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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United Parcel Service Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
United Parcel Service Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes showed a significant increase from 1,136 million US dollars in 2020 to a peak of 15,125 million US dollars in 2021. However, after this peak, there was a decline over the subsequent years, dropping to 12,726 million in 2022, 7,622 million in 2023, and further down to 6,582 million by 2024. This indicates a volatile profitability trend with a substantial decrease after the initial surge in 2021.
- Cost of Capital
- The cost of capital increased steadily from 12.51% in 2020 to a high of 13.21% in 2022. Subsequently, it decreased somewhat in the following years, falling to 12.72% in 2023 and further to 12.44% by 2024. This pattern suggests a period of rising capital costs followed by a slight easing.
- Invested Capital
- Invested capital increased consistently throughout the analyzed period, from 33,181 million US dollars in 2020 to 48,150 million in 2024. This gradual growth indicates increased capital investment over time, despite fluctuations in profitability.
- Economic Profit
- Economic profit was negative in 2020 at -3,014 million US dollars, then experienced a notable turnaround with a sharp increase to 9,321 million in 2021. Thereafter, it declined steadily each year, reaching 6,812 million in 2022, 1,840 million in 2023, and further dropping to 594 million in 2024. These changes mirror the trend in NOPAT and suggest diminishing residual income relative to the cost of capital.
- Overall Analysis
- The data depicts a period of significant improvement in profitability and economic profit in 2021, which was not sustained in subsequent years. While invested capital grew consistently, indicating ongoing investment, profitability as measured by NOPAT and economic profit declined markedly after 2021. The cost of capital increased until 2022 and then declined slightly, but this did not prevent the decrease in economic profit. This combination reflects challenges in maintaining returns above the cost of invested capital beyond the peak year.
Net Operating Profit after Taxes (NOPAT)
United Parcel Service Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2024 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 Income Trend
- The net income shows significant volatility over the analyzed period. It started relatively low at 1,343 million USD in 2020, then experienced a sharp increase to 12,890 million USD in 2021. Following that peak, net income declined to 11,548 million USD in 2022, and continued to decrease more substantially in 2023 and 2024, reaching 6,708 million USD and 5,782 million USD respectively. This indicates a strong peak in profitability in 2021 followed by a steady decline, though it remains above the initial 2020 level.
- NOPAT (Net Operating Profit After Taxes) Trend
- The NOPAT also exhibits a similar pattern to net income, beginning at 1,136 million USD in 2020. Thereafter, it rose markedly to 15,125 million USD in 2021, representing the highest value within the period. It then experienced a decrease, falling to 12,726 million USD in 2022, and continued to decline in the subsequent years to 7,622 million USD in 2023 and 6,582 million USD in 2024. Despite the decline after 2021, the NOPAT levels in the later years remain notably higher than those at the start of the period.
- Overall Pattern
- Both key profitability metrics—net income and NOPAT—reflect a peak in 2021 followed by a downward trend through 2024. The declines from the peak values are quite pronounced, suggesting that the company faced challenges impacting profitability after 2021. Nevertheless, profitability metrics have not returned to the low levels seen in 2020, indicating retained periodic strength despite the decreases.
Cash Operating Taxes
United Parcel Service Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Income Tax Expense
- The income tax expense exhibits significant volatility across the observed periods. There is a substantial increase from 501 million USD in 2020 to 3,705 million USD in 2021, indicating a sharp rise in tax liabilities or taxable income during that year. Subsequently, the tax expense decreases slightly but remains elevated at 3,277 million USD in 2022. Following 2022, a notable downward trend occurs with the tax expense falling to 1,865 million USD in 2023 and further down to 1,660 million USD in 2024. This pattern suggests a peak in tax expense in the early years followed by a considerable reduction towards the later years.
- Cash Operating Taxes
- Cash operating taxes show a more consistent upward movement initially, rising from 1,520 million USD in 2020 to 2,219 million USD in 2021, and further increasing to 2,913 million USD in 2022. Despite the initial rise, the trend reverses after 2022, with cash operating taxes decreasing to 1,861 million USD in 2023. However, there is a slight increase again in 2024 to 1,889 million USD. Overall, cash operating taxes demonstrate a growing burden through the first three years, followed by a reduction and a minor rebound in the final year.
- Comparison and Insights
- While both income tax expense and cash operating taxes start at relatively lower levels in 2020 and rise significantly in the subsequent years, income tax expense peaks higher and declines more sharply than cash operating taxes. The divergence in their trajectories after 2022 indicates possible changes in tax strategies, timing differences between accrued tax expense and actual cash paid, or adjustments related to deferred tax assets or liabilities. The fluctuations suggest a dynamic tax environment with a shift toward lower reported tax expenses and cash taxes in the recent years, potentially reflecting changes in profitability, tax planning measures, or regulatory impacts.
Invested Capital
United Parcel Service Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 equity for controlling interests.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction-in-progress.
7 Subtraction of marketable securities.
- Total reported debt & leases
- The total reported debt and leases exhibit a fluctuating but generally declining trend over the five-year period. Starting from $27,754 million at the end of 2020, the figure decreased to $23,521 million by the end of 2022, followed by a rise to $26,729 million in 2023, before dipping again to $25,652 million in 2024. This pattern suggests some variability in debt management, possibly influenced by financing activities or capital expenditure requirements.
- Equity for controlling interests
- Equity for controlling interests shows a significant increase between 2020 and 2021, rising sharply from $657 million to $14,253 million. This upward trajectory continued, albeit at a slower pace, reaching $19,786 million in 2022. However, equity decreased moderately in the subsequent years to $17,306 million in 2023 and further to $16,718 million in 2024. The initial surge might reflect strong retained earnings or capital injections, while the later decline could suggest share repurchases, dividends, or losses impacting shareholder equity.
- Invested capital
- Invested capital demonstrates a consistent upward trend throughout the period. Starting at $33,181 million in 2020, it increased steadily each year, reaching $44,780 million in 2022 and continuing to rise to $48,150 million by the end of 2024. This gradual growth indicates ongoing investment in the company’s assets, potentially reflecting expansion or enhancement of operational capacity.
Cost of Capital
United Parcel Service Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
United Parcel Service Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 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 notable fluctuations in the economic profit of the entity. Starting from a significant loss in 2020, characterized by a negative economic profit of -3014 million US dollars, the performance improved markedly in 2021 with a peak economic profit of 9321 million US dollars. This demonstrates a substantial turnaround. However, following this peak, the economic profit experienced a downward trend, decreasing to 6812 million in 2022, then sharply dropping to 1840 million in 2023, and further declining to 594 million in 2024, indicating a substantial reduction in profitability after the initial recovery.
Invested capital showed a consistent upward trajectory throughout the entire period. Starting at 33181 million US dollars in 2020, it increased steadily year by year to reach 48150 million US dollars by the end of 2024. This growth suggests ongoing investments or asset acquisitions increasing the capital base over time.
The economic spread ratio complements the trends observed in economic profit. It began with a negative value of -9.08% in 2020, aligning with the negative economic profit for that year. In 2021, the ratio increased sharply to 21%, reflecting the peak in economic profit. Thereafter, it exhibited a declining pattern, dropping to 15.21% in 2022 and further down to 4.05% in 2023, before converging near zero at 1.23% in 2024. This consistent decline suggests diminishing returns on invested capital, approaching a breakeven scenario by the end of the period.
Overall, the data indicates a recovery phase from a negative economic position in 2020 to a peak of profitability in 2021, followed by a decline in economic profit and returns on capital despite continued capital investment growth. The diminishing economic spread signals challenges in generating strong returns on the increasing invested capital base in recent years.
Economic Profit Margin
United Parcel Service Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenue Trends
- The revenue demonstrated a steady increase from 84,628 million USD in 2020 to a peak of 100,338 million USD in 2022. However, it experienced a decline in 2023 to 90,958 million USD, followed by a slight recovery to 91,070 million USD in 2024. This indicates strong growth until 2022, with some volatility and stabilization occurring thereafter.
- Economic Profit Trends
- The economic profit showed significant volatility over the observed period. It shifted from a substantial loss of 3,014 million USD in 2020 to a positive peak at 9,321 million USD in 2021. Subsequently, economic profit declined consistently from 6,812 million USD in 2022 to 594 million USD in 2024, indicating decreasing profitability despite still positive results after 2020.
- Economic Profit Margin Trends
- The economic profit margin also exhibited substantial fluctuations. Starting with a negative margin of -3.56% in 2020, it sharply improved to 9.58% in 2021, before decreasing to 6.79% in 2022. The margin then further contracted to 2.02% in 2023 and 0.65% in 2024, reflecting a declining efficiency in converting revenue into economic profit over recent years.
- Summary Insight
- Overall, the data reveals that while revenue peaked and then slightly receded, economic profitability and margin followed a pattern of initial recovery and growth post-2020, but faced a weakening trend from 2022 onwards. This suggests challenges in sustaining profit levels, despite relatively stable revenue in the last two years analyzed.