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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United Rentals Inc. pages available for free this week:
- Income Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value (EV)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
United Rentals Inc., economic profit calculation
US$ in millions
| 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 net operating profit after taxes exhibited variation over the analyzed period. Initially, it increased from 1784 million US dollars at the end of 2018 to 1925 million in 2019. However, there was a significant decline in 2020 to 1323 million, likely due to external factors impacting profitability. The trend reversed in 2021, with NOPAT increasing to 2048 million and continuing to notably rise to 3088 million by the end of 2022, suggesting improved operational performance and profitability.
- Cost of Capital
- The cost of capital showed a consistent upward trend throughout the period, beginning at 12.3% in 2018 and rising progressively each year, reaching 17.45% in 2022. This increase in the cost of capital indicates rising required returns by investors or higher financing costs, which could impact investment decisions and valuation metrics.
- Invested Capital
- Invested capital experienced fluctuation and overall growth during the period. After a modest increase from 17871 million US dollars in 2018 to 18200 million in 2019, it decreased to 17027 million in 2020, possibly reflecting asset disposals or reduced investments. From 2020 onwards, invested capital increased steadily, reaching 19019 million in 2021 and 22485 million in 2022, signaling renewed capital deployment or asset acquisition to support business expansion.
- Economic Profit
- The economic profit remained negative in all years, illustrating that the returns generated were less than the cost of capital annually. Although the deficits decreased from a low of -1300 million in 2020 to -834 million in 2022, the company did not achieve positive economic profit, which may highlight ongoing challenges in generating value beyond capital costs despite improvements in operating profit.
Net Operating Profit after Taxes (NOPAT)
United Rentals Inc., NOPAT calculation
US$ in millions
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 deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
- Net Income Trends
- The net income demonstrated a generally positive trajectory over the five-year period. Starting at 1,096 million US dollars in 2018, it exhibited a moderate increase in 2019 to 1,174 million. However, in 2020, there was a noticeable decline to 890 million, which may reflect operational or market challenges during that year. In the following years, the net income recovered robustly, rising to 1,386 million in 2021 and reaching a significant peak of 2,105 million in 2022. This indicates a strong improvement in profitability towards the end of the period under review.
- Net Operating Profit After Taxes (NOPAT) Trends
- The NOPAT figures show a similar pattern to net income but with generally higher absolute values. Beginning at 1,784 million US dollars in 2018, NOPAT increased to 1,925 million in 2019. Like net income, it saw a decline in 2020 down to 1,323 million, suggesting a potential operational impact consistent with that year's challenges. The subsequent years saw substantial recovery and growth, with NOPAT rising sharply to 2,048 million in 2021 and further to 3,088 million in 2022. This indicates enhanced operational efficiency and profitability after tax, reflecting strong business performance in the latter years.
- Comparative Insights
- Both net income and NOPAT experienced a dip in 2020, likely due to external or internal disruptions affecting the company’s financial results. Despite this setback, the company demonstrated robust recovery and growth in 2021 and 2022, with both metrics exceeding prior peak levels. The growth in NOPAT outpaces that of net income, which could imply improved operational profitability and tax efficiency. Overall, the data reflects resilience and improving profitability over the five-year period, culminating in significantly stronger financial outcomes in the most recent year.
Cash Operating Taxes
United Rentals Inc., cash operating taxes calculation
US$ in millions
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).
- Provision for Income Taxes
- The provision for income taxes showed a general upward trend over the analyzed period. Starting at $380 million in 2018, it decreased to $340 million in 2019 and further declined to $249 million in 2020. However, from 2020 onward, there was a notable increase, reaching $460 million in 2021 and continuing to rise to $697 million in 2022. This suggests fluctuations in taxable income or changes in tax planning strategies, with a significant rise in the last two years under review.
- Cash Operating Taxes
- Cash operating taxes exhibited considerable volatility throughout the years. Beginning at $228 million in 2018, the amount increased to $279 million in 2019, followed by a sharp rise to $517 million in 2020. Subsequently, cash operating taxes decreased to $287 million in 2021 and further dropped slightly to $260 million in 2022. The spike in 2020 may reflect extraordinary tax payments or adjustments, whereas the reduction post-2020 indicates normalization or timing differences in tax payments relative to income.
Invested Capital
United Rentals Inc., invested capital calculation (financing approach)
US$ in millions
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 deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases showed a decreasing trend from 12,395 million USD at the end of 2018 to 10,409 million USD by the end of 2020. Following that decline, there was a slight increase in 2021 to 10,508 million USD and a more pronounced rise to 12,223 million USD by the end of 2022. Overall, debt levels decreased initially but exhibited an upward reversal in the last two years.
- Stockholders’ Equity
- Stockholders’ equity progressively increased throughout the five-year period, rising from 3,403 million USD in 2018 to 7,062 million USD in 2022. The growth was consistent year-on-year, with the most substantial increments occurring in 2021 and 2022. This indicates a strengthening of the equity base and suggests enhanced retained earnings or equity issuance over time.
- Invested Capital
- Invested capital experienced fluctuations, starting at 17,871 million USD in 2018 and peaking at 18,200 million USD in 2019 before declining to the lowest point of 17,027 million USD in 2020. From 2020 onward, there was a recovery and marked growth to 19,019 million USD in 2021 and further to 22,485 million USD in 2022. The overall trend after 2020 reflects expanding invested capital, which may result from increased asset acquisition or other investments.
Cost of Capital
United Rentals 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: 2022-12-31).
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 – 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 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 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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
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 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
United Rentals Inc., 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 millions) | ||||||
| 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 demonstrates a consistent negative trend throughout the observed periods. Starting at -415 million US dollars in 2018, the loss deepened in 2019. A significant deterioration occurred in 2020, with the economic profit falling sharply to -1300 million US dollars. Although there was some improvement in the subsequent years, the values remained substantially negative, reaching -1107 million in 2021 and -834 million in 2022. This indicates that the company has been generating returns below its cost of capital during this entire period, despite some recovery after 2020.
- Invested Capital
- Invested capital showed a moderate increase from 2018 to 2019, rising from 17,871 million to 18,200 million US dollars. It declined notably in 2020 to 17,027 million US dollars, coinciding with the peak negative economic profit, suggesting possible reductions in asset base or divestments. However, from 2020 onward, invested capital increased significantly, reaching 19,019 million in 2021 and then surging to 22,485 million US dollars in 2022. This upward trend may indicate further investments or expansions despite the company's ongoing struggle to generate positive economic profit.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, reflecting returns below the cost of capital. Starting at -2.32% in 2018, it slightly declined to -2.36% in 2019, then plunged to -7.63% in 2020, which aligns with the sharp drop in economic profit. After 2020, there was a recovery trend with the ratio improving to -5.82% in 2021 and further to -3.71% in 2022. While the economic spread ratio is still negative, the improvement suggests the company has been narrowing its gap between returns and capital costs since the low point in 2020.
- Overall Insights
- The data reveals a period of financial challenges peaking in 2020, characterized by significant negative economic profit and economic spread ratio. Despite this, invested capital decreased only temporarily and later increased substantially, indicating continued capital commitments. The gradual improvement in economic spread ratio and economic profit after 2020 points to ongoing efforts to enhance operational efficiency or profitability, yet the figures have not returned to positive territory. The company remains under pressure to generate returns that exceed its cost of capital to create long-term shareholder value.
Economic Profit Margin
United Rentals Inc., 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted 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 revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- Adjusted revenues demonstrated a generally upward trend over the five-year period. Starting at 8,057 million US dollars in 2018, revenues increased steadily reaching 9,350 million in 2019. Although there was a slight decline to 8,526 million in 2020, revenues rebounded strongly in subsequent years, reaching 9,748 million in 2021 and peaking at 11,690 million in 2022. This pattern indicates resilience and growth with a notable recovery following the dip observed in 2020.
- Economic Profit
- Economic profit was negative throughout the period, indicating that the company operated at a loss from an economic profit perspective. The losses deepened significantly in 2020, worsening from -430 million in 2019 to -1,300 million. Although there was some recovery in the following years, economic profit remained substantially negative at -1,107 million in 2021 and -834 million in 2022. The trend suggests challenges in converting revenue growth into positive economic profit.
- Economic Profit Margin
- The economic profit margin mirrored the trend in economic profit, consistently remaining negative. The margin was relatively moderate at -5.15% and -4.60% in 2018 and 2019 respectively, but it deteriorated sharply in 2020 to -15.24%, coinciding with the significant drop in economic profit. Although improvement occurred thereafter, margins were still deeply negative at -11.36% in 2021 and -7.14% in 2022. These figures reflect persistent inefficiencies in profit generation relative to revenues.