Economic Value Added (EVA)
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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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Procter & Gamble Co. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Debt to Equity since 2005
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Economic Profit
Procter & Gamble Co., economic profit calculation
US$ in millions
| 12 months ended: | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a significant increase from 3768 million USD in 2019 to 12785 million USD in 2020. Following this sharp rise, it continued an upward trend, reaching 15111 million USD by 2024. The growth rate slowed after 2020, but steady improvements were observed year over year.
- Cost of Capital
- The cost of capital displayed a gradual upward trend, starting at 7.97% in 2019 and progressively increasing to 8.26% by 2024. This steady increase indicates rising expenses related to financing and investment risk over the period.
- Invested Capital
- Invested capital grew from 89875 million USD in 2019 to a peak of 101100 million USD in 2020, before declining to 93924 million USD in 2022. Subsequently, it resumed an increasing pattern, reaching 97641 million USD by 2024, though it did not return to the 2020 peak level. This fluctuation suggests adjustments in asset investments or capital structure management.
- Economic Profit
- Economic profit was negative at -3392 million USD in 2019 but experienced a marked turnaround to positive figures starting in 2020 with 4738 million USD. It then steadily increased to 7041 million USD by 2024. The trend reflects improved profitability above the cost of capital and enhanced value creation for shareholders across the period.
Net Operating Profit after Taxes (NOPAT)
Procter & Gamble Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in restructuring reserves.
3 Addition of increase (decrease) in equity equivalents to net earnings attributable to Procter & Gamble (P&G).
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net earnings attributable to Procter & Gamble (P&G).
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data demonstrates a significant upward trend in both net earnings attributable to the company and net operating profit after taxes (NOPAT) over the six-year period ending June 30, 2024.
- Net Earnings Attributable to Procter & Gamble (P&G)
- This metric shows a marked increase from 3,897 million USD in 2019 to a peak of 14,879 million USD in 2024. The most substantial jump occurred between 2019 and 2020, rising by approximately 234%, indicating a major improvement in profitability or a one-time gain during this period. From 2020 onwards, net earnings maintained steady growth, with incremental increases each year, reflecting sustained profitability and possibly effective cost management or revenue growth.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT follows a closely aligned pattern with net earnings, beginning at 3,768 million USD in 2019 and increasing to 15,111 million USD by 2024. The initial surge between 2019 and 2020 is similarly notable, with a rise exceeding 239%. Subsequent annual increases are steady yet moderate, consistent with improving operational efficiency and profitability after tax considerations.
Overall, both indicators reflect strong financial performance improvements, particularly from 2019 to 2020, followed by consistent growth. This suggests the company has effectively enhanced its earnings capacity and operational benefits over the analyzed time frame.
Cash Operating Taxes
Procter & Gamble Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
The analysis of tax-related financial figures over the six-year period reveals a consistent upward trend in both tax expense and cash operating taxes, with minor fluctuations.
- Tax Expense
-
There is a clear increase from 2,103 million USD in 2019 to 3,787 million USD in 2024. The increase is steady year-over-year, with a more moderate rise in 2022 compared to previous years but an acceleration again in 2023 and 2024. This suggests an overall growing tax liability, possibly reflecting increasing profitability or changes in taxable income.
- Cash Operating Taxes
-
This metric shows a similar pattern, starting at 2,583 million USD in 2019 and increasing to 4,135 million USD in 2024. Although generally rising, the cash operating taxes experienced a slight decrease from 4,168 million USD in 2023 to 4,135 million USD in 2024. Despite this minor decline, the overall trend is upwards throughout the period.
The relationship between tax expense and cash operating taxes shows that cash paid taxes are consistently higher than the tax expense recognized, which could indicate timing differences or deferred tax considerations. The growing scale of both amounts aligns with expectations of expanded operations or higher taxable earnings over the timeframe analyzed.
Invested Capital
Procter & Gamble Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of restructuring reserves.
4 Addition of equity equivalents to shareholders’ equity attributable to Procter & Gamble.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investment securities.
The annual financial data reveals several notable trends concerning the company's debt, equity, and invested capital over the six-year period from June 30, 2019, to June 30, 2024.
- Total reported debt & leases
- The total reported debt and leases demonstrate variability without a clear unidirectional trend. The amount increased from $31,235 million in 2019 to a peak of $35,611 million in 2020, followed by a decline to $32,838 million in 2021 and a further decrease to $32,293 million in 2022. This was then followed by another increase to $35,424 million in 2023 before falling again to $33,369 million in 2024. Overall, debt levels show moderate fluctuations but remain relatively within a range of approximately $31 billion to $35 billion.
- Shareholders’ equity attributable to Procter & Gamble
- Shareholders’ equity has remained relatively stable with a gradual upward trend. Starting at $47,194 million in 2019, it slightly decreased over the next two years before stabilizing near the $46 billion mark from 2020 to 2023. In 2024, equity increased significantly to $50,287 million. This increase in 2024 indicates strengthening in the company's net assets or retained earnings, improving the equity base.
- Invested capital
- Invested capital shows a pattern of increase and decrease that largely mirrors the debt movements but on a larger scale. It grew from $89,875 million in 2019 to a peak of $101,100 million in 2020, then declined over the next two years to $93,924 million in 2022. After a modest recovery to $96,550 million in 2023, invested capital slightly increased again to $97,641 million in 2024. This indicates some volatility but overall growth in capital investment over the period.
In summary, the company exhibits moderate fluctuations in total debt and invested capital, with debt levels oscillating around a mean range while invested capital shows a general upward trajectory after an initial peak. Shareholders’ equity has remained fairly constant with a noticeable increase in the latest year, suggesting improved financial strength entering the most recent period. The data reflects a prudent management of leverage combined with a focus on maintaining a solid equity base and sustained invested capital.
Cost of Capital
Procter & Gamble Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Procter & Gamble Co., economic spread ratio calculation
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
The data reveals notable trends in the economic profitability and capital efficiency over the periods analyzed. The economic profit showed a significant turnaround from a negative value in June 2019 to sustained positive and growing figures in subsequent years. Specifically, it moved from a loss of -3,392 million US dollars in 2019 to positive figures exceeding 7,000 million US dollars by 2024. This illustrates a marked improvement in generating value exceeding the cost of capital.
Invested capital increased from 89,875 million US dollars in 2019 to a peak in 2020 at 101,100 million US dollars, followed by a slight decline and stabilization around the mid-90,000 million range in the years after. This indicates that the company maintained a relatively stable level of capital investment with moderate fluctuations after the initial increase.
The economic spread ratio, representing the percentage spread between return on invested capital and the cost of capital, aligns closely with the trends in economic profit. It shifted from a negative -3.77% in 2019 to a positive and improving range above 4.69% in 2020, growing further to over 7% by 2022. Although there was a minor dip in 2023 to 7.02%, the ratio rose again in 2024 to 7.21%. This sustained positive spread indicates improved operational efficiency and profitability relative to the cost of capital over the period.
In summary, the company demonstrated a strong recovery and continuous improvement in economic profitability and return efficiency after 2019. The investments in capital stabilized while economic returns and spreads increased, signaling enhanced value creation for stakeholders during the recent years.
Economic Profit Margin
Procter & Gamble Co., economic profit margin calculation
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Net sales | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
- Net Sales
- Net sales showed a consistent upward trend over the six-year period. Starting at 67,684 million USD in mid-2019, sales increased steadily each year, reaching 84,039 million USD by mid-2024. The growth indicates a positive trajectory in revenue generation for the company throughout this period.
- Economic Profit
- Economic profit exhibited a significant turnaround. It began with a negative value of -3,392 million USD in mid-2019, reflecting a substantial loss. However, from mid-2020 onwards, this metric improved dramatically, becoming positive at 4,738 million USD. The upward trend continued, with economic profit rising annually to reach 7,041 million USD by mid-2024. This suggests improved operational efficiency and value creation during these years.
- Economic Profit Margin
- The economic profit margin mirrored the trend seen in economic profit. Initially negative at -5.01% in mid-2019, it shifted to positive territory by mid-2020, achieving 6.68%. The margin continued to increase, peaking at 8.74% in mid-2021. Although there was a slight dip to 8.26% in mid-2023, the margin slightly recovered to 8.38% by mid-2024. Overall, the margin indicates enhanced profitability relative to sales over the analyzed timeframe.