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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UnitedHealth Group Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Analysis of Revenues
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Economic Profit
UnitedHealth Group Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating economic profit performance. Net operating profit after taxes (NOPAT) generally increased from 2020 to 2023, but experienced a substantial decline in 2024. Invested capital consistently rose throughout the period, while the cost of capital remained relatively stable. These factors combined to produce a varied economic profit trajectory.
- Economic Profit Trend
- Economic profit exhibited an initial decline from US$5,084 million in 2020 to US$4,559 million in 2021. A subsequent recovery occurred, with economic profit increasing to US$5,634 million in 2022 and reaching a peak of US$8,008 million in 2023. However, 2024 saw a significant reversal, resulting in an economic loss of US$989 million.
- NOPAT Performance
- NOPAT increased from US$18,059 million in 2020 to US$18,910 million in 2021, followed by more substantial growth to US$22,615 million in 2022 and US$26,672 million in 2023. The decline to US$18,940 million in 2024 is a notable shift, coinciding with the negative economic profit.
- Cost of Capital Stability
- The cost of capital remained relatively consistent, fluctuating between 9.94% and 10.27% over the five-year period. The slight decrease to 10.04% in 2024 did not offset the decline in NOPAT, contributing to the negative economic profit.
- Invested Capital Growth
- Invested capital demonstrated a consistent upward trend, increasing from US$130,513 million in 2020 to US$198,557 million in 2024. This growth in capital employed did not translate into proportional economic profit gains, particularly in the final year.
The substantial decline in economic profit in 2024, despite continued growth in invested capital, suggests a potential issue with capital allocation efficiency or a significant decrease in operational profitability. Further investigation into the factors driving the 2024 NOPAT reduction is warranted.
Net Operating Profit after Taxes (NOPAT)
UnitedHealth Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in receivables allowances.
3 Addition of increase (decrease) in unearned revenues.
4 Addition of increase (decrease) in equity equivalents to net earnings attributable to UnitedHealth Group common shareholders.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 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 attributable to UnitedHealth Group common shareholders.
- Net Earnings attributable to UnitedHealth Group common shareholders
- The net earnings showed a generally upward trend from 2020 to 2023, increasing from 15,403 million US dollars in 2020 to a peak of 22,381 million US dollars in 2023. However, in 2024, there was a notable decline to 14,405 million US dollars, indicating a significant reduction compared to the previous year and even below the 2021 level.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited growth over the first four years, rising from 18,059 million US dollars in 2020 to a peak of 26,672 million US dollars in 2023. Similar to net earnings, 2024 saw a decrease in NOPAT to 18,940 million US dollars, which is considerably lower than the 2023 figure but still above the 2020 and 2021 levels.
- Overall Analysis
- Both net earnings and NOPAT demonstrated strong performance growth from 2020 through 2023, suggesting operational improvements and profitability enhancements during this period. The sharp decline in both metrics in 2024 indicates a reversal of these positive trends, potentially due to adverse business conditions, increased costs, or other factors affecting profitability. Despite the decline, the 2024 NOPAT remains above earlier years, implying some retained operational efficiency compared to the start of the observed period.
Cash Operating Taxes
UnitedHealth Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The analysis of the tax-related financial data over the five-year period reveals several noteworthy trends.
- Provision for income taxes
- The provision for income taxes exhibited some fluctuations during the observed period. An initial decrease occurred from 4,973 million USD in 2020 to 4,578 million USD in 2021. This was followed by an increase to 5,704 million USD in 2022 and a further rise to 5,968 million USD in 2023. However, the provision dropped significantly to 4,829 million USD in 2024. Overall, the provision peaked in 2023 before declining in the last reported year.
- Cash operating taxes
- Cash operating taxes mirrored a somewhat similar overall pattern but with more pronounced changes. After decreasing from 5,358 million USD in 2020 to 4,823 million USD in 2021, there was a substantial rise to 6,851 million USD in 2022 and a slight increase to 6,936 million USD in 2023. The amount then declined to 5,994 million USD in 2024. This suggests that cash operating taxes experienced greater volatility compared to the provision for income taxes, with notable escalations in 2022 and 2023 before easing in 2024.
In summary, both provision for income taxes and cash operating taxes showed a general pattern of decline in the initial year, followed by significant increases in the middle years of the period, peaking around 2023, and subsequently decreasing in 2024. The larger magnitude of changes in cash operating taxes compared to provision for income taxes may warrant further investigation to understand the underlying causes.
Invested Capital
UnitedHealth Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 unearned revenues.
5 Addition of equity equivalents to shareholders’ equity attributable to UnitedHealth Group.
6 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases exhibit a consistent upward trend over the five-year period. Starting at $47,914 million in 2020, it increases gradually each year, reaching $81,793 million by 2024. The most significant growth appears between 2023 and 2024, where the increase surpasses previous annual increments, indicating a potentially higher reliance on debt financing or capital lease arrangements in the most recent year.
- Shareholders’ equity attributable to UnitedHealth Group
- Shareholders’ equity shows a steady increase from $65,491 million in 2020 to $92,658 million in 2024. The equity base grows consistently each year without any declines, reflecting accumulation of retained earnings or issuance of additional equity capital. The growth rate appears relatively stable, with a slightly accelerated increase from 2022 onwards, suggesting strengthening financial foundation.
- Invested capital
- Invested capital also demonstrates a continual rise, moving from $130,513 million in 2020 to $198,557 million in 2024. This indicator grows substantially over the period, with the largest yearly increments occurring between 2021 and 2022, and then especially from 2023 to 2024. The rising invested capital corresponds with the increases in both debt and equity, indicating expanded capital deployment or asset base growth.
Cost of Capital
UnitedHealth Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper, long-term debt and other financing obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper, long-term debt and other financing obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper, long-term debt and other financing obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper, long-term debt and other financing obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper, long-term debt and other financing obligations3 | ÷ | = | × | × (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 Commercial paper, long-term debt and other financing obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper, long-term debt and other financing obligations3 | ÷ | = | × | × (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 Commercial paper, long-term debt and other financing obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper, long-term debt and other financing obligations3 | ÷ | = | × | × (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 Commercial paper, long-term debt and other financing obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
UnitedHealth Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited a fluctuating pattern over the five-year period. Initially, the ratio demonstrated growth, peaking in 2023, before experiencing a significant decline in 2024.
- Economic Spread Ratio Trend
- The economic spread ratio began at 3.90% in 2020, decreasing to 3.26% in 2021. A modest increase was then observed in 2022, reaching 3.41%. The ratio experienced its highest value in 2023 at 4.38%, indicating improved profitability relative to invested capital. However, a substantial decrease occurred in 2024, with the ratio falling to -0.50%. This negative value suggests that returns generated were insufficient to cover the cost of capital employed.
Economic profit generally increased from 2020 to 2023, aligning with the positive trend in the economic spread ratio during that period. However, the substantial decline in economic spread ratio in 2024 corresponded with a significant decrease in economic profit, resulting in a negative economic profit value.
- Invested Capital Trend
- Invested capital consistently increased throughout the period, rising from US$130,513 million in 2020 to US$198,557 million in 2024. This continuous growth in invested capital occurred alongside the fluctuating economic spread ratio, potentially contributing to the negative economic profit observed in the most recent year.
The combination of increasing invested capital and a declining economic spread ratio in 2024 resulted in a negative economic profit, signaling a potential deterioration in value creation. The shift from positive economic profit and a rising economic spread ratio in prior years to the 2024 results warrants further investigation.
Economic Profit Margin
UnitedHealth Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues, customers | ||||||
| Add: Increase (decrease) in unearned revenues | ||||||
| Adjusted revenues, customers | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues, customers
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited fluctuating performance over the five-year period. Initially, economic profit demonstrated growth, peaking in 2023 before experiencing a substantial decline in 2024. Simultaneously, adjusted revenues, customers consistently increased throughout the period, though the rate of growth varied annually.
- Economic Profit
- Economic profit increased from US$5,084 million in 2020 to US$4,559 million in 2021, representing a slight decrease. Subsequent years saw increases, reaching US$5,634 million in 2022 and a high of US$8,008 million in 2023. However, 2024 witnessed a significant reversal, with economic profit falling to a loss of US$989 million.
- Adjusted Revenues, Customers
- Adjusted revenues, customers increased steadily from US$255,859 million in 2020 to US$395,038 million in 2024. The largest year-over-year increase occurred between 2021 and 2022 (US$37,634 million), while the increase between 2023 and 2024 was US$27,225 million, indicating a slowing rate of revenue growth.
- Economic Profit Margin
- The economic profit margin generally trended upward from 1.99% in 2020 to 2.18% in 2023, mirroring the increase in economic profit. However, this positive trend was disrupted in 2024, with the margin declining sharply to -0.25%. This indicates that despite continued revenue growth, profitability, as measured by economic profit relative to adjusted revenues, decreased substantially in the latest year.
The divergence between increasing revenues and decreasing economic profit in 2024 warrants further investigation. While revenue continued to climb, the substantial decline in economic profit suggests increased costs or a decrease in the efficiency of capital utilization. The negative economic profit margin in 2024 indicates that the company’s return on capital employed was less than its cost of capital during that period.