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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- Statement of Comprehensive Income
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
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Economic Profit
Time Warner Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values show a fluctuating trend over the five-year period. Beginning at 5,150 million USD in 2013, the figure slightly increased to 5,167 million USD in 2014, before declining to 4,751 million USD in 2015. The value experienced a modest recovery in 2016, rising to 4,943 million USD, and further increased to 5,040 million USD in 2017. Overall, NOPAT remained relatively stable with minor fluctuations but did not demonstrate significant growth.
- Cost of Capital
- The cost of capital has maintained a relatively stable range between 10.76% and 11.43% throughout the five years. It started at 11.32% in 2013, increased slightly to 11.34% in 2014, decreased to a low of 10.76% in 2015, and then rose again to 11.43% in 2016, followed by a slight decrease to 11.38% in 2017. There is no clear upward or downward trend, indicating a stable capital cost environment during this period.
- Invested Capital
- Invested capital decreased from 56,262 million USD in 2013 to 52,455 million USD in 2014, suggesting divestment or asset reduction. However, it rose slightly to 53,163 million USD in 2015 and continued to increase to 54,961 million USD in 2016, followed by a further rise to 57,150 million USD in 2017. This indicates a period of reinvestment or asset growth after the initial decline in 2014, culminating in an overall increase in invested capital across the five years.
- Economic Profit
- Economic profit remained negative throughout the period, indicating that the return on invested capital was insufficient to cover the cost of capital consistently. The economic loss improved somewhat from -1,219 million USD in 2013 to -782 million USD in 2014. However, it worsened again to -970 million USD in 2015 and further declined to -1,337 million USD in 2016, before reaching its lowest point at -1,464 million USD in 2017. The trend suggests increasing economic loss, with the company not generating value above the cost of capital over these years.
Net Operating Profit after Taxes (NOPAT)
Time Warner Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in accrued restructuring and severance costs.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Time Warner Inc. shareholders.
6 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2017 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 35.00% =
8 Addition of after taxes interest expense to net income attributable to Time Warner Inc. shareholders.
9 2017 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 35.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
- Net Income Attributable to Time Warner Inc. Shareholders
- A consistent upward trend in net income is observable over the five-year period. Starting at $3,691 million in 2013, net income increased marginally each year, reaching $3,927 million in 2016. A notable rise occurred in 2017, with net income sharply increasing to $5,247 million, indicating a significant enhancement in profitability in that year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a relatively stable but slightly fluctuating pattern. From $5,150 million in 2013, it increased slightly to $5,167 million in 2014, followed by a decline to $4,751 million in 2015. The figure then recovered somewhat in 2016 and 2017, reaching $5,040 million by the end of 2017. Overall, NOPAT remained within a narrow range, suggesting moderate operational profit stability with some variation over the years.
- Comparative Observations
- While net income demonstrated a robust growth trajectory, especially in the final year, NOPAT displayed greater stability but without a clear upward trend. The divergence between the increasing net income and relatively stable NOPAT in the last year might indicate changes in non-operating factors such as financing activities, tax adjustments, or other income components contributing positively to net income.
Cash Operating Taxes
Time Warner Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
- Current and Deferred Income Taxes on Income from Continuing Operations
- The amount of current and deferred income taxes provided on income from continuing operations exhibited a fluctuating trend over the five-year period. In 2013, the value was 1,749 million US dollars, which decreased significantly to 785 million in 2014. It then increased again to 1,651 million in 2015, followed by a decline to 1,281 million in 2016. By the end of 2017, this measure further dropped to 701 million US dollars, marking the lowest point in the observed range. Overall, the data suggest variability with no clear upward or downward long-term trend, but a general reduction from the starting value.
- Cash Operating Taxes
- Cash operating taxes showed a more consistent upward trend compared to the income taxes provided on continuing operations. Starting at 1,442 million US dollars in 2013, there was a notable increase to 1,048 million in 2014, which appears to be a decline; however, the following years reversed this pattern with values rising to 1,757 million in 2015 and then slightly decreasing to 1,465 million in 2016. The amount surged substantially in 2017 to 2,078 million US dollars, representing the highest value within the period. This trend indicates growing cash tax liabilities over time, with some minor fluctuations in the middle years.
- Comparison Insights
- Comparing both tax-related measures reveals divergent patterns: while current and deferred income taxes showed a volatile yet generally declining trend, cash operating taxes tended to increase, especially markedly in the final year. This divergence may indicate changes in tax accounting, timing differences, or shifts in taxable income and cash tax payment obligations across the reporting years.
Invested Capital
Time Warner Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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 deferred revenue.
5 Addition of accrued restructuring and severance costs.
6 Addition of equity equivalents to total Time Warner Inc. shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases exhibited a generally increasing trend from 2013 to 2016, rising from $21,765 million to $25,355 million. However, in 2017, there was a slight decrease to $24,720 million. This indicates an overall growth in debt commitments over the period, with a minor reduction in the final year.
- Total Time Warner Inc. Shareholders’ Equity
- Shareholders’ equity showed a declining trend from 2013 through 2015, decreasing from $29,904 million to $23,619 million. In 2016, the equity slightly increased to $24,335 million and further rebounded more significantly in 2017 to $28,375 million. This pattern suggests a period of equity contraction followed by recovery toward the end of the analyzed timeframe.
- Invested Capital
- Invested capital declined from $56,262 million in 2013 to $52,455 million in 2014, followed by a modest increase in subsequent years, reaching $57,150 million in 2017. The leveling and eventual rise in invested capital imply a stabilization and renewed investment activities after an initial drop.
- Overall Observations
- Over the five-year period, the company’s financial structure demonstrated changes characterized by an initial increase in debt and decrease in equity and invested capital, followed by a stabilization and partial recovery. The reduction in shareholders’ equity between 2013 and 2015 could be indicative of challenges faced, while the subsequent increases in equity and invested capital suggest restored confidence and investment. The relatively stable debt levels near the end of the period highlight a controlled leverage approach.
Cost of Capital
Time Warner Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| 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: 2016-12-31).
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: 2015-12-31).
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: 2014-12-31).
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: 2013-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Time Warner Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit Trends
- The economic profit has consistently declined over the analyzed period from 2013 to 2017. Starting at -1219 million US dollars in 2013, it improved somewhat in 2014 to -782 million, but then reversed course and deteriorated again, reaching -1464 million US dollars by 2017. This indicates increasing losses in terms of economic profit, reflecting the company’s inability to generate returns exceeding its cost of capital during these years.
- Invested Capital Fluctuations
- The invested capital showed a pattern of fluctuation but generally an increasing trend from 2013 to 2017. It started at 56,262 million US dollars in 2013, dipped to a low of 52,455 million in 2014, then gradually increased annually to peak at 57,150 million US dollars in 2017. This suggests the company was expanding its capital base, potentially through investments or asset accumulation, despite the pressure on economic profit.
- Economic Spread Ratio Developments
- The economic spread ratio, representing the margin by which returns exceed the cost of invested capital, remained negative throughout the period. It started at -2.17% in 2013, improved slightly to -1.49% in 2014, then worsened in the next years, reaching its lowest point at -2.56% in 2017. This negative spread, becoming more pronounced over time, corroborates the findings from economic profit data, indicating that the company's invested capital was consistently generating returns below its required cost.
- Overall Financial Analysis
- The combined trends indicate a challenging financial performance over the five-year span. Despite an increase in invested capital, the company failed to achieve positive economic profit or a positive economic spread. The brief improvement in 2014 suggests possible short-term factors or management actions that temporarily mitigated losses, but these were not sustained. The worsening economic spread and increasing absolute economic losses imply the company was investing more capital without achieving sufficient returns, which could signal issues with capital efficiency or profitability in core operations.
Economic Profit Margin
Time Warner Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- The adjusted revenues exhibit an overall upward trend from 2013 to 2017. Beginning at approximately 29,738 million US dollars in 2013, revenues decreased slightly in 2014 to 27,360 million, followed by a recovery and steady growth through to 2017, reaching 31,400 million US dollars. This indicates a general increase in the company’s top-line performance over the five-year period despite a minor dip in 2014.
- Economic Profit
- The economic profit figures are consistently negative throughout the period, indicating economic losses each year. The losses slightly improved from -1,219 million US dollars in 2013 to -782 million in 2014 but deteriorated again in the subsequent years, culminating in -1,464 million in 2017. This pattern suggests challenges in generating returns above the company’s cost of capital despite growing revenues.
- Economic Profit Margin
- Consistent with the economic profit figures, the economic profit margin remains negative in all years, confirming that the company’s profits are below the required economic threshold. The margin improved from -4.1% in 2013 to -2.86% in 2014, reflecting a relatively better performance that year. However, it worsened again over the following years, reaching -4.66% in 2017. This indicates increasing inefficiency in converting revenues into economic profit during the latter years.
- Overall Insights
- While adjusted revenues show a positive growth trajectory, the persistent negative economic profit and margin indicate that the company struggles to achieve economic profitability. The brief improvement observed in 2014 did not sustain, as losses intensified toward the end of the period. This suggests that revenue growth was not sufficient to offset costs and capital charges, highlighting areas for further operational or financial efficiency improvements.