficiency occurred in 2020, and while 2021 showed signs of narrowing the gap between returns and the cost of capital, the subsequent decline in 2022 suggests that the underlying drivers of negative economic spread remain unresolved.
Economic Profit Margin
ONEOK Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by persistent negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital throughout the analyzed period. Despite the continuous economic losses, a notable recovery in revenue scaling after 2020 contributed to a steady improvement in the economic profit margin.
- Economic Profit Trajectory
- Economic profit experienced a consistent decline from 2018 through 2020, with losses expanding from 1.43 billion US dollars to a peak deficit of 2.12 billion US dollars. A significant correction occurred in 2021, where losses narrowed to 1.33 billion US dollars, before slightly widening again to 1.54 billion US dollars in 2022.
- Revenue Volatility and Growth
- A V-shaped trend is observed in revenues, which decreased from 12.59 billion US dollars in 2018 to a period low of 8.54 billion US dollars in 2020. This downward trend reversed sharply in 2021 and 2022, with revenues climbing to 16.54 billion US dollars and 22.39 billion US dollars, respectively.
- Economic Profit Margin Evolution
- The economic profit margin mirrored the volatility of revenues and absolute economic profit. The margin deteriorated from -11.32% in 2018 to its lowest point of -24.79% in 2020. Following the revenue surge, the margin improved significantly to -8.05% in 2021 and further to -6.88% in 2022. This progression indicates that while the company continued to destroy economic value, the magnitude of this loss relative to total revenue decreased as the scale of operations expanded.