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.
Paying user area
Try for free
Raytheon Co. pages available for free this week:
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Raytheon Co. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Raytheon Co., economic profit calculation
US$ 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 annual financial data reveals several key trends for the company over the five-year period ending December 31, 2019.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a generally upward trajectory, increasing from $2,171 million in 2015 to $3,427 million in 2019. There was a slight dip observed in 2017 where NOPAT decreased marginally compared to 2016 but rebounded strongly the following years. This reflects an overall strengthening in operational profitability over the period.
- Cost of Capital
- The cost of capital showed a steady incremental increase, moving from 11.72% in 2015 to 12.41% in 2019. The gradual rise suggests increasing expectations for returns or higher risk perceptions associated with the company's investments over these years.
- Invested Capital
- Invested capital expanded consistently from $22,413 million in 2015 to $26,688 million by the end of 2019. The capital base grew steadily year-on-year, indicating ongoing investments or asset accumulation to support business operations and growth objectives.
- Economic Profit
- The economic profit, which accounts for the cost of capital, remained negative from 2015 through 2018, although the magnitude of losses decreased, improving from -$456 million in 2015 to -$177 million in 2018. In 2019, economic profit turned positive to $114 million, marking a significant improvement in value creation after covering the cost of capital.
In summary, while the company increased both its operating profits and invested capital, the cost of capital rose slightly during the same timeframe. Despite initial economic losses, improvement in operational performance combined with efficient capital utilization led to positive economic profit in the final year observed. This indicates an enhanced ability to generate returns exceeding financing costs, reflecting improved financial health and potential for shareholder value creation.
Net Operating Profit after Taxes (NOPAT)
Raytheon Co., NOPAT calculation
US$ 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.
- Economic Profit
- The economic profit showed a fluctuating trend over the observed five-year period. Starting from a significant negative value of -456 million US dollars in 2015, the loss decreased to -343 million in 2016, indicating some improvement. However, the economic profit worsened again to -500 million in 2017, before improving substantially in 2018 to -177 million. Notably, in 2019, the company achieved a positive economic profit of 114 million US dollars, signifying a turnaround and improved value creation.
- Invested Capital
- The invested capital consistently increased throughout the period. It rose from 22,413 million US dollars at the end of 2015 to 23,509 million in 2016, maintaining marginal growth in 2017 at 23,548 million. There was a more pronounced increase from 2017 onward, with invested capital reaching 26,081 million in 2018 and further growing to 26,688 million in 2019. This steady increase suggests ongoing investment and asset accumulation.
- Economic Spread Ratio
- The economic spread ratio, reflecting the return spread over the cost of capital, remained negative for most of the period, signaling that returns did not sufficiently cover the capital cost. It started at -2.04% in 2015, improved to -1.46% in 2016, then declined again to -2.12% in 2017. A notable improvement was observed in 2018 when the ratio rose to -0.68%, and this trend continued positively into 2019 when it turned positive at 0.43%. The shift to a positive spread ratio in 2019 aligns with the positive economic profit, indicating improved profitability relative to capital costs.
- Overall Analysis
- The data reveals a period marked by initial financial challenges, with negative economic profits and economic spread ratios indicating underperformance relative to invested capital costs. However, the latter years show clear signs of recovery and value creation. The continuous growth in invested capital suggests ongoing investments, while the positive shift in economic profit and spread ratio in 2019 reflects enhanced operational efficiency or profitability. The trajectory implies successful efforts to generate returns exceeding capital costs by the end of the period examined.
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.
- Net Sales
- There is a consistent upward trend in net sales over the five-year period. Sales increased steadily from approximately 23.2 billion US dollars in 2015 to nearly 29.2 billion US dollars in 2019. This reflects ongoing growth in revenue generation, with an average annual increase that suggests expansion or increased demand for products and services.
- Economic Profit
- The economic profit figures show notable volatility and an overall improvement trend. Initially, economic profit was deeply negative at -456 million US dollars in 2015, becoming slightly less negative in 2016 at -343 million. It declined again in 2017 to -500 million but improved significantly in 2018 to -177 million, culminating in a positive figure of 114 million US dollars in 2019. This progression from losses to a positive economic profit indicates enhanced operational efficiency or improved cost management leading to value creation in the latter year.
- Economic Profit Margin
- The economic profit margin percentage mirrors the behavior seen in economic profit. Starting at -1.96% in 2015, it shows a gradual improvement trend, with a reduction in negative margin to -0.65% by 2018 and eventually turning positive at 0.39% in 2019. The margin improvement signifies a better conversion of sales into actual economic profit, reflecting improved profitability relative to revenue over time.
- Overall Analysis
- The company has demonstrated consistent top-line growth with increasing net sales each year. While economic profit was negative for the majority of the period, there was a clear positive trajectory, culminating in a positive economic profit and margin by the end of the period analyzed. This suggests a positive turnaround in financial performance, with operational improvements or strategic changes likely contributing to enhanced profitability. The improvement in economic profit margin also suggests better cost control or higher value generation per unit of sales as the company moves toward sustained profitability.