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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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Target Corp. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Economic Profit
12 months ended: | Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | |
---|---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | |||||||
Cost of capital2 | |||||||
Invested capital3 | |||||||
Economic profit4 |
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net operating profit after taxes (NOPAT)
- The net operating profit after taxes exhibited a generally increasing trend from 2020 to 2022, rising from 3896 million US$ in 2020 to 7872 million US$ in 2022. However, a significant decline occurred in 2023, with NOPAT dropping to 3821 million US$, followed by a partial recovery to 4953 million US$ in 2024, and then a subsequent decrease to 4376 million US$ in 2025. This pattern indicates volatility in operating profitability in the most recent years.
- Cost of capital
- The cost of capital showed a gradual upward trend from 12.61% in 2020 to a peak of 13.5% in 2022. Thereafter, it moderately decreased to 11.95% by 2025, reflecting a possible reduction in the company’s financing costs or changes in market conditions affecting the weighted average cost of capital over the period analyzed.
- Invested capital
- Invested capital generally increased over the analyzed years, starting at 27256 million US$ in 2020 and rising steadily to 36107 million US$ in 2025. The rise was consistent except for a slight decline recorded in 2022 and 2023 compared to 2021, after which the growth trend resumed. This trend suggests ongoing investment in assets or growth initiatives despite fluctuations in profitability.
- Economic profit
- Economic profit experienced significant fluctuations during the period. It increased from 460 million US$ in 2020 to a high of 3802 million US$ in 2022, indicating a strong creation of value above the cost of capital at that point. However, a sharp reversal occurred in 2023, with economic profit turning negative at -87 million US$, implying value destruction that year. The figure recovered to 509 million US$ in 2024 but dropped again to 61 million US$ in 2025, showing instability in delivering returns exceeding capital costs.
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net earnings.
3 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
4 2025 Calculation
Tax benefit of net interest expense = Adjusted net interest expense × Statutory income tax rate
= × 21.00% =
5 Addition of after taxes interest expense to net earnings.
6 Elimination of discontinued operations.
- Net Earnings
- The net earnings demonstrate significant variability over the observed periods. Starting at 3,281 million USD in 2020, earnings increased markedly to 4,368 million USD in 2021 and then exhibited a strong peak at 6,946 million USD in 2022. However, the subsequent years show a pronounced decline, with net earnings dropping to 2,780 million USD in 2023. Thereafter, earnings partially recovered to 4,138 million USD in 2024 and slightly decreased to 4,091 million USD in 2025. This trend suggests a period of robust profit growth culminating in 2022, followed by a sharp contraction and partial stabilization in the latest years.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT follows a pattern somewhat aligned with net earnings but with some variation in magnitude. Beginning at 3,896 million USD in 2020, NOPAT increased steadily to 5,024 million USD in 2021 and then experienced a substantial rise to 7,872 million USD in 2022. This was followed by a notable decrease to 3,821 million USD in 2023. The value subsequently increased to 4,953 million USD in 2024, then declined again to 4,376 million USD in 2025. The pattern indicates that operational profitability reached its highest point in 2022 and then declined sharply in 2023, showing a moderate recovery but not reaching previous peak levels in the following years.
- Summary of Trends
- Both net earnings and NOPAT reveal a strong growth phase culminating in 2022, indicative of favorable business conditions or operational efficiencies. The significant declines in both metrics in 2023 point to potential challenges or adverse conditions impacting profitability in that period. The partial rebound in 2024 followed by stabilization or slight decline in 2025 indicates the firm is managing to recover from the downturn but has yet to regain peak profitability levels seen in 2022. Overall, the data reflect volatility in profitability with a cyclical peak and trough pattern over the six-year span.
Cash Operating Taxes
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
- Provision for Income Taxes
- The provision for income taxes exhibited an overall upward trend from February 1, 2020, through January 29, 2022, increasing from $921 million to $1961 million. This represents a significant rise over the two-year span. Subsequently, there was a marked decline to $638 million as of January 28, 2023, after which the provision increased again, reaching approximately $1170 million by February 1, 2025. This fluctuation suggests variability in taxable income or changes in tax planning strategies over the years measured.
- Cash Operating Taxes
- Cash operating taxes showed considerable volatility throughout the period. Starting at $862 million in February 2020, the amount rose sharply to $1585 million by January 30, 2021, and remained relatively high at $1546 million in January 29, 2022. However, in the following year, there was a steep decline to $178 million in January 28, 2023. After this trough, cash operating taxes rebounded to $998 million in February 3, 2024, and further increased to $1474 million by February 1, 2025. These wide swings indicate fluctuations in actual tax outflows, possibly influenced by changes in taxable income, timing differences, or tax payments.
- Comparative Insights
- Both provision for income taxes and cash operating taxes showed similar patterns of rising sharply in the early years, reaching peaks around 2021-2022, followed by sharp declines in 2023, and then partial recoveries towards 2025. Notably, the cash operating taxes displayed greater volatility compared to provisions, suggesting possible timing mismatches or adjustments between accounting provisions and actual cash tax payments. The divergence in the magnitude of changes, particularly the sharp drop in cash operating taxes in 2023 compared to provisions, may reflect tax refunds, credits, or other operational factors affecting cash flows distinct from accounting accruals.
Invested Capital
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ investment.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction-in-progress.
- Total Reported Debt & Leases
- The total reported debt and leases show a consistent upward trend across the periods, increasing from $13,974 million in early 2020 to $19,875 million by early 2025. This indicates a growing reliance on debt and lease obligations over the five-year span, with the most notable increases occurring between 2021 and 2023. The growth rate appears to moderate slightly towards the final years but remains at a high absolute level.
- Shareholders’ Investment
- Shareholders’ investment exhibits more fluctuation compared to debt levels. It initially rises from $11,833 million in 2020 to a peak of $14,440 million in 2021, followed by a decline through 2023 down to $11,232 million. After this trough, it rebounds significantly in 2024 and 2025, reaching $14,666 million. This pattern suggests periods of both contraction and expansion in shareholder equity, possibly reflecting profit retention, dividend policy changes, or equity financing activities during these years.
- Invested Capital
- Invested capital shows a general upward trajectory over the observed time frame. Beginning at $27,256 million in 2020, it increases steadily with a slight dip only in 2022, remaining around $30,000 million before accelerating growth to $36,107 million by 2025. The growth in invested capital aligns with the increasing debt levels and mostly recovering shareholders’ investment, indicating an overall expansion in the company’s capital base.
- Overall Analysis
- The financial data depicts a company increasing its capital base primarily through rising debt while shareholders’ equity shows variability. The growing total invested capital alongside increasing debt suggests that the company may be financing growth or operations with a heavier reliance on debt instruments. The variable equity levels imply possible fluctuations in earnings retention or capital structure adjustments. This pattern of rising debt and invested capital coupled with equity variability may have implications for financial leverage and risk profile over the reported years.
Cost of Capital
Target Corp., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2025-02-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2024-02-03).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2023-01-28).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2021-01-30).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt and other borrowings, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2020-02-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Invested capital2 | |||||||
Performance Ratio | |||||||
Economic spread ratio3 | |||||||
Benchmarks | |||||||
Economic Spread Ratio, Competitors4 | |||||||
Costco Wholesale Corp. | |||||||
Walmart Inc. |
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit shows considerable volatility over the periods analyzed. It increased significantly from 460 million US dollars in early 2020 to a peak of 3802 million US dollars by early 2022. This was followed by a sharp decline to a negative economic profit of -87 million US dollars in early 2023. Subsequently, economic profit rebounded to positive figures in 2024 and 2025, reaching 509 million and 61 million US dollars respectively. This pattern suggests a period of strong profitability followed by a notable downturn, and a partial recovery thereafter.
- Invested Capital
- The invested capital has shown a generally increasing trend throughout the observed periods. Starting from 27,256 million US dollars in early 2020, it steadily increased with minor fluctuations to reach 36,107 million US dollars by early 2025. This gradual rise in invested capital indicates ongoing investment activity and expansion of the capital base over time.
- Economic Spread Ratio
- The economic spread ratio, which measures the return on invested capital above the cost of capital, experienced substantial fluctuations. It improved from 1.69% in early 2020 to a substantial peak of 12.61% in early 2022, aligning with the peak in economic profit. However, in early 2023, the ratio turned negative at -0.29%, reflecting a period where the returns were insufficient to cover capital costs. The ratio then recovered to positive but relatively low levels of 1.48% and 0.17% in the subsequent years, reflecting diminished but still positive economic returns on invested capital.
- Overall Insights
- The data reveals a company experiencing a phase of high economic profitability and strong returns on invested capital culminating in early 2022, followed by a sharp downturn in profitability and economic returns in early 2023. Invested capital steadily grew throughout this period, suggesting continued commitment to capital investment despite fluctuations in profitability. The subsequent recovery in economic profit and spread ratio, although modest, indicates efforts toward restoring economic value creation.
Economic Profit Margin
Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Net sales | |||||||
Performance Ratio | |||||||
Economic profit margin2 | |||||||
Benchmarks | |||||||
Economic Profit Margin, Competitors3 | |||||||
Costco Wholesale Corp. | |||||||
Walmart Inc. |
Based on: 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Net Sales Trends
- Net sales exhibited a consistent upward trajectory from February 2020 through January 2023, increasing from $78,112 million to a peak of $109,120 million. Subsequently, there was a slight decline in the following two years, with net sales decreasing to $107,412 million in February 2024 and further to $106,566 million in February 2025. Overall, the data reflect strong growth over the longer term, albeit with a minor downturn in the most recent periods.
- Economic Profit Analysis
- Economic profit demonstrated significant volatility over the observed period. Starting at $460 million in February 2020, economic profit nearly doubled to $941 million by January 2021, followed by a substantial surge to $3,802 million in January 2022. However, this positive trend sharply reversed in January 2023, with economic profit turning negative to -$87 million. Recovery was noted in the two subsequent periods, with economic profit improving to $509 million in February 2024 and then declining again to $61 million in February 2025. This pattern indicates fluctuating profitability and challenges in maintaining economic profit consistently.
- Economic Profit Margin Insights
- The economic profit margin mirrored the trends observed in economic profit values. It grew steadily from 0.59% in February 2020 to a high of 3.59% in January 2022, indicating improved profitability relative to net sales. However, the margin turned negative at -0.08% in January 2023, reflecting the dip in economic profit. It slightly recovered to 0.47% in February 2024 but dropped again to 0.06% in February 2025. These fluctuations point to underlying operational or cost-related pressures impacting profitability efficiency.
- Overall Observations
- The data highlight robust top-line growth during the initial years, followed by a modest decline more recently. Meanwhile, economic profit and its margin reveal significant instability, with a notable peak in 2022 and a precarious downturn in 2023, followed by partial recovery. This suggests external or internal factors affecting profit generation despite generally solid sales. The narrowing economic profit margin toward the end of the period warrants attention toward cost management and operational effectiveness to sustain profitability.