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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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- Statement of Comprehensive Income
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Return on Assets (ROA) since 2013
- Price to Book Value (P/BV) since 2013
- Analysis of Revenues
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Economic Profit
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes experienced significant fluctuation over the analyzed period. Initially, there was a considerable loss of -73,949 thousand US dollars in 2017. This was followed by a strong recovery reaching a peak profit of 442,934 thousand US dollars in 2018. However, in the subsequent years, the NOPAT showed a declining trend, dropping to 382,306 thousand US dollars in 2019, sharply decreasing to 17,546 thousand US dollars in 2020, and ultimately turning negative again in 2021 with a loss of -387,636 thousand US dollars.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, with slight variations. It started at 11% in 2017, then slightly decreased to around 10.7% in 2018. From 2019 through 2020, it fluctuated marginally around the 10.95% to 11.04% range, before decreasing to 10.01% in 2021. Overall, the cost of capital showed minor downward adjustments but maintained consistency near the 11% mark.
- Invested Capital
- Invested capital exhibited a steady upward trend over the five-year span. The value increased from 4,627,898 thousand US dollars in 2017 to 5,185,025 thousand in 2018, followed by incremental growth to 5,287,225 thousand in 2019. The upward trajectory accelerated in 2020 and 2021, reaching 5,970,409 thousand and 7,449,784 thousand respectively. This consistent increase suggests ongoing capital investment or accumulation of assets.
- Economic Profit
- The economic profit consistently remained negative during the entire period, indicating the company did not generate value above its cost of capital. Although there was an improvement from -582,871 thousand US dollars in 2017 to -111,795 thousand in 2018, economic profit deteriorated again in subsequent years. It declined to -196,614 thousand in 2019, plummeted to -641,444 thousand in 2020, and further worsened to -1,133,571 thousand US dollars in 2021. The deepening negative economic profit, despite increasing invested capital, suggests that returns were insufficient relative to the capital charge.
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 deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income (loss).
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income (loss).
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals significant fluctuations in net income and net operating profit after taxes (NOPAT) over the five-year period.
- Net Income (Loss)
- Initially, there was a substantial net loss of approximately -108 million US dollars at the end of 2017. This was followed by a strong recovery in 2018, with net income increasing sharply to nearly 1.2 billion US dollars. The positive trend continued into 2019, with net income reaching around 1.47 billion US dollars. However, the company experienced a pronounced reversal in 2020, recording a significant net loss of approximately -1.14 billion US dollars. This negative result persisted into 2021, albeit at a reduced loss of about -221 million US dollars. Overall, net income demonstrates high volatility, with a peak in 2019 and losses resurging in the last two years of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT follows a similar pattern to net income, starting with a negative value of around -74 million US dollars in 2017. It then sharply increased to 443 million US dollars in 2018, followed by a slight decline to 382 million US dollars in 2019. A notable decline occurred in 2020, with NOPAT dropping to a marginal positive figure of about 17.5 million US dollars, indicating a substantial reduction in operational profitability. In 2021, NOPAT turned negative again, reaching approximately -388 million US dollars, which reflects a deterioration in operational efficiency or increased operating costs relative to revenue.
In summary, both profitability measures indicate a period of growth and profitability in the middle years (2018–2019), contrasting sharply with losses and reduced operating performance in the earlier and later years. This suggests the company faced considerable challenges affecting its bottom line and operations towards the end of the examined timeframe.
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).
- Provision (benefit) for income taxes
- The provision (benefit) for income taxes displays significant fluctuations over the analyzed periods. Initially, in 2017, the company reported a positive provision, indicating tax expenses amounting to approximately 12.6 million US dollars. Subsequently, in 2018 and 2019, the figures reflect substantial negative values, with benefits representing tax credits or reductions exceeding 782 million and 1.07 billion US dollars respectively. This shift suggests large tax benefits or loss carrybacks during these years. However, in 2020, the provision reverted sharply to a positive expense exceeding 1.08 billion US dollars, indicating a considerable tax charge. Lastly, in 2021, the provision again turned negative at around 190 million US dollars, signifying a tax benefit. This volatililty suggests that the company experienced considerable variability in taxable income, tax planning outcomes, or tax accounting treatments across the years.
- Cash operating taxes
- Cash operating taxes have generally remained within a more stable range compared to the provision for income taxes. The amounts paid in cash taxes fluctuated moderately between approximately 27.6 million and 51.6 million US dollars throughout the periods. The lowest cash taxes occurred in 2018 at roughly 27.6 million US dollars, while the highest payment was recorded in 2021 at approximately 51.6 million US dollars. The intermediate years show amounts oscillating around 41.8 million to 49.7 million US dollars. The overall trend suggests relatively consistent cash outflows for taxes despite the considerable volatility in the tax provision figures, which may indicate timing differences, deferred tax effects, or non-cash tax items affecting the taxable income reconciliation.
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 deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of short-term investments.
The financial data reveals several key trends in the company's capital structure and financial positioning over the five-year period ending in 2021.
- Total Reported Debt & Leases
- This liability measure shows a general upward trend throughout the period. Starting at approximately 2.34 billion USD in 2017, the amount increased significantly to around 3.49 billion USD in 2018. A slight decrease to roughly 3.29 billion USD is observed in 2019, but the figure rises sharply again in the two subsequent years, reaching approximately 4.48 billion USD in 2020 and peaking at about 5.55 billion USD by the end of 2021. This trend indicates a growing reliance on debt and lease obligations to finance operations or investments.
- Stockholders’ Equity
- Equity shows overall growth from 2017 to 2019, moving from around 5.05 billion USD to above 8.7 billion USD. However, this is followed by a decline in the two subsequent years, falling to roughly 7.97 billion USD in 2020 and further to about 7.31 billion USD in 2021. This decrease suggests potential distribution of earnings (such as dividends or share buybacks), losses, or other equity-reducing events during these years.
- Invested Capital
- Invested capital displays a solid overall upward trajectory. It starts at approximately 4.63 billion USD in 2017 and steadily rises each year, reaching close to 7.45 billion USD by 2021. The progression is consistent, with the most notable increases occurring from 2019 onward. This upward movement indicates an expanding base of capital utilized to support the company’s operations and growth initiatives.
In summary, the company has increasingly utilized debt and leases as part of its capital structure, while stockholders' equity experienced growth through 2019 followed by reductions in subsequent years. The consistent increase in invested capital underscores an ongoing expansion in financial resources employed by the company, reflecting potential investments in assets or operational capabilities. The interplay between rising debt and declining equity toward the end of the period may warrant further analysis regarding financial risk and capital cost optimization.
Cost of Capital
Twitter Inc., 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 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 »
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 thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | ||||||
Economic profit1 | ||||||
Invested capital2 | ||||||
Performance Ratio | ||||||
Economic spread ratio3 | ||||||
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Alphabet Inc. | ||||||
Charter Communications Inc. | ||||||
Comcast Corp. | ||||||
Meta Platforms Inc. | ||||||
Netflix Inc. | ||||||
Walt Disney Co. |
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.
The analysis of the financial data over the five-year period reveals several significant trends regarding the economic profitability and capital investment of the company.
- Economic Profit
- The economic profit figures consistently show negative values throughout the period, indicating that the company incurred economic losses each year. The loss magnitude fluctuated, initially improving from a loss of approximately 582.9 million USD in 2017 to 111.8 million USD in 2018. However, this improvement was short-lived as losses increased again in 2019, reaching about 196.6 million USD. A substantial deterioration occurred in 2020 and 2021, with losses expanding dramatically to approximately 641.4 million USD and further to 1.13 billion USD, respectively. This trend suggests growing challenges in generating returns above the cost of invested capital.
- Invested Capital
- Invested capital exhibited a generally upward trajectory over the years, increasing steadily from roughly 4.63 billion USD in 2017 to about 7.45 billion USD in 2021. This steady capital base expansion indicates ongoing investments or asset growth, potentially reflecting efforts to support business expansion or operational scale-up despite profitability challenges.
- Economic Spread Ratio
- The economic spread ratio, which measures the return spread over the cost of capital, remained negative throughout the entire period. Initially, the ratio was deeply negative at -12.59% in 2017, indicating returns were significantly below the cost of capital. It improved substantially in 2018 to -2.16%, indicating a narrowing loss margin relative to capital costs. However, negative spreads returned in subsequent years, worsening again in 2019 (-3.72%), sharply deteriorating in 2020 (-10.74%), and further declining to -15.22% by 2021. This pattern confirms a persistent inability to generate returns sufficient to cover capital costs, with the gap widening significantly in the later years.
Overall, the company shows increasing invested capital alongside persistent and worsening negative economic profits and spreads. This combination suggests that while the company has expanded its asset base, it has been increasingly unable to generate adequate returns in relation to its capital costs, leading to substantial value erosion over the period analyzed.
Economic Profit Margin
Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in thousands) | ||||||
Economic profit1 | ||||||
Revenue | ||||||
Add: Increase (decrease) in deferred revenue | ||||||
Adjusted revenue | ||||||
Performance Ratio | ||||||
Economic profit margin2 | ||||||
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Alphabet Inc. | ||||||
Charter Communications Inc. | ||||||
Comcast Corp. | ||||||
Meta Platforms Inc. | ||||||
Netflix Inc. | ||||||
Walt Disney Co. |
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 ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit displayed a volatile and predominantly negative trend over the analyzed period. From a loss of approximately -$583 million in 2017, it improved considerably in 2018, reducing the loss to nearly -$112 million. However, this improvement was not sustained, as a decline followed in 2019 with economic profit worsening to about -$197 million. Subsequently, more significant deteriorations occurred in 2020 and 2021, with losses increasing substantially to approximately -$641 million and -$1.13 billion, respectively. This pattern signifies a deteriorating ability to generate economic value, with the most pronounced losses occurring in the last two years of the period.
- Adjusted Revenue
- The adjusted revenue showed a consistent upward trajectory throughout the period. Starting from roughly $2.44 billion in 2017, revenues increased steadily year-over-year, reaching approximately $3.05 billion in 2018 and $3.49 billion in 2019. The growth trend persisted in 2020 with revenues around $3.71 billion, culminating in a substantial increase in 2021 to approximately $5.09 billion. This reflects strong revenue growth, especially notable in the last year, indicating effective sales or business expansion efforts.
- Economic Profit Margin
- The economic profit margin mirrored the negative trend of economic profit, starting at -23.91% in 2017 and dramatically improving to -3.66% in 2018, indicating a momentary reduction in loss relative to revenue. However, this improvement was transient, as the margin worsened again to -5.63% in 2019, then sharply declined to -17.29% in 2020 and further to -22.25% in 2021. This trend reveals that despite revenue growth, the efficiency or profitability relative to revenues has degraded significantly since 2018.