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 States Steel Corp. pages available for free this week:
- Income Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Economic Profit
United States Steel Corp., 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
= – × =
The financial performance from 2018 to 2022 is characterized by extreme volatility in operational profitability and a significant transition from economic value destruction to value creation. A period of severe contraction between 2019 and 2020 was followed by a sharp recovery in 2021, although the momentum diminished by the end of 2022.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trajectory is observed in operational earnings. After a positive start in 2018, NOPAT declined into negative territory, reaching a trough of negative 1,095 million US dollars in 2020. A substantial reversal occurred in 2021, with profits surging to 4,449 million US dollars, before moderating to 3,060 million US dollars in 2022.
- Cost of Capital
- The cost of capital exhibited significant fluctuations, starting at 21.65% in 2018 and dropping to a period low of 12.55% in 2019. From 2020 onward, a consistent upward trend is evident, with the rate climbing back to 21.44% by 2022, indicating an increasing hurdle rate for investment returns.
- Invested Capital
- A consistent expansion of the capital base is noted throughout the period. Invested capital grew steadily from 6,762 million US dollars in 2018 to 12,723 million US dollars in 2022. A particularly sharp increase occurred between 2020 and 2021, where the capital base expanded by approximately 43%.
- Economic Profit
- The economic profit trend reflects the interplay between surging capital investments and erratic NOPAT. Value destruction intensified from 2018 to 2020, peaking at a loss of 2,590 million US dollars. The company pivoted to value creation in 2021, achieving an economic profit of 1,973 million US dollars. However, by 2022, this figure decreased to 332 million US dollars, suggesting that while the company remains value-additive, the margin of economic profit has narrowed significantly.
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
= × =
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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.
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 $260 million, yet remained considerably higher than the levels observed in the earlier years.
Overall, the data points to considerable volatility in both the income tax provision and cash operating taxes, with a general trend towards higher tax expenses and cash tax payments in the most recent years. The divergence between income tax provision and cash operating taxes in certain years, such as 2018 and 2020 where provisions were negative but cash taxes positive, may indicate timing differences, tax credits, or adjustments impacting accounting and cash tax reporting differently.
Invested Capital
United States Steel Corp., invested capital calculation (financing approach)
US$ 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 $12,723 million in 2022. The steady rise indicates ongoing investment in assets or operations that support the business. The substantial jump between 2020 and 2021 aligns with the marked increase in equity, implying financed growth and asset expansion during this period.
Cost of Capital
United States Steel Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ 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 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | ||||||
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.
The financial performance from 2018 through 2022 is characterized by a period of substantial economic value destruction followed by a sharp recovery and a subsequent moderation in returns. This period is marked by significant volatility in profitability and a consistent expansion of the capital base.
- Economic Profit Trends
- A downward trajectory was observed from 2018 to 2020, with economic profit declining from -571 million USD to a low of -2,590 million USD. This trend reversed sharply in 2021, as the company transitioned to a positive economic profit of 1,973 million USD. By 2022, although the company remained value-creative, economic profit contracted significantly to 332 million USD.
- Invested Capital Growth
- Invested capital exhibited continuous growth throughout the five-year period, rising from 6,762 million USD in 2018 to 12,723 million USD in 2022. A notable acceleration in capital investment occurred between 2020 and 2021, where invested capital increased by approximately 43%, coinciding with the company's return to positive economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrored the volatility of economic profit, plummeting from -8.44% in 2018 to a nadir of -30.04% in 2020, indicating that the return on invested capital was significantly below the cost of capital. A dramatic recovery occurred in 2021, with the ratio surging to 15.98%. However, this margin narrowed considerably in 2022 to 2.61%, suggesting a diminished capacity to generate returns above the required cost of capital compared to the previous year.
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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a period of severe economic value erosion followed by a rapid recovery and subsequent margin contraction. A significant downturn culminated in 2020, after which a sharp pivot in profitability was observed in 2021, although the magnitude of value creation diminished by 2022.
- Net Sales Trends
- Revenue exhibited a volatile trajectory, declining from 14,178 million USD in 2018 to a low of 9,741 million USD in 2020. A substantial recovery followed, with sales expanding to 20,275 million USD in 2021 and reaching a period high of 21,065 million USD by the end of 2022.
- Economic Profit Analysis
- Economic profit remained negative from 2018 through 2020, with losses widening from 571 million USD to a peak deficit of 2,590 million USD. The trend reversed sharply in 2021, yielding a positive economic profit of 1,973 million USD. However, this figure decreased to 332 million USD in 2022, indicating a reduction in the amount of value created above the cost of capital despite continued revenue growth.
- Economic Profit Margin Volatility
- The economic profit margin mirrored the volatility of absolute profit figures. A deepening negative trend was evident from 2018 (-4.03%) to 2020, where the margin reached its lowest point at -26.59%. A significant correction occurred in 2021, resulting in a positive margin of 9.73%. By 2022, the margin contracted significantly to 1.58%, suggesting that the increase in net sales was not accompanied by a proportional increase in economic profit.