Economic Value Added (EVA)
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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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
Trane Technologies plc, economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a fluctuating trend over the analyzed periods. It increased from approximately 1.45 billion US dollars in 2018 to about 1.64 billion in 2019, which represents a positive growth. However, it declined in 2020 to around 1.27 billion US dollars, likely reflecting challenging conditions during that year. Subsequently, the NOPAT recovered, rising to approximately 1.67 billion in 2021 and further to about 2.14 billion US dollars by the end of 2022, indicating improved profitability and operational efficiency in the later years.
- Cost of Capital
- The cost of capital remained relatively stable across the observed years, starting at 13.31% in 2018 and showing a gradual slight increase to 13.90% by 2022. The marginal upward trend suggests a moderately rising hurdle rate for returns, possibly reflecting changes in market conditions or risk perceptions over time.
- Invested Capital
- Invested capital exhibits some volatility. After an increase from approximately 13.68 billion US dollars in 2018 to 15.64 billion in 2019, there was a noticeable decline in 2020 and 2021 to about 13.83 billion and 13.35 billion, respectively. In 2022, it slightly increased again to roughly 13.52 billion US dollars. This pattern may indicate asset optimization or divestitures following a peak in 2019.
- Economic Profit
- Economic profit is negative for the first four years, beginning at -370 million US dollars in 2018 and worsening to -430.6 million in 2019, further deteriorating to -570.7 million in 2020. A significant improvement is observed in 2021, with the negative economic profit narrowing to -129.3 million US dollars. By 2022, economic profit turns positive at approximately 260 million US dollars, signaling that the company's net operating profit exceeded the cost of capital, thus generating value for shareholders in the latest period.
- Summary
- Overall, the data reveals a recovery trajectory after 2020, with key indicators such as NOPAT and economic profit demonstrating improvement. Declining invested capital after 2019 suggests strategic reallocation or efficiency measures. The steady cost of capital underscores a relatively stable financial environment in terms of capital costs. The positive shift in economic profit by 2022 is a noteworthy development, indicating enhanced economic value creation in recent operations.
Net Operating Profit after Taxes (NOPAT)
Trane Technologies plc, NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in deferred revenue.
5 Addition of increase (decrease) in standard product warranty liability.
6 Addition of increase (decrease) in equity equivalents to net earnings attributable to Trane Technologies plc.
7 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net earnings attributable to Trane Technologies plc.
10 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
- Net earnings attributable to Trane Technologies plc
- Net earnings exhibit variability over the five-year period analyzed. The value increased from approximately 1.34 billion US dollars in 2018 to about 1.41 billion in 2019, representing moderate growth. However, a significant decline occurred in 2020, with net earnings dropping to approximately 854.9 million US dollars. This downturn was followed by a strong recovery in 2021, when net earnings rose again to roughly 1.42 billion US dollars. The upward trend continued into 2022, reaching the highest observed value of approximately 1.76 billion US dollars, indicating overall positive growth in the latter years despite the earlier dip.
- Net operating profit after taxes (NOPAT)
- NOPAT demonstrates a generally increasing trend, with fluctuations noticeable in the dataset. Starting at roughly 1.45 billion US dollars in 2018, NOPAT increased to around 1.64 billion in 2019. A decline is observed in 2020, where it decreased to nearly 1.27 billion US dollars. Subsequent years show a recovery trend: in 2021, NOPAT rose significantly to approximately 1.67 billion, followed by a substantial increase in 2022 to nearly 2.14 billion US dollars. This pattern of decrease in 2020 followed by strong growth thereafter mirrors the trend observed in net earnings and suggests resilience and effective operational performance improvements post-2020.
Cash Operating Taxes
Trane Technologies plc, cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
- Tax Expense Trend
- The tax expense exhibits a fluctuating pattern over the five-year period. It increased from 281,300 thousand US dollars in 2018 to a peak of 353,700 thousand US dollars in 2019. Following this, there was a decline to 296,800 thousand US dollars in 2020, before rising again in 2021 to 333,500 thousand US dollars. In 2022, the tax expense continued to grow, reaching 375,900 thousand US dollars, the highest value in the series.
- Cash Operating Taxes Trend
- The cash operating taxes show a general downward trend with some recovery periods. After a high of 475,262 thousand US dollars in 2018, there was a notable decrease to 391,918 thousand US dollars in 2019, followed by a further decline to 328,760 thousand US dollars in 2020. In 2021, cash operating taxes rebounded to 409,078 thousand US dollars but then declined again to 356,060 thousand US dollars in 2022. Overall, the values in 2022 remain below the initial 2018 figure.
- Comparative Insights
- While tax expense shows a general upward trajectory with some volatility, cash operating taxes have generally decreased from the 2018 level, despite some recovery in 2021. This divergence suggests potential timing differences or adjustments in non-cash accounting components affecting reported tax expenses relative to actual cash outflows in taxes.
Invested Capital
Trane Technologies plc, invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 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).
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 LIFO reserve. See details »
5 Addition of deferred revenue.
6 Addition of standard product warranty liability.
7 Addition of equity equivalents to total Trane Technologies plc shareholders’ equity.
8 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
-
The total reported debt and leases displayed an overall increasing trend from 2018 through 2022. Starting at approximately 4.64 billion USD in 2018, the figure rose significantly to about 6.14 billion USD in 2019, marking the highest value within the period. Subsequently, the debt decreased to approximately 5.69 billion USD in 2020 and continued to decline to 5.29 billion USD in 2021. In 2022, the total reported debt and leases slightly increased to around 5.31 billion USD. This pattern indicates a peak in 2019, followed by a gradual reduction and stabilization in the recent years.
- Total Shareholders’ Equity
-
The total shareholders’ equity showed a decreasing trend over the five-year period. Beginning at roughly 7.02 billion USD in 2018, equity increased slightly to about 7.27 billion USD in 2019. However, from 2019 onwards, equity declined consistently to approximately 6.41 billion USD in 2020, then to 6.26 billion USD in 2021, and further to 6.09 billion USD in 2022. This steady reduction suggests a shrinking equity base over time.
- Invested Capital
-
Invested capital increased from approximately 13.68 billion USD in 2018 to a peak of about 15.64 billion USD in 2019. Following this peak, invested capital decreased to around 13.83 billion USD in 2020 and continued to decline to 13.35 billion USD in 2021. In 2022, there was a slight increase to roughly 13.52 billion USD. This trend reflects a significant build-up of capital in 2019, followed by a contraction and subsequent stabilization during the last two years.
Cost of Capital
Trane Technologies plc, 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: 2022-12-31).
1 US$ in thousands
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 thousands
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 thousands
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 thousands
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 thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Trane Technologies plc, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed a negative trend from 2018 to 2020, with values declining from -369,756 thousand US dollars in 2018 to -570,699 thousand US dollars in 2020. This indicates increasing economic losses during this period. However, a significant improvement occurred in 2021, with the economic profit loss narrowing substantially to -129,316 thousand US dollars. In 2022, the economic profit turned positive, reaching 259,789 thousand US dollars, suggesting a strong recovery and value creation in the latest period.
- Invested Capital
- The invested capital exhibited fluctuations over the years. It increased from 13,684,819 thousand US dollars in 2018 to a peak of 15,640,000 thousand US dollars in 2019. Subsequently, it decreased to 13,835,000 thousand US dollars in 2020 and continued declining to 13,354,600 thousand US dollars in 2021. In 2022, there was a slight rebound to 13,518,500 thousand US dollars. Despite these variations, the overall invested capital remained relatively stable around the 13 to 15 billion US dollar range.
- Economic Spread Ratio
- The economic spread ratio remained negative from 2018 through 2021, indicating that the return on invested capital was below the cost of capital during these years. It deteriorated from -2.7% in 2018, further decreasing to -4.13% in 2020, which corresponds with the lowest economic profit in that year. An improvement was observed in 2021 as the ratio moved closer to zero at -0.97%. In 2022, the ratio turned positive to 1.92%, reflecting not only a recovery but also profitability exceeding the cost of capital, consistent with the positive economic profit recorded in that year.
Economic Profit Margin
Trane Technologies plc, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenues | ||||||
| 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: 2022-12-31), 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).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a declining trend from 2018 to 2020, with values moving from -369,756 thousand US dollars to a low of -570,699 thousand US dollars. In 2021, there was a significant improvement as the loss narrowed drastically to -129,316 thousand US dollars, followed by a positive economic profit of 259,789 thousand US dollars in 2022. This indicates a substantial turnaround in profitability over this period.
- Adjusted Net Revenues
- Adjusted net revenues increased overall across the analyzed periods, starting at 15,667,400 thousand US dollars in 2018 and reaching 16,597,700 thousand US dollars in 2022. Notably, there was a decline in 2020 to 12,456,300 thousand US dollars, likely influenced by external factors impacting the business environment, but revenues recovered in subsequent years, demonstrating resilience and growth.
- Economic Profit Margin
- The economic profit margin followed a pattern consistent with the economic profit figures. Initially negative, it deteriorated further from -2.36% in 2018 to -4.58% in 2020. However, the margin improved significantly to -0.91% in 2021 and turned positive at 1.62% in 2022. This progression reflects improving efficiency and profitability relative to revenues over time.