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
Valero Energy Corp., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,868 – 19.71% × 51,119 = -2,210
The financial performance from 2019 to 2023 is characterized by significant volatility in operating profitability and a consistent expansion of the capital base. Economic profit remained negative for the majority of the period, indicating that the returns generated from operations were generally insufficient to cover the company's cost of capital, with the sole exception of the 2022 fiscal year.
- Net Operating Profit After Taxes (NOPAT)
- A highly volatile trend is observed in NOPAT, which fluctuated from 4,429 million USD in 2019 to a deficit of 1,650 million USD in 2020. A strong recovery followed, peaking at 13,520 million USD in 2022 before moderating to 7,868 million USD in 2023. This variance suggests high sensitivity to external market conditions and operational shifts.
- Invested Capital and Cost of Capital
- Invested capital exhibited a steady upward trajectory, growing from 40,757 million USD in 2019 to 51,119 million USD by 2023. Concurrently, the cost of capital remained relatively high, ranging between 16.42% and 19.92%. The simultaneous increase in both the total capital deployed and the rate required to justify that capital created a higher threshold for achieving positive economic value.
- Economic Profit Trends
- The company experienced substantial value destruction in 2020, with economic profit dropping to negative 8,375 million USD. While a recovery trend occurred in 2021 and 2022—culminating in a positive economic profit of 3,603 million USD in 2022—this gain was not sustained. By 2023, economic profit returned to a negative position of 2,210 million USD, reflecting the inability of NOPAT to keep pace with the increased cost of the expanding invested capital base.
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Net Operating Profit after Taxes (NOPAT)
Valero Energy Corp., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Valero Energy Corporation stockholders.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,113 × 5.70% = 63
6 2023 Calculation
Tax benefit of interest and debt expense, net of capitalized interest = Adjusted interest and debt expense, net of capitalized interest × Statutory income tax rate
= 655 × 21.00% = 138
7 Addition of after taxes interest expense to net income (loss) attributable to Valero Energy Corporation stockholders.
The financial performance from 2019 through 2023 exhibits significant volatility, characterized by a sharp contraction in 2020 followed by a period of substantial growth that peaked in 2022 before undergoing a correction in 2023.
- Net Operating Profit After Taxes (NOPAT) Trends
- A dramatic fluctuation is observed in NOPAT, which fell from 4,429 million US$ in 2019 to a deficit of 1,650 million US$ in 2020. A robust recovery followed, with NOPAT ascending to 5,561 million US$ in 2021 and reaching a five-year peak of 13,520 million US$ in 2022. By the end of 2023, NOPAT experienced a notable decline to 7,868 million US$, representing a reduction of approximately 41.8% from the previous year's high.
- Net Income Volatility
- Net income attributable to stockholders mirrored the trajectory of NOPAT, shifting from a profit of 2,422 million US$ in 2019 to a loss of 1,421 million US$ in 2020. The recovery phase saw net income rise to 930 million US$ in 2021 and surge to 11,528 million US$ in 2022. The 2023 figure settled at 8,835 million US$, maintaining a significantly higher level than pre-2022 figures despite the year-over-year decrease.
- Comparative Analysis of NOPAT and Net Income
- The divergence between NOPAT and net income provides insight into the impact of non-operating items and financing costs. In 2021, a substantial gap is evident, where NOPAT (5,561 million US$) far exceeded net income (930 million US$), suggesting that operational profitability was significantly offset by interest expenses, taxes, or other non-operating losses. Conversely, in 2023, net income (8,835 million US$) surpassed NOPAT (7,868 million US$), indicating that non-operating gains or financing benefits contributed positively to the final bottom line, offsetting a decline in pure operational profit.
- Operational Peak and Correction
- The year 2022 represents the zenith of both operational and net profitability within the analyzed period. The subsequent decline in 2023 indicates a normalization of earnings or a shift in market conditions, although both metrics remain substantially elevated compared to the 2019-2021 baseline.
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Cash Operating Taxes
Valero Energy Corp., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
The analysis of tax obligations between 2019 and 2023 reveals significant volatility in both accrual-based income tax expenses and cash-based tax outflows. The period is characterized by a sharp transition from tax benefits in 2020 to substantial tax expenditures in 2022 and 2023, reflecting high variability in taxable income.
- Cash Operating Tax Trends
- Cash operating taxes exhibited extreme fluctuations, moving from US$ 577 million in 2019 to a tax benefit of US$ 931 million in 2020. A recovery followed in 2021 with payments of US$ 519 million, culminating in a peak of US$ 3,508 million in 2022. By 2023, cash operating taxes decreased slightly to US$ 2,654 million, yet remained significantly higher than pre-2022 levels.
- Correlation Between Accrual and Cash Taxes
- There is a tight correlation between income tax expense and cash operating taxes across the reported timeframe. The minimal variance between these two metrics indicates that tax liabilities are largely settled in cash within the same reporting period, suggesting a low impact from deferred tax adjustments on the total tax burden.
- Operational Profitability Indicators
- The exponential increase in cash tax payments observed in 2022 and 2023 suggests a period of intensified profitability. The shift from a negative tax position in 2020 to multi-billion dollar payments in subsequent years highlights a substantial increase in the company's taxable operating base.
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Invested Capital
Valero Energy Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 LIFO reserve. See details »
5 Addition of equity equivalents to total Valero Energy Corporation stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
Invested capital exhibited a consistent upward trajectory over the five-year period ending December 31, 2023. From a base of 40,757 million in 2019, the total expanded to 51,119 million by 2023, indicating a sustained increase in the total capital employed by the organization to generate economic value.
- Invested Capital Growth
- The most significant acceleration in invested capital occurred between 2021 and 2022, where the value increased from 44,526 million to 49,772 million. This indicates a period of intensified capital allocation or asset accumulation.
- Debt and Lease Trends
- Total reported debt and leases experienced a sharp increase in 2020, peaking at 15,847 million. Following this peak, a consistent deleveraging trend is observed, with debt levels receding to 12,637 million by the end of 2023.
- Stockholders' Equity Fluctuations
- Equity showed a decline from 21,803 million in 2019 to a low of 18,430 million in 2021. However, a robust recovery followed, with equity growing to 26,346 million by 2023, becoming the primary driver of the overall increase in invested capital in the final two years of the period.
- Capital Structure Shift
- The composition of invested capital shifted toward a higher proportion of equity funding. While the 2020 period was characterized by increased debt and decreased equity, the 2022 and 2023 periods reflect a transition toward equity-based capital strengthening and concurrent debt reduction.
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Cost of Capital
Valero Energy Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 46,474) | 46,474) | ÷ | 59,002) | = | 0.79 | 0.79 | × | 23.99% | = | 18.90% | ||
| Debt and finance lease obligations, including current portion3 | 11,415) | 11,415) | ÷ | 59,002) | = | 0.19 | 0.19 | × | 4.80% × (1 – 21.00%) | = | 0.73% | ||
| Operating lease liability4 | 1,113) | 1,113) | ÷ | 59,002) | = | 0.02 | 0.02 | × | 5.70% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 59,002) | 1.00 | 19.71% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,152) | 49,152) | ÷ | 61,535) | = | 0.80 | 0.80 | × | 23.99% | = | 19.16% | ||
| Debt and finance lease obligations, including current portion3 | 11,296) | 11,296) | ÷ | 61,535) | = | 0.18 | 0.18 | × | 4.76% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 1,087) | 1,087) | ÷ | 61,535) | = | 0.02 | 0.02 | × | 5.20% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 61,535) | 1.00 | 19.92% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,135) | 35,135) | ÷ | 51,978) | = | 0.68 | 0.68 | × | 23.99% | = | 16.22% | ||
| Debt and finance lease obligations, including current portion3 | 15,588) | 15,588) | ÷ | 51,978) | = | 0.30 | 0.30 | × | 4.43% × (1 – 21.00%) | = | 1.05% | ||
| Operating lease liability4 | 1,255) | 1,255) | ÷ | 51,978) | = | 0.02 | 0.02 | × | 4.20% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 51,978) | 1.00 | 17.34% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,973) | 30,973) | ÷ | 48,910) | = | 0.63 | 0.63 | × | 23.99% | = | 15.19% | ||
| Debt and finance lease obligations, including current portion3 | 16,767) | 16,767) | ÷ | 48,910) | = | 0.34 | 0.34 | × | 4.20% × (1 – 21.00%) | = | 1.14% | ||
| Operating lease liability4 | 1,170) | 1,170) | ÷ | 48,910) | = | 0.02 | 0.02 | × | 4.70% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 48,910) | 1.00 | 16.42% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,358) | 29,358) | ÷ | 42,022) | = | 0.70 | 0.70 | × | 23.99% | = | 16.76% | ||
| Debt and finance lease obligations, including current portion3 | 11,374) | 11,374) | ÷ | 42,022) | = | 0.27 | 0.27 | × | 5.21% × (1 – 21.00%) | = | 1.11% | ||
| Operating lease liability4 | 1,290) | 1,290) | ÷ | 42,022) | = | 0.03 | 0.03 | × | 4.90% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 42,022) | 1.00 | 17.99% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Valero Energy Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,210) | 3,603) | (2,162) | (8,375) | (2,904) | |
| Invested capital2 | 51,119) | 49,772) | 44,526) | 40,966) | 40,757) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.32% | 7.24% | -4.86% | -20.44% | -7.13% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.78% | 6.72% | -2.40% | — | — | |
| ConocoPhillips | 6.55% | 19.29% | 4.98% | — | — | |
| ExxonMobil Holdings Corp. | 3.07% | 11.83% | 3.21% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,210 ÷ 51,119 = -4.32%
4 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by significant volatility in economic value creation, contrasted by a consistent expansion of the capital base.
- Invested Capital Trends
- A steady upward trajectory in invested capital is observed, increasing from 40,757 million USD in 2019 to 51,119 million USD by 2023. This represents a continuous growth in the total assets deployed to generate returns over the five-year period.
- Economic Profit Analysis
- Economic profit remained negative for four of the five analyzed years, indicating that the company generally failed to generate returns exceeding its cost of capital. A severe contraction occurred in 2020, with economic profit dropping to negative 8,375 million USD. While a significant turnaround was achieved in 2022, reaching a positive 3,603 million USD, this gain was not sustained, as 2023 saw a return to a deficit of 2,210 million USD.
- Economic Spread Ratio Performance
- The economic spread ratio exhibits extreme fluctuations, mirroring the instability of the economic profit. The ratio reached its lowest point in 2020 at -20.44%, signaling a substantial gap between actual returns and the required cost of capital. An improvement trend followed, peaking in 2022 with a positive spread of 7.24%, the only period of true economic value addition. However, the ratio declined again to -4.32% in 2023, confirming a return to value destruction.
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Economic Profit Margin
Valero Energy Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (2,210) | 3,603) | (2,162) | (8,375) | (2,904) | |
| Revenues, includes excise taxes on sales by certain of foreign operations | 144,766) | 176,383) | 113,977) | 64,912) | 108,324) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.53% | 2.04% | -1.90% | -12.90% | -2.68% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -4.08% | 6.05% | -2.98% | — | — | |
| ConocoPhillips | 9.48% | 18.56% | 8.30% | — | — | |
| ExxonMobil Holdings Corp. | 2.82% | 8.82% | 3.16% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues, includes excise taxes on sales by certain of foreign operations
= 100 × -2,210 ÷ 144,766 = -1.53%
3 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by significant volatility in economic value creation, with a predominant trend of negative economic profit interrupted by a singular year of value addition.
- Economic Profit Trends
- Economic profit remained negative for four out of the five analyzed years. A substantial decline occurred in 2020, where economic profit reached its lowest point at -8,375 million US$. A recovery phase followed, resulting in the only positive economic profit of 3,603 million US$ in 2022. However, this gain was not sustained, as the figure returned to a deficit of -2,210 million US$ by the end of 2023.
- Revenue Dynamics
- Revenues exhibited a sharp contraction in 2020, falling to 64,912 million US$, which coincided with the peak economic loss. A strong upward trajectory followed, peaking in 2022 at 176,383 million US$, before moderating to 144,766 million US$ in 2023. The correlation between revenue growth and economic profit is evident, particularly during the 2020-2022 cycle.
- Economic Profit Margin Analysis
- The economic profit margin reflects the volatility of the absolute profit figures. The margin deteriorated sharply to -12.90% in 2020, indicating a significant failure to cover the cost of capital relative to sales. The margin improved to -1.90% in 2021 and transitioned to a positive 2.04% in 2022. By 2023, the margin regressed to -1.53%, signaling a return to a state where economic value was destroyed rather than created.
Overall, the data indicates that while the entity achieved a peak in economic efficiency and value creation in 2022, it has historically struggled to maintain a positive economic profit margin, with performance closely tied to fluctuations in total revenues.
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