Stock Analysis on Net

Stryker Corp. (NYSE:SYK)

$22.49

This company has been moved to the archive! The financial data has not been updated since April 29, 2022.

Economic Value Added (EVA)

Microsoft Excel

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Economic Profit

Stryker Corp., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 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), 10-K (reporting date: 2017-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


The financial data over the five-year period reflects several key trends and insights regarding profitability, cost of capital, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)
NOPAT experienced a marked increase from 2017 to 2019, rising from 1,187 million US dollars to 2,347 million US dollars. However, this growth trend reversed in 2020, with NOPAT declining to 1,867 million US dollars, before slightly recovering to 2,015 million US dollars in 2021. This suggests a period of strong profitability growth initially, followed by volatility and a partial rebound.
Cost of Capital
The cost of capital remained relatively stable throughout the period, fluctuating marginally between 12.85% and 13.18%. Notably, there was a slight downward trend from 2017 to 2020, reaching its lowest point at 12.85%, then increasing again in 2021 to 13.11%. This stability indicates consistent capital costs despite market changes.
Invested Capital
Invested capital showed continuous growth from 2017 through 2020, increasing substantially from 17,502 million US dollars to 27,132 million US dollars. In 2021, there was a slight contraction to 26,516 million US dollars. The overall trend implies ongoing investment and expansion until 2020, with a minor reduction in the most recent year.
Economic Profit
Economic profit remained negative throughout all observed years, signaling that the returns did not exceed the cost of capital. Although the negative economic profit improved somewhat from -1,120 million US dollars in 2017 to -629 million US dollars in 2018, it deteriorated again in 2019 and 2020, reaching a low of -1,620 million US dollars. A small improvement was noted in 2021 with economic profit at -1,461 million US dollars. This persistent negative economic profit highlights challenges in generating value beyond capital costs despite profitability gains.

In summary, while operational profitability as measured by NOPAT showed growth followed by some decline and recovery, the consistent negative economic profit points to an ongoing struggle to create economic value above the cost of capital. Investment levels increased substantially until 2020 but slightly decreased in the final year, and the cost of capital remained stable overall. The data suggests a need to improve efficiency or returns on invested capital to enhance economic profitability.


Net Operating Profit after Taxes (NOPAT)

Stryker Corp., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net earnings
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
(Gain) loss on marketable securities
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
Net operating profit after taxes (NOPAT)

Based on: 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), 10-K (reporting date: 2017-12-31).

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 earnings.

4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2021 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.

7 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

8 Elimination of after taxes investment income.


Net Earnings

Net earnings experienced significant volatility over the five-year period. Beginning at 1,020 million US dollars in 2017, the figure surged remarkably to 3,553 million US dollars in 2018, representing a substantial one-year increase. However, this peak was not sustained, as net earnings declined sharply to 2,083 million US dollars in 2019 and further decreased to 1,599 million US dollars in 2020. In 2021, net earnings showed a partial recovery, increasing to 1,994 million US dollars, but remained below the peak level attained in 2018.

Net Operating Profit After Taxes (NOPAT)

NOPAT displayed a more consistent and generally upward trajectory compared to net earnings. Starting at 1,187 million US dollars in 2017, NOPAT increased steadily to 2,098 million US dollars in 2018 and further to 2,347 million US dollars in 2019. Despite a decline in 2020 to 1,867 million US dollars, likely reflecting operational challenges during that year, NOPAT rebounded in 2021 to 2,015 million US dollars. Overall, NOPAT demonstrated more resilience and less volatility than net earnings.

Comparative Insights

Comparing the two metrics reveals that net operating profit after taxes maintained a more stable and sustained improvement trajectory relative to net earnings, which exhibited marked fluctuations. The disparity in patterns suggests that non-operating factors or extraordinary items may have influenced net earnings particularly in 2018, 2019, and 2020. The decrease observed in both measures during 2020 aligns temporally with global disruptions impacting corporate performance. The subsequent partial recovery in 2021 indicates improved financial performance, though net earnings have yet to reach prior peak levels.


Cash Operating Taxes

Stryker Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Income tax expense (benefit)
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 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), 10-K (reporting date: 2017-12-31).


Income Tax Expense (Benefit)
The income tax expense exhibits significant volatility over the analyzed period. In 2017, the expense was positive at 1,043 million USD, indicating a tax liability. However, in 2018, there was a notable reversal with a tax benefit of 1,197 million USD, representing a significant reduction in tax expense or recognition of deferred tax assets. In the subsequent years, the income tax expense resumed positive values, recorded at 479 million USD in 2019, decreasing to 355 million USD in 2020, and further declining to 287 million USD by the end of 2021. This trend suggests a normalization of tax expense after the considerable benefit observed in 2018, with a consistent downward trajectory in tax expense amounts during the latter years.
Cash Operating Taxes
Cash operating taxes show a different behavior compared to the income tax expense line. Starting at 1,076 million USD in 2017, there is a sharp decline to 417 million USD in 2018. For the years 2019 and 2020, cash operating taxes remain relatively stable at 383 million USD and 354 million USD, respectively. In 2021, an increase occurs, rising to 583 million USD. This increase may indicate a higher tax cash outflow in the most recent year, potentially due to changes in taxable income, tax policy, or timing differences in tax payments. Overall, cash operating taxes appear to stabilize after the initial decrease, with a notable uptick in the final year of the period analyzed.

Invested Capital

Stryker Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Current maturities of debt
Long-term debt, excluding current maturities
Operating lease liability1
Total reported debt & leases
Total Stryker shareholders’ equity
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Non-controlling interest
Adjusted total Stryker shareholders’ equity
Marketable securities6
Invested capital

Based on: 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), 10-K (reporting date: 2017-12-31).

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 Stryker shareholders’ equity.

5 Removal of accumulated other comprehensive income.

6 Subtraction of marketable securities.


Total reported debt & leases
The total reported debt and leases exhibited an increasing trend from 2017 to 2020, rising from $7,518 million to $14,425 million. This represents a significant increase in leverage over the four-year period. However, in 2021, there was a reduction to $12,901 million, indicating some deleveraging or repayment of obligations after the peak in 2020.
Total Stryker shareholders’ equity
Shareholders’ equity showed consistent growth throughout the period under review. Starting at $9,966 million in 2017, equity steadily increased each year, reaching $14,877 million by 2021. This progression suggests ongoing retention of earnings or issuance of equity contributing to strengthening the capital base.
Invested capital
Invested capital followed an upward trajectory from 2017 to 2020, growing from $17,502 million to $27,132 million. This growth aligns with the increases in both debt and equity, reflecting expanded investment in assets or operations. In 2021, invested capital slightly decreased to $26,516 million, likely influenced by the reduction in total debt and leases observed in the same year.

Cost of Capital

Stryker Corp., 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: 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 »

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: 2019-12-31).

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: 2018-12-31).

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 – 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 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Stryker Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Abbott Laboratories
CVS Health Corp.
Elevance Health Inc.
Intuitive Surgical Inc.
Medtronic PLC
UnitedHealth Group Inc.

Based on: 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), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


Economic Profit
The economic profit showed considerable fluctuations over the five-year period. It improved from -$1,120 million in 2017 to -$629 million in 2018, indicating a reduction in economic losses. However, the economic profit declined again to -$699 million in 2019 and worsened significantly to -$1,620 million in 2020. In 2021, there was a slight improvement, with economic profit rising to -$1,461 million, though it remained substantially negative.
Invested Capital
Invested capital exhibited a consistent upward trend from 2017 through 2020, increasing from $17,502 million to $27,132 million. This represents a significant expansion in the asset base or capital employed. In 2021, invested capital slightly decreased to $26,516 million, marking the first contraction after four years of growth.
Economic Spread Ratio
The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, remained negative throughout the period. It improved from -6.4% in 2017 to -3.03% in 2018 and then stabilized around -3% in 2019. Subsequently, it deteriorated sharply to -5.97% in 2020 and experienced a minor recovery to -5.51% in 2021. The persistently negative values indicate that the company's returns did not cover the cost of capital, reflecting value destruction over the years.
Summary of Trends and Insights
Overall, the data indicate that despite increasing invested capital, the firm struggled to generate positive economic profits during the period. The improvements in economic profit and economic spread ratio noted in 2018 were not sustained, with significant declines occurring especially in 2020, possibly reflecting external challenges or operational difficulties. The sustained negative economic spread ratio suggests inefficiencies in capital utilization or high capital costs relative to returns. The slight reduction in invested capital in 2021 may suggest attempts to optimize or scale down investment, which correlated with a marginal improvement in economic profitability but remained far from breakeven levels.

Economic Profit Margin

Stryker Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Abbott Laboratories
CVS Health Corp.
Elevance Health Inc.
Intuitive Surgical Inc.
Medtronic PLC
UnitedHealth Group Inc.

Based on: 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), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

3 Click competitor name to see calculations.


The financial data over the five-year period reveals notable trends in core performance metrics related to profitability and sales.

Net Sales
Net sales exhibited a generally positive trend, increasing from US$12,444 million in 2017 to US$17,108 million in 2021. There was steady growth each year except for a slight decrease in 2020 when sales declined from US$14,884 million in 2019 to US$14,351 million. However, sales rebounded strongly in 2021, reaching the highest level in the series.
Economic Profit
Economic profit consistently remained negative throughout the period, indicating the company’s earnings did not exceed the cost of capital. Although some improvement was observed from -US$1,120 million in 2017 to -US$629 million in 2018, economic profit deteriorated again in 2019 and significantly worsened in 2020. In 2021, there was a moderate recovery, but it still remained deeply negative at -US$1,461 million.
Economic Profit Margin
The economic profit margin followed a similar pattern to economic profit, remaining negative at all points. It improved from -9.00% in 2017 to -4.62% in 2018 and remained relatively stable in 2019. However, the margin declined sharply in 2020 to -11.29%, indicating poorer profitability relative to sales during that year. By 2021, the margin improved to -8.54% but still reflects a significant loss in economic profit relative to sales.

Overall, the data indicates that while the company has achieved growth in net sales, it struggled to convert these sales into positive economic profit, implying challenges in covering the full cost of capital. The sharp declines in economic profit and margin in 2020 suggest potential impacts from extraordinary circumstances or operating challenges during that year, with some recovery noted in 2021. Negative economic profit margins throughout the period highlight ongoing profitability challenges that may warrant strategic focus to improve capital efficiency and operational effectiveness.