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.
Economic Profit
United States Steel Corp., economic profit 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 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
= 3,060 – 21.38% × 12,723 = 340
The financial performance from 2018 to 2022 exhibits significant volatility in value creation, characterized by a period of substantial economic loss followed by a sharp recovery and subsequent moderation.
- Net Operating Profit After Taxes (NOPAT)
- A highly volatile trend is observed in NOPAT, which declined from 893 million USD in 2018 to a trough of -1,095 million USD in 2020. A dramatic reversal occurred in 2021, with NOPAT peaking at 4,449 million USD, before moderating to 3,060 million USD in 2022. This indicates a period of severe operational distress followed by a strong recovery in profitability.
- Invested Capital and Cost of Capital
- Invested capital demonstrated consistent year-over-year growth, increasing from 6,762 million USD in 2018 to 12,723 million USD by 2022, representing nearly a twofold increase in the capital base. Simultaneously, the cost of capital fluctuated, reaching a low of 12.52% in 2019 before trending upward to 21.38% by 2022. The combination of a larger capital base and a rising cost of capital increased the threshold for achieving positive economic profit.
- Economic Profit
- Economic profit remained negative from 2018 through 2020, with losses widening to a peak of -2,586 million USD in 2020, signaling significant value destruction during this interval. The entity transitioned to value creation in 2021, achieving a positive economic profit of 1,980 million USD. However, this gain contracted sharply to 340 million USD in 2022, suggesting that while the company remained value-additive, the margin of economic profit narrowed significantly as costs and capital requirements evolved.
The overall trajectory indicates that while operational profitability recovered strongly post-2020, the expansion of the invested capital base and the increase in the cost of capital have placed downward pressure on the ability to generate sustained, high levels of economic profit.
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Net Operating Profit after Taxes (NOPAT)
United States Steel Corp., 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 doubtful accounts.
3 Addition of increase (decrease) in accrued liabilities for restructuring and other cost reduction programs.
4 Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to United States Steel Corporation.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 154 × 6.73% = 10
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 169 × 21.00% = 36
7 Addition of after taxes interest expense to net earnings (loss) attributable to United States Steel Corporation.
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 44 × 21.00% = 9
9 Elimination of after taxes investment income.
The financial data over the analyzed periods exhibit notable fluctuations in profitability metrics for the entity. The net earnings attributable to the company reveal a volatile trajectory, characterized by a significant loss phase between 2019 and 2020, followed by a pronounced recovery and peak in 2021, and a subsequent decrease in 2022, though remaining positive.
- Net Earnings (Loss) Attributable
- In 2018, the company reported net earnings amounting to 1,115 million US dollars, followed by a sharp decline to a loss of 630 million in 2019. This adverse trend intensified in 2020 with a deeper loss of 1,165 million. The year 2021 marked a substantial turnaround with net earnings reaching 4,174 million, representing the highest value in the dataset. In 2022, earnings declined to 2,524 million, which, despite being lower than the previous year, remained robust and positive.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values mirror the net earnings trend closely, confirming the operational profitability challenges faced during 2019 and 2020. In 2018, NOPAT was recorded at 893 million US dollars, declining sharply to a negative 121 million in 2019, and further deteriorating to a negative 1,095 million in 2020. A significant recovery occurred in 2021, with NOPAT peaking at 4,449 million. Although there was a decrease in 2022 to 3,060 million, the figure remained strongly positive, indicative of sustained operational improvement relative to the loss years.
Overall, the data indicate a period of financial stress and operational difficulty during 2019 and 2020, likely reflective of external or internal challenges during those years. The strong rebound in 2021 signifies effective recovery measures, enhanced profitability, or favorable market conditions. The subsequent decline in 2022, while noteworthy, does not negate the positive turnaround, suggesting a period of stabilization at an improved profit level compared to the negative earnings years.
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Cash Operating Taxes
United States Steel Corp., 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).
The data reveals notable fluctuations in the income tax provision (benefit) over the five-year period. Initially, there was a substantial tax benefit recorded in 2018 at -$303 million, indicating a negative tax expense or a tax benefit. This shifted to a positive income tax provision of $178 million in 2019, signaling a tax expense rather than a benefit during that year. The year 2020 once again saw a tax benefit of -$142 million, suggesting a reversal or reduction in tax obligations. However, in 2021 and 2022, the trend changed significantly, with the income tax provision increasing to $170 million and then sharply rising to $735 million. This indicates progressively higher tax expenses in the later years, with 2022 showing the most substantial tax charge over the period analyzed.
Cash operating taxes displayed a different pattern. From 2018 to 2019, there was a marked decrease from $60 million to $6 million. This was followed by a recovery to $49 million in 2020, and a substantial increase in 2021 to $290 million, suggesting a significant rise in actual cash payments for taxes in that year. In 2022, the cash operating taxes slightly decreased to $260 million, yet remained considerably higher than the levels observed in the earlier years.
Overall, the data points to considerable volatility in both the income tax provision and cash operating taxes, with a general trend towards higher tax expenses and cash tax payments in the most recent years. The divergence between income tax provision and cash operating taxes in certain years, such as 2018 and 2020 where provisions were negative but cash taxes positive, may indicate timing differences, tax credits, or adjustments impacting accounting and cash tax reporting differently.
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Invested Capital
United States Steel Corp., invested capital calculation (financing approach)
US$ 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 accrued liabilities for restructuring and other cost reduction programs.
5 Addition of equity equivalents to total United States Steel Corporation stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in process.
The financial data exhibits notable fluctuations in key measures over the five-year period ending in 2022.
- Total Reported Debt & Leases
- There is a general upward trend from 2018 to 2020, with debt rising from $2,624 million to $5,109 million. This is followed by a decrease in 2021 to $4,085 million, after which the debt level stabilizes in 2022 at $4,131 million. The initial increase suggests a phase of leveraging or increased borrowing, while the subsequent reduction and stabilization indicate efforts to manage or reduce debt obligations.
- Total United States Steel Corporation Stockholders’ Equity
- Equity demonstrates a mixed trajectory. The equity declined from $4,202 million in 2018 to $3,786 million in 2020, possibly reflecting losses or distributions exceeding earnings. A significant reversal occurs in 2021 with equity surging to $9,010 million and further increasing to $10,218 million in 2022. This sharp rise in equity suggests substantial profits, capital injections, or retained earnings during these years, strengthening the company's financial position.
- Invested Capital
- Invested capital has consistently increased year over year, growing from $6,762 million in 2018 to $12,723 million in 2022. The steady rise indicates ongoing investment in assets or operations that support the business. The substantial jump between 2020 and 2021 aligns with the marked increase in equity, implying financed growth and asset expansion during this period.
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Cost of Capital
United States Steel Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,809) | 6,809) | ÷ | 11,054) | = | 0.62 | 0.62 | × | 31.68% | = | 19.52% | ||
| Debt3 | 4,091) | 4,091) | ÷ | 11,054) | = | 0.37 | 0.37 | × | 6.12% × (1 – 21.00%) | = | 1.79% | ||
| Operating lease liability4 | 154) | 154) | ÷ | 11,054) | = | 0.01 | 0.01 | × | 6.73% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 11,054) | 1.00 | 21.38% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | 6,179) | 6,179) | ÷ | 10,941) | = | 0.56 | 0.56 | × | 31.68% | = | 17.89% | ||
| Debt3 | 4,568) | 4,568) | ÷ | 10,941) | = | 0.42 | 0.42 | × | 6.10% × (1 – 21.00%) | = | 2.01% | ||
| Operating lease liability4 | 194) | 194) | ÷ | 10,941) | = | 0.02 | 0.02 | × | 6.56% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 10,941) | 1.00 | 20.00% | ||||||||||
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 | 4,331) | 4,331) | ÷ | 9,957) | = | 0.43 | 0.43 | × | 31.68% | = | 13.78% | ||
| Debt3 | 5,404) | 5,404) | ÷ | 9,957) | = | 0.54 | 0.54 | × | 7.89% × (1 – 21.00%) | = | 3.38% | ||
| Operating lease liability4 | 222) | 222) | ÷ | 9,957) | = | 0.02 | 0.02 | × | 7.45% × (1 – 21.00%) | = | 0.13% | ||
| Total: | 9,957) | 1.00 | 17.29% | ||||||||||
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 | 1,495) | 1,495) | ÷ | 5,374) | = | 0.28 | 0.28 | × | 31.68% | = | 8.81% | ||
| Debt3 | 3,642) | 3,642) | ÷ | 5,374) | = | 0.68 | 0.68 | × | 6.42% × (1 – 21.00%) | = | 3.44% | ||
| Operating lease liability4 | 237) | 237) | ÷ | 5,374) | = | 0.04 | 0.04 | × | 7.76% × (1 – 21.00%) | = | 0.27% | ||
| Total: | 5,374) | 1.00 | 12.52% | ||||||||||
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 | 3,970) | 3,970) | ÷ | 6,423) | = | 0.62 | 0.62 | × | 31.68% | = | 19.58% | ||
| Debt3 | 2,210) | 2,210) | ÷ | 6,423) | = | 0.34 | 0.34 | × | 6.65% × (1 – 21.00%) | = | 1.81% | ||
| Operating lease liability4 | 243) | 243) | ÷ | 6,423) | = | 0.04 | 0.04 | × | 6.65% × (1 – 21.00%) | = | 0.20% | ||
| Total: | 6,423) | 1.00 | 21.59% | ||||||||||
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 States Steel Corp., 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 | 340) | 1,980) | (2,586) | (1,102) | (567) | |
| Invested capital2 | 12,723) | 12,346) | 8,622) | 7,841) | 6,762) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 2.67% | 16.04% | -30.00% | -14.06% | -8.38% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | -6.14% | -2.67% | — | — | — | |
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 × 340 ÷ 12,723 = 2.67%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a period of significant value destruction followed by a sharp recovery and subsequent stabilization. The trajectory indicates a volatility in the ability to generate returns exceeding the cost of capital, transitioning from deeply negative economic profits to a positive, albeit diminishing, spread by the end of the period.
- Economic Profit Trends
- A period of intensifying losses is observed from 2018 to 2020, with economic profit declining from -567 million US$ to a trough of -2,586 million US$. This trend reversed sharply in 2021, marking a pivot to value creation with a profit of 1,980 million US$. Although profitability remained positive in 2022, there was a significant contraction to 340 million US$, indicating a moderation in the recovery momentum.
- Invested Capital Growth
- Invested capital exhibited a consistent upward trend throughout the five-year period. Capital grew steadily from 6,762 million US$ in 2018 to 8,622 million US$ in 2020, followed by a substantial increase to 12,346 million US$ in 2021. This growth culminated in 12,723 million US$ by 2022, suggesting a sustained expansion of the asset base or increased funding requirements to support operations.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of economic profit, reflecting the efficiency of capital utilization relative to the cost of capital. A deteriorating trend is evident from 2018 to 2020, with the ratio falling from -8.38% to -30.00%, representing a period of severe value erosion. A dramatic reversal occurred in 2021, where the ratio peaked at 16.04%, signifying that the company generated returns well above its cost of capital. By 2022, the ratio compressed to 2.67%, suggesting that while the company continues to create economic value, the margin of excess return has narrowed significantly.
In summary, the analysis reveals a cyclical pattern of financial performance. The company moved from a phase of increasing economic loss and expanding capital investment to a phase of high-yield value creation in 2021, before entering a state of marginal positive spread in 2022.
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Economic Profit Margin
United States Steel Corp., 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 | 340) | 1,980) | (2,586) | (1,102) | (567) | |
| Net sales | 21,065) | 20,275) | 9,741) | 12,937) | 14,178) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 1.61% | 9.77% | -26.55% | -8.52% | -4.00% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | -9.77% | -4.07% | — | — | — | |
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 ÷ Net sales
= 100 × 340 ÷ 21,065 = 1.61%
3 Click competitor name to see calculations.
The economic profit margin exhibited extreme volatility over the five-year period from 2018 to 2022, characterized by a severe downturn followed by a rapid recovery and subsequent margin compression. The transition from consistent value destruction to value creation reflects significant shifts in both top-line revenue and the ability to exceed the cost of capital.
- Value Destruction Phase (2018–2020)
- A progressive deterioration in economic performance is observed during this period. Economic profit declined from -US$ 567 million in 2018 to a nadir of -US$ 2,586 million in 2020. This coincided with a contraction in net sales, which fell from US$ 14,178 million to US$ 9,741 million. Consequently, the economic profit margin widened significantly from -4.00% to -26.55%, indicating that the company failed to generate returns sufficient to cover its cost of capital.
- Recovery and Peak Value Creation (2021)
- A sharp reversal occurred in 2021, marked by a substantial increase in net sales to US$ 20,275 million. This surge in revenue drove economic profit into positive territory, reaching US$ 1,980 million. The economic profit margin shifted from a deep negative to a peak of 9.77%, signaling a transition to positive economic value added.
- Margin Compression and Stabilization (2022)
- Although net sales continued to grow slightly, reaching US$ 21,065 million in 2022, economic profit experienced a sharp decline to US$ 340 million. This divergence resulted in a significant contraction of the economic profit margin to 1.61%. While the company remained value-creative, the efficiency of value generation diminished considerably compared to the previous year.
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