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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Verizon Communications Inc. pages available for free this week:
- Income Statement
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Book Value (P/BV) since 2005
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Economic Profit
Verizon Communications 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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures exhibit an overall fluctuating trend over the five-year period. Starting at $24,311 million in 2020, there was a notable increase in 2021, reaching $29,903 million. However, NOPAT declined in 2022 to $28,039 million and fell significantly in 2023 to $19,450 million. In 2024, the figure partially recovered to $24,675 million, indicating some improvement but not returning to the peak levels seen in 2021.
- Cost of Capital
- The cost of capital demonstrates a relatively stable trend with minor fluctuations. It decreased marginally from 7.66% in 2020 to a low of 7.26% in 2022. Thereafter, it slightly increased to 7.38% in 2023 and again to 7.44% in 2024. The modest variation in the cost of capital suggests a stable financing environment over the period under review.
- Invested Capital
- Invested capital shows a consistent upward trend throughout the period. Beginning at $247,730 million in 2020, it increased steadily each year, reaching $307,881 million by 2024. This continuous growth indicates ongoing investment or capital deployment, reflecting potential expansion or asset accumulation strategies.
- Economic Profit
- Economic profit trends are more volatile and reflect performance relative to the cost of capital. The economic profit was positive and rising from $5,332 million in 2020 to a peak of $8,080 million in 2021, followed by a decline to $6,149 million in 2022. In 2023, economic profit turned negative at -$3,010 million, signaling that the return on invested capital was below the cost of capital that year. There was a return to positive economic profit in 2024, albeit at a lower level of $1,784 million, indicating some recovery but still subdued performance relative to earlier years.
Net Operating Profit after Taxes (NOPAT)
Verizon Communications Inc., NOPAT calculation
US$ 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 allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Verizon.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Verizon.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data indicate fluctuations in net income attributable to Verizon over the five-year period. Initially, net income rose from 17,801 million US dollars in 2020 to a peak of 22,065 million US dollars in 2021. It slightly declined in 2022 to 21,256 million US dollars, followed by a more pronounced decrease to 11,614 million US dollars in 2023. This was followed by a recovery in 2024, with net income increasing to 17,506 million US dollars, yet remaining below the 2020 and 2021 levels.
Net operating profit after taxes (NOPAT) exhibited a somewhat similar trend, with growth from 24,311 million US dollars in 2020 to a high of 29,903 million US dollars in 2021. It then decreased to 28,039 million US dollars in 2022 and experienced a substantial drop to 19,450 million US dollars in 2023. In 2024, NOPAT rebounded to 24,675 million US dollars, approaching the 2020 level but still below the 2021 and 2022 peaks.
- Net Income Trends
- There was an overall increase from 2020 to 2021, followed by a decline in 2022 and a sharper decrease in 2023, with partial recovery in 2024.
- NOPAT Trends
- The pattern mirrored net income, with growth until 2021, a slight reduction in 2022, a significant drop in 2023, and a recovery in 2024.
- Comparative Observations
- Net income showed more volatility compared to NOPAT, particularly noticeable in 2023 where the decline was more pronounced, suggesting potential non-operating factors affecting net income during that period.
- Recovery in 2024
- Both net income and NOPAT indicate a recovery from the 2023 downturn, though neither fully returned to the peak levels observed in 2021.
Overall, the data reveal a period of growth until 2021, followed by a two-year downturn, with partial recovery by 2024. This suggests operational and possibly market challenges during 2022 and 2023, with improving conditions or strategic adjustments reflected in the 2024 figures.
Cash Operating Taxes
Verizon Communications 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 financial data indicates varying trends in both income tax provision and cash operating taxes over the five-year period.
- Income Tax Provision
- The income tax provision generally increased from 2020 to 2021, rising from $5,619 million to $6,802 million. It slightly decreased in 2022 to $6,523 million, followed by a more pronounced drop in 2023 to $4,892 million. In 2024, a moderate recovery is observed with the provision increasing to $5,030 million. Overall, the data reveals a peak in tax provision in 2021, after which there is a downward adjustment with some stabilization in the latest year.
- Cash Operating Taxes
- Cash operating taxes exhibited more volatility during the period. Starting relatively high at $5,100 million in 2020, there is a significant decline in 2021 to $3,436 million. This is followed by an increase in 2022 to $4,451 million, a subsequent decrease in 2023 to $3,774 million, and a sharp rise in 2024 to $5,750 million, the highest level in the five years. The fluctuations suggest variable cash tax payments, potentially influenced by operational performance, timing of payments, or tax planning measures.
In summary, while the income tax provision shows a general peak followed by stabilization at a lower level, cash operating taxes display more pronounced variability with a significant rebound in the final year of the series. These trends may reflect changes in earnings, tax policies, or cash management strategies impacting the company's tax obligations over time.
Invested Capital
Verizon Communications Inc., invested capital calculation (financing approach)
US$ 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 equity equivalents to equity attributable to Verizon.
5 Removal of accumulated other comprehensive income.
6 Subtraction of work in progress.
7 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases show an initial increase from 150,547 million USD in 2020 to a peak of 177,930 million USD in 2021. Subsequently, there is a gradual decline reaching 168,357 million USD by 2024. This pattern suggests a period of increased borrowing or lease commitments followed by deleveraging or reduction in lease obligations in the most recent years.
- Equity Attributable to Verizon
- Equity attributable to Verizon demonstrates a consistent upward trend over the five-year period. Starting at 67,842 million USD in 2020, it rises steadily each year to reach 99,237 million USD by the end of 2024. This reflects an accumulation of retained earnings and/or capital infusion, indicating strengthening shareholder equity.
- Invested Capital
- Invested capital increases notably from 247,730 million USD in 2020 to 307,881 million USD in 2024. The rise is steady but slows in growth rate after 2022, suggesting ongoing investment activities with a moderation in expansion or capital expenditure intensity in the later years.
- Overall Insights
- The company's financial structure over this period indicates a strategic adjustment towards lowering debt and lease obligations after initial growth, while continuing to enhance equity and maintain steady invested capital accumulation. The trend of increasing equity alongside decreasing debt levels implies strengthening financial stability and possibly improved creditworthiness. Invested capital growth, albeit at a slower pace towards the end, signals maintenance of investment in the business operations and asset base.
Cost of Capital
Verizon Communications Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Verizon Communications 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 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
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.
- Economic Profit
- The economic profit demonstrated fluctuations over the five-year period. It increased significantly from 5,332 million US dollars in 2020 to a peak of 8,080 million in 2021. However, it declined to 6,149 million in 2022 and turned negative, registering a loss of 3,010 million in 2023. The figure rebounded somewhat in 2024, achieving a positive 1,784 million, though still below earlier peaks.
- Invested Capital
- Invested capital exhibited a steady upward trend throughout the period. Starting at 247,730 million US dollars in 2020, it increased annually to reach 307,881 million by the end of 2024. The growth rate slowed somewhat after 2021 but maintained consistent increments year over year.
- Economic Spread Ratio
- The economic spread ratio mirrored the volatility observed in economic profit. Beginning at 2.15% in 2020, it rose to its highest point of 2.79% in 2021. Subsequently, this ratio declined to 2.04% in 2022 before turning negative (-0.99%) in 2023, indicating a reduction in economic returns relative to the cost of capital. In 2024, the ratio recovered to 0.58%, showing improvement but remaining below the initial years.
- Summary Insights
- The period from 2020 to 2024 was marked by initial growth followed by a contraction and partial recovery in financial performance as indicated by economic profit and spread ratio. The substantial increase in invested capital suggests ongoing investments or asset accumulation despite volatility in profit generation. The negative economic spread and profit in 2023 point to a challenging year, possibly reflecting increased costs, decreased returns, or other operational difficulties. The partial recovery in 2024 suggests efforts toward improved profitability but not yet restored to earlier peak levels.
Economic Profit Margin
Verizon Communications 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 | ||||||
| Operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
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 ÷ Operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period from 2020 to 2024. Operating revenues demonstrate a relatively steady increase initially, rising from $128,292 million in 2020 to $136,835 million in 2022. However, there is a slight decline in 2023 to $133,974 million, followed by a modest recovery to $134,788 million in 2024. This suggests some fluctuation in core business turnover but overall stability with a mild downward pressure in the middle of the period.
Economic profit shows a more volatile pattern. It increased significantly from $5,332 million in 2020 to a peak of $8,080 million in 2021. Subsequently, it dropped to $6,149 million in 2022 and further reversed sharply to a negative value of -$3,010 million in 2023, indicating a period of economic losses. The figure recovers somewhat in 2024 to $1,784 million but remains well below the earlier highs.
The economic profit margin echoes the pattern of economic profit, starting at 4.16% in 2020 and rising to 6.05% in 2021 before declining to 4.49% in 2022. A substantial negative margin of -2.25% appears in 2023, aligning with the negative economic profit figure. The margin returns to a positive but low 1.32% in 2024. These changes suggest fluctuating efficiency and profitability in generating economic value relative to the revenues.
- Operating Revenues
- Generally stable with a peak in 2022, slight dip in 2023, and partial recovery in 2024.
- Economic Profit
- Substantial growth in 2021 followed by declines, including a significant loss in 2023 before partial improvement.
- Economic Profit Margin
- Mirrors economic profit trends with a peak in 2021, negative margin in 2023, and modest recovery in 2024.
Overall, while the company maintained relatively consistent operating revenues, its ability to convert this revenue into economic profit experienced significant fluctuations, highlighting periods of strong value creation as well as challenges impacting profitability during the period analyzed.