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 – 21.43% × 12,723 = 334
The financial performance between 2018 and 2022 is characterized by extreme volatility in operating profitability and a consistent expansion of the capital base. Economic profit shifted from a period of significant value destruction to a peak of value creation in 2021, before experiencing a sharp contraction in 2022.
- Net Operating Profit After Taxes (NOPAT)
- A severe downward trend is observed from 2018 to 2020, with NOPAT falling from 893 million US$ to a deficit of 1,095 million US$. This was followed by a substantial recovery in 2021, where NOPAT peaked at 4,449 million US$, before moderating to 3,060 million US$ in 2022.
- Cost of Capital
- The cost of capital exhibited a fluctuating pattern, decreasing to 12.54% in 2019 before entering a steady upward trajectory. By December 31, 2022, the rate climbed to 21.43%, indicating a higher threshold for the company to generate a positive return on its invested capital.
- Invested Capital
- Invested capital demonstrates a consistent growth pattern over the five-year period, rising from 6,762 million US$ in 2018 to 12,723 million US$ in 2022. A significant increase in capital deployment is noted between 2020 and 2021, where the base grew by approximately 43%.
- Economic Profit
- Economic profit remained negative for three consecutive years, reaching its lowest point of -2,589 million US$ in 2020, which indicates that operating profits were insufficient to cover the cost of capital. A pivot to positive economic value was achieved in 2021 with a gain of 1,975 million US$. However, this value creation diminished significantly in 2022 to 334 million US$, driven by the combination of declining NOPAT and an increasing cost of capital.
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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 $12,723 million in 2022. The steady rise indicates ongoing investment in assets or operations that support the business. The substantial jump between 2020 and 2021 aligns with the marked increase in equity, implying financed growth and asset expansion during this period.
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Cost of Capital
United States Steel Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,809) | 6,809) | ÷ | 11,054) | = | 0.62 | 0.62 | × | 31.76% | = | 19.56% | ||
| Debt3 | 4,091) | 4,091) | ÷ | 11,054) | = | 0.37 | 0.37 | × | 6.12% × (1 – 21.00%) | = | 1.79% | ||
| Operating lease liability4 | 154) | 154) | ÷ | 11,054) | = | 0.01 | 0.01 | × | 6.73% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 11,054) | 1.00 | 21.43% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 | × | 31.76% | = | 17.94% | ||
| 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 | 20.04% | ||||||||||
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 | × | 31.76% | = | 13.81% | ||
| 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 | 17.33% | ||||||||||
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 | × | 31.76% | = | 8.83% | ||
| 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 | 12.54% | ||||||||||
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 | × | 31.76% | = | 19.63% | ||
| 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 | 21.64% | ||||||||||
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 | 334) | 1,975) | (2,589) | (1,104) | (570) | |
| Invested capital2 | 12,723) | 12,346) | 8,622) | 7,841) | 6,762) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 2.62% | 16.00% | -30.03% | -14.08% | -8.43% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | -6.20% | -2.72% | — | — | — | |
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 × 334 ÷ 12,723 = 2.62%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits significant volatility over the analyzed five-year period, characterized by a period of substantial value destruction followed by a sharp recovery and subsequent stabilization.
- Invested Capital Trends
- A consistent upward trajectory is observed in invested capital, which increased steadily from US$ 6,762 million in 2018 to US$ 12,723 million in 2022. This represents a near doubling of the capital base, indicating continuous investment or capital accumulation despite fluctuating profitability.
- Economic Profit and Value Erosion
- Economic profit experienced a severe decline between 2018 and 2020, reaching a trough of negative US$ 2,589 million. This trend is mirrored in the economic spread ratio, which deteriorated from -8.43% in 2018 to a low of -30.03% in 2020, signaling that the returns generated were significantly lower than the cost of the capital employed.
- Recovery and Spread Normalization
- A sharp reversal occurred in 2021, with economic profit surging to US$ 1,975 million and the economic spread ratio shifting to a positive 16.00%. This indicates a transition from value destruction to significant value creation. By 2022, although the economic spread ratio contracted to 2.62% and economic profit decreased to US$ 334 million, the ratio remained positive, suggesting that the entity continued to earn a return exceeding its cost of capital.
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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 | 334) | 1,975) | (2,589) | (1,104) | (570) | |
| Net sales | 21,065) | 20,275) | 9,741) | 12,937) | 14,178) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 1.59% | 9.74% | -26.58% | -8.53% | -4.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | -9.86% | -4.15% | — | — | — | |
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 × 334 ÷ 21,065 = 1.59%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by extreme volatility in economic value creation, featuring a severe contraction through 2020 followed by a rapid recovery and a subsequent margin compression in 2022.
- Economic Profit Trends
- A significant decline in economic profit is observed from 2018 to 2020, with losses widening from -570 million USD to a peak deficit of -2,589 million USD. This downward trajectory reversed sharply in 2021, where the company achieved a positive economic profit of 1,975 million USD. However, this gain diminished by 2022, falling to 334 million USD.
- Net Sales Correlation
- Net sales exhibited a mirrored pattern to economic profit during the initial period of decline, dropping from 14,178 million USD in 2018 to a low of 9,741 million USD in 2020. A massive expansion in sales occurred in 2021, reaching 20,275 million USD, and continued to grow slightly to 21,065 million USD in 2022. This suggests that the recovery in economic profit was heavily supported by a substantial increase in top-line revenue.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates a period of critical value destruction between 2018 and 2020, with the margin deteriorating from -4.02% to -26.58%. This indicates that the company failed to generate returns sufficient to cover its cost of capital during this window. A dramatic pivot occurred in 2021, with the margin swinging to a positive 9.74%, the highest point in the analyzed period. By 2022, despite the continued growth in net sales, the margin contracted sharply to 1.59%, indicating a significant reduction in the efficiency of value creation relative to sales volume.
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