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 Rentals Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Analysis of Debt
- Aggregate Accruals
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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 fluctuations over the analyzed period. It increased from 1784 million USD in 2018 to 1925 million USD in 2019, followed by a sharp decline to 1323 million USD in 2020. Subsequently, the figure rebounded strongly to 2048 million USD in 2021 and further increased to 3088 million USD in 2022, suggesting a significant recovery and growth in operating profitability in the last two years.
- Cost of Capital
- The cost of capital showed an upward trend throughout the period, rising steadily from 12.37% in 2018 to 17.54% in 2022. The increase in the cost of capital implies higher required returns by investors, potentially due to increased risk or market conditions affecting the company’s capital structure or external economic environment.
- Invested Capital
- Invested capital displayed a general upward trend from 17871 million USD in 2018 to 22485 million USD in 2022. There was a slight dip in 2020 to 17027 million USD, possibly associated with economic or operational challenges during that year. However, the invested capital increased significantly after 2020, indicating ongoing or expanding investment in assets supporting the company’s operations.
- Economic Profit
- Economic profit remained negative throughout the five-year period, indicating that the company did not generate returns exceeding its cost of capital. Although economic profit improved somewhat from its lowest point of -1314 million USD in 2020 to -856 million USD in 2022, it still reflects a shortfall in value creation relative to the required returns by investors. The consistent negative economic profit suggests challenges in efficiently utilizing capital 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 of the company was negative throughout the analyzed period, indicating consistent value destruction rather than creation. The loss deepened significantly in 2020, reaching its lowest point at -1314 million USD. Although the negative economic profit gradually improved in 2021 and 2022, it remained substantial at -856 million USD by the end of 2022, signaling ongoing challenges in achieving profitability beyond the cost of capital.
- Invested Capital
- Invested capital experienced a general upward trend over the five-year span. Starting at 17,871 million USD in 2018, the invested capital slightly decreased in 2020 to 17,027 million USD but then increased significantly in 2021 and 2022, reaching 22,485 million USD. This growth suggests a substantial expansion of the company's asset base or investments, possibly intended to support future growth or operational capacity.
- Economic Spread Ratio
- The economic spread ratio, which represents the difference between return on invested capital and cost of capital, was negative in all years, reflecting that returns did not cover the cost of capital. This ratio deteriorated sharply in 2020, dropping to -7.72%, which aligns with the peak economic profit loss in the same year. Post-2020, the ratio improved steadily but stayed negative at -3.81% in 2022, indicating the company had not yet reached a break-even level in economic returns.
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.
- Economic Profit
- The economic profit demonstrated a persistent negative value throughout the five-year period, indicating ongoing economic losses. The deficit deepened significantly in 2020, worsening to -1,314 million US dollars from -442 million in 2019. Although there was some recovery in 2021 and 2022, with economic profit improving to -1,125 million and then to -856 million, the values remained substantially below zero, reflecting sustained challenges in value creation.
- Adjusted Revenues
- Adjusted revenues showed an overall upward trend with fluctuations. Revenues increased from 8,057 million US dollars in 2018 to 9,350 million in 2019, followed by a decline to 8,526 million in 2020. Post-2020, revenues rebounded strongly, reaching 9,748 million in 2021 and further increasing to 11,690 million in 2022. This rising revenue trend from 2020 onwards indicates recovery and growth momentum.
- Economic Profit Margin
- The economic profit margin was consistently negative, mirroring the trend seen in economic profit. Starting at -5.28% in 2018, it slightly improved to -4.72% in 2019 before deteriorating sharply to -15.41% in 2020. In 2021, the margin improved to -11.54%, and further recovery was evident in 2022 with a margin of -7.32%. Despite the improvements in recent years, the margin remains negative, evidencing ongoing inefficiencies or cost challenges relative to the capital employed.