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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Economic Profit
SLB N.V., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
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
= – × =
The financial performance, as measured by economic value added (EVA) metrics, demonstrates a significant shift over the five-year period. Initially, the company experienced substantial economic losses, which gradually diminished but remained negative throughout the analyzed timeframe. This analysis details the trends in net operating profit after taxes (NOPAT), cost of capital, invested capital, and the resulting economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a dramatic improvement from a substantial loss of US$11,275 million in 2020 to a positive value of US$2,298 million in 2021. This positive trend continued, with NOPAT increasing to US$3,801 million in 2022 and further to US$4,641 million in 2023. The rate of increase slowed in 2024, with NOPAT reaching US$4,815 million, indicating a maturing growth phase.
- Cost of Capital
- The cost of capital increased consistently from 13.37% in 2020 to 18.15% in 2022. This rise suggests increasing risk or changing market conditions impacting the company’s funding costs. However, the cost of capital decreased slightly in 2023 to 17.94% and continued to decline to 17.40% in 2024, potentially reflecting improved financial stability or a more favorable economic outlook.
- Invested Capital
- Invested capital remained relatively stable between 2020 and 2022, fluctuating around US$33 billion. A noticeable increase occurred in 2023, reaching US$37,776 million, and continued in 2024 to US$39,383 million. This suggests a period of increased investment in operations or acquisitions.
- Economic Profit
- Economic profit, representing the difference between NOPAT and the cost of capital applied to invested capital, was significantly negative throughout the period. The largest loss was recorded in 2020 at US$15,744 million. While the losses diminished over time – to US$3,128 million in 2021, US$2,358 million in 2022, and US$2,134 million in 2023 – they persisted in 2024, amounting to US$2,035 million. The narrowing of the loss is attributable to the growth in NOPAT, but the cost of capital and increasing invested capital continue to outweigh the operating profits generated.
In summary, while the company has demonstrably improved its operational profitability as indicated by NOPAT, it has not yet achieved a level of profitability sufficient to cover its cost of capital given its invested capital base. The continued negative economic profit suggests that the company is not generating returns exceeding its cost of funding, despite positive trends in NOPAT.
Net Operating Profit after Taxes (NOPAT)
SLB N.V., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 (loss) attributable to SLB.
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 income (loss) attributable to SLB.
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 performance over the five-year period demonstrates a significant turnaround and continued improvement. Initially, there was a substantial net loss attributable to the company, followed by positive net income figures in subsequent years that increased steadily. This positive trend in net income is indicative of enhanced profitability and operational efficiency.
Similarly, the net operating profit after taxes (NOPAT) reflects a comparable trajectory. The initial negative value suggests operational challenges; however, subsequent values indicate recovery and growth. The NOPAT consistently increased year over year, suggesting improved operational management and a stronger ability to generate profit from core activities after accounting for taxes.
- Net Income (Loss) Attributable to the Company
- The net income was significantly negative in the initial year, reflecting considerable losses. From the following year onward, the company achieved positive net income that increased each year, reaching the highest value in the final reported year. This consistent growth highlights successful efforts in boosting profitability and possibly the impact of strategic initiatives or market conditions favoring the company.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures mirror the profit improvement seen in net income. Starting with a large operating loss, NOPAT turned positive in the second year and grew progressively each year. This metric suggests the company not only recovered from its operating losses but also enhanced its core operational efficiency, resulting in increased post-tax operating profits.
Overall, the data suggest a positive operational turnaround and financial strengthening over the period, with marked improvements in profitability and operational effectiveness. The upward trends in both net income and NOPAT indicate that the company has managed to overcome initial difficulties and establish a trajectory of sustainable growth.
Cash Operating Taxes
SLB N.V., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
- Tax Expense (Benefit) Trend
- The tax expense demonstrated a significant shift from a negative value of -812 million US dollars in 2020 to positive values in subsequent years. Specifically, it increased to 446 million in 2021, followed by a further rise to 779 million in 2022. This upward trajectory continued with 1,007 million in 2023 and reached 1,093 million in 2024. This trend indicates a transition from a tax benefit or credit situation in 2020 towards steadily increasing tax liabilities over the following periods.
- Cash Operating Taxes Trend
- Cash operating taxes exhibited a consistent upward trend across the five-year period. Beginning at 546 million US dollars in 2020, it increased moderately to 579 million in 2021. This increase became more pronounced in 2022 with a rise to 905 million. The subsequent years recorded further increases to 1,070 million in 2023 and 1,211 million in 2024. The data suggests growing cash outflows related to tax obligations, reflecting increasing taxable income or changes in tax regulations.
- Overall Tax Position
- Collectively, the data reveals a clear pattern of increasing tax-related expenses. The movement from a tax benefit in 2020 to steadily higher tax expenses and cash operating taxes over five years suggests improving profitability or changing tax circumstances that require greater tax payments. The consistent increase in cash operating taxes aligns with the growing tax expense, underscoring a heightened cash burden related to taxation.
Invested Capital
SLB N.V., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 SLB stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of marketable securities.
The financial data reveals notable trends in key components of the company's capital structure and invested capital over a five-year period, from December 31, 2020, through December 31, 2024.
- Total reported debt & leases
- This figure shows a consistent decline from US$17,897 million at the end of 2020 to US$12,925 million by the end of 2022. Thereafter, it stabilizes with minimal fluctuations, holding steady at around US$12,775 to US$12,816 million through 2023 and 2024. This trend indicates a substantial reduction in leverage or debt obligations in the initial years, followed by a period of debt stabilization.
- Total SLB stockholders’ equity
- Equity exhibits a strong upward trajectory, increasing from US$12,071 million in 2020 to US$21,130 million in 2024. The progression is steady year-over-year, representing significant growth in the company’s net assets and possibly reflecting retained earnings, capital injections, or other equity-enhancing activities.
- Invested capital
- The invested capital metric shows a moderate increase from US$33,428 million in 2020 to US$39,383 million in 2024. There is a slight dip observed in 2021, but following that, the invested capital consistently increases year by year, with a notable rise from 2022 onward. This pattern indicates an overall expansion in the assets deployed in the business, suggesting ongoing investment activities and possible growth initiatives.
Overall, the data indicates a strengthening in the company’s financial position characterized by a reduction in debt levels during the early years alongside steady growth in equity and invested capital. The stable debt levels in later years combined with increasing equity and invested capital suggest improved capital structure management and potentially enhanced financial flexibility.
Cost of Capital
SLB N.V., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
SLB N.V., economic spread ratio calculation
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
The economic spread ratio demonstrates a consistent, albeit decelerating, negative trend over the five-year period. While remaining negative throughout, the ratio exhibits improvement annually, indicating a diminishing gap between the cost of capital and returns generated from invested capital.
- Economic Spread Ratio
- In 2020, the economic spread ratio stood at -47.10%. This represents the largest negative spread within the observed timeframe. A substantial improvement is noted in 2021, with the ratio increasing to -9.51%, signifying a reduced disparity between returns and the cost of capital.
- The rate of improvement slows in subsequent years. The ratio further improved to -6.95% in 2022 and -5.65% in 2023. By 2024, the economic spread ratio reached -5.17%, representing the smallest negative spread observed. This suggests a continued, though diminishing, positive trend in the relationship between returns and the cost of capital.
The invested capital figures show a general upward trend, increasing from US$33,428 million in 2020 to US$39,383 million in 2024. This increase in invested capital occurs alongside the improving, yet negative, economic spread ratio.
- Economic Profit
- Economic profit remains negative throughout the period, mirroring the negative economic spread ratio. The magnitude of the economic profit loss decreases over time, from -US$15,744 million in 2020 to -US$2,035 million in 2024. This reduction in the absolute value of economic profit aligns with the observed improvement in the economic spread ratio.
The combined trends suggest that while the company is consistently destroying economic value (negative economic profit), the rate of value destruction is decreasing. The increasing invested capital, coupled with the improving economic spread ratio, indicates a potential shift towards more efficient capital allocation, though further monitoring is required to determine if a positive economic profit can be achieved.
Economic Profit Margin
SLB N.V., economic profit margin calculation
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
The economic profit margin demonstrates a consistent, albeit decelerating, improvement over the five-year period. While negative throughout, the magnitude of the loss has decreased year over year. This suggests increasing efficiency in capital allocation and profitability, despite continued negative economic profit.
- Economic Profit
- Economic profit remains negative across the observed period, ranging from a loss of US$15,744 million in 2020 to a loss of US$2,035 million in 2024. The absolute value of the loss has decreased substantially, indicating a narrowing gap between returns generated and the cost of capital. The rate of decrease in the loss is slowing, with smaller reductions observed in later years.
- Revenue
- Revenue exhibits volatility, initially decreasing from US$23,601 million in 2020 to US$22,929 million in 2021, before increasing significantly to US$28,091 million in 2022. This upward trend continues through 2023 (US$33,135 million) and 2024 (US$36,289 million), demonstrating consistent revenue growth in the latter part of the period. The growth in revenue appears to be a key driver in the improving economic profit margin.
- Economic Profit Margin
- The economic profit margin begins at -66.71% in 2020, representing a substantial loss relative to revenue. The margin improves to -13.64% in 2021, then to -8.39% in 2022, -6.44% in 2023, and finally to -5.61% in 2024. This indicates a consistent reduction in the percentage of revenue consumed by costs exceeding the required rate of return. The rate of improvement in the margin is decreasing, with the smallest change occurring between 2023 and 2024.
The combined trends suggest that while the company continues to operate at an economic loss, its performance is improving. The increasing revenue is contributing to a smaller percentage loss, indicating enhanced operational efficiency or a more favorable capital structure. Further investigation into the components of economic profit – net operating profit after tax and the cost of capital – would be necessary to pinpoint the specific drivers of this trend.