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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- Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Economic Profit
Raytheon Co., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals several key trends relating to profitability, capital efficiency, and economic value creation over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a generally increasing trend, rising from $2,171 million in 2015 to $3,427 million in 2019. Despite a slight dip in 2017 compared to 2016, the overall upward movement indicates improving operational profitability over the period.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating marginally between 11.7% and 12.39% across the years. This stability suggests consistent capital market conditions and borrowing costs, with a slight uptick in 2019 that could indicate marginally higher financing costs or increased risk perceptions.
- Invested Capital
- Invested capital increased steadily from $22,413 million in 2015 to $26,688 million in 2019. This growth reflects ongoing investment in assets or operations, rising by around 19% over the five years, which could signal expansion activities or inflation effects on asset values.
- Economic Profit
- Economic profit was negative in the initial four years, although the magnitude of the loss improved notably, moving from -$452 million in 2015 to -$172 million in 2018. In 2019, economic profit turned positive to $120 million, indicating that the company finally began generating returns above its cost of capital. This shift suggests enhanced value creation in the most recent year, supported by higher NOPAT relative to invested capital and cost of capital.
Net Operating Profit after Taxes (NOPAT)
Raytheon Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Raytheon Company.
4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Raytheon Company.
7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
- Net income attributable to Raytheon Company
- The net income shows a generally positive trend over the five-year period. Starting at 2,074 million US dollars in 2015, there was a modest increase in 2016 to 2,211 million. However, the net income slightly declined in 2017 to 2,024 million. From 2017 onwards, the net income rose significantly, reaching 2,909 million in 2018 and further increasing to 3,343 million by the end of 2019. This pattern indicates recovery and robust growth in profitability in the latter years.
- Net operating profit after taxes (NOPAT)
- NOPAT also demonstrates an upward trajectory across the reported years. The value grew steadily from 2,171 million US dollars in 2015 to 2,456 million in 2016. A slight decline occurred in 2017, with NOPAT at 2,393 million, mirroring the dip seen in net income for that year. In 2018, NOPAT increased sharply to 3,010 million and continued its upward movement to 3,427 million in 2019. This trend underscores improving operational efficiency and effective tax management contributing to profit growth over the period.
- Overall Trend Analysis
- The data reveals a consistent improvement in both net income and NOPAT from 2015 to 2019, notwithstanding the minor setbacks in 2017. The stronger gains after 2017 suggest enhanced operational performance and possibly favorable market or internal conditions. The parallel movement between net income and NOPAT implies that the operating profits, after accounting for taxes, significantly drive the net profitability of the company.
Cash Operating Taxes
Raytheon Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial data indicates a fluctuating pattern in the provisions for federal and foreign income taxes over the five-year period. Starting at 733 million US dollars in 2015, the provision increased steadily to reach a peak of 1,114 million in 2017. However, in 2018, the provision experienced a significant decline to 264 million, followed by a recovery to 658 million in 2019. This trend suggests variability in the company's taxable income or changes in tax rates or policies during these years.
Regarding cash operating taxes, the figures show a less consistent trend. The amount decreased slightly from 881 million in 2015 to 840 million in 2016, then rose to 939 million in 2017. Similar to the provision for income taxes, cash operating taxes dropped considerably in 2018 to 327 million before increasing again to 721 million in 2019. The parallel movements in both provision and cash taxes in 2018 and 2019 indicate an underlying correlation in tax strategies or tax liabilities paid.
- Provision for Federal and Foreign Income Taxes
- General upward trend from 2015 to 2017, followed by a sharp decline in 2018 and partial rebound in 2019
- Reflects volatility possibly due to changes in earnings before tax, tax regulations, or deferred tax assets/liabilities adjustments
- Cash Operating Taxes
- Slight fluctuations with a significant drop in 2018 and a recovery in 2019
- Movements suggest impact from operational cash flows and timing differences in tax payments
- Comparison and Insights
- Both tax-related figures exhibit synchronized declines in 2018, indicating potential operational or fiscal events affecting tax computations or payments during that year
- The rebound in 2019 points to normalization or adjustments after an anomalous fiscal period
Invested Capital
Raytheon Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 equity equivalents to total Raytheon Company stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of short-term investments.
- Total reported debt & leases
-
The total reported debt and leases demonstrate a gradual declining trend over the analyzed period. Starting from 6,306 million US dollars in 2015, the figure increased slightly in 2016 to 6,421 million but began to decrease thereafter. By 2019, the total reported debt and leases had reduced to 5,679 million, reflecting a consistent effort to manage and reduce debt levels over time.
- Total Raytheon Company stockholders’ equity
-
The stockholders’ equity shows a generally positive upward trend from 2015 to 2019. It started at 10,128 million US dollars in 2015 and experienced a minor decline through 2017, reaching 9,963 million. However, a significant recovery occurred in 2018 and 2019, with equity increasing to 11,472 million and then to 12,223 million respectively. This growth suggests an improvement in the company’s net asset base and potential retention of earnings or capital injection during these latter years.
- Invested capital
-
Invested capital shows a steady increase over the period examined. Beginning at 22,413 million US dollars in 2015, it rose each year, attaining 23,509 million in 2016 and edging slightly upward to 23,548 million in 2017. Subsequently, there was a more pronounced increase in 2018 to 26,081 million, continuing to grow in 2019 to 26,688 million. This upward trend indicates ongoing capital investment or asset expansion, potentially supporting future growth initiatives.
Cost of Capital
Raytheon Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and 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 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Raytheon Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals notable trends over the five-year period ending December 31, 2019. The economic profit experienced considerable fluctuation, starting with a significant negative value of -452 million US dollars in 2015. Although there was some improvement in 2016, economic profit declined again in 2017 to an even more negative level of -495 million US dollars. Subsequently, the losses diminished substantially by 2018, reaching -172 million US dollars, before turning positive in 2019 with an economic profit of 120 million US dollars. This progression indicates a gradual recovery to profitability after a period of economic losses.
Invested capital displayed a consistent upward trend throughout the entire period. Starting at 22,413 million US dollars in 2015, it rose steadily each year to reach 26,688 million US dollars by the end of 2019. This increase suggests ongoing investment and asset accumulation within the company, reflecting growth in the scale of operations or capital base.
The economic spread ratio, which measures the return spread on invested capital, exhibited a pattern aligned with the economic profit figures. It was negative in each of the first four years, indicating returns below the cost of capital, with the lowest point at -2.10% in 2017. However, this ratio improved consistently from 2018 onward, turning positive in 2019 at 0.45%. This improvement further supports the notion of the company shifting towards more efficient capital utilization and enhanced economic value creation in the latest year.
Economic Profit Margin
Raytheon Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several key trends and shifts over the five-year period under review.
- Net Sales
- Net sales experienced a consistent year-over-year increase throughout the period, rising from 23,247 million US dollars in 2015 to 29,176 million US dollars in 2019. This upward trend indicates steady revenue growth, representing an approximate 25% increase over the five years.
- Economic Profit
- The economic profit figures display considerable volatility. The company suffered economic losses from 2015 through 2018, recording the most substantial loss in 2017 with -495 million US dollars. However, there is a notable recovery in 2019, where economic profit turns positive to 120 million US dollars. This shift indicates improved profitability and value creation in the last year of the period.
- Economic Profit Margin
- Mirroring the economic profit values, the economic profit margin remains negative for the first four years, fluctuating between -1.94% (2015) and -0.63% (2018), and then improves to a positive 0.41% in 2019. The progressive narrowing of negative margins and eventual positivity in 2019 reflect enhanced efficiency and returns relative to net sales.
Overall, the data suggest that while revenue growth was steady and consistent, profitability outcomes were initially weak but showed substantial improvement by 2019. The turnaround in economic profit and margin in the final year could indicate effective cost management or other operational improvements leading to enhanced economic value generation.