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 Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) 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
= – × =
The financial data reveals several key trends in the company's profitability, cost structure, capital investment, and economic performance over the five-year period ending in 2024.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced an overall increase from 24,311 million US dollars in 2020 to a peak of 29,903 million in 2021. However, it declined moderately in 2022 to 28,039 million and then sharply dropped to 19,450 million in 2023 before recovering to 24,675 million in 2024. This pattern suggests volatility in operating profitability, with a significant downturn in 2023 followed by a partial rebound.
- Cost of Capital
- The cost of capital showed a gradual decrease from 7.7% in 2020 to a low of 7.29% in 2022, indicating a potentially lower financing cost or risk environment during that period. It then slightly rose to 7.41% in 2023 and 7.47% in 2024, which may reflect an increase in perceived risk or changes in capital structure or market conditions.
- Invested Capital
- Invested capital exhibited a consistent upward trend throughout the period, increasing from 247,730 million US dollars in 2020 to 307,881 million in 2024. This steady growth implies ongoing investment in the company's operations, assets, or working capital.
- Economic Profit
- Economic profit, representing the value created beyond the cost of capital, started positively at 5,238 million in 2020 and improved to 7,978 million in 2021. It then declined to 6,048 million in 2022 before turning negative at -3,110 million in 2023, indicating that the company did not cover its cost of capital that year. A recovery was noted in 2024 with economic profit rising to 1,679 million, but still notably lower than the earlier years. This negative economic profit in 2023 may be linked to the sharp decline in NOPAT that same year despite continuous capital investment.
Overall, the financial analysis suggests a period of strong profit growth and economic value creation in the early years, challenged by a difficult year in 2023 where profitability and economic profit dipped substantially. The company improved its position in 2024, yet economic profit remained subdued compared to the earlier peak. The steadily increasing invested capital indicates ongoing commitment to operational capacity or expansion, though managing returns relative to the cost of this capital will be important moving forward.
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.
The analysis of the financial indicators over the five-year period reveals several notable trends in economic profit, invested capital, and economic spread ratio. These metrics provide insights into the company's profitability relative to its invested capital and the trends in financial efficiency.
- Economic Profit
- The economic profit shows a fluctuating pattern across the years. Initially, there is a strong increase from 5,238 million USD in 2020 to 7,978 million USD in 2021, indicating improved profitability during this period. However, in 2022, economic profit declines to 6,048 million USD and sharply turns negative in 2023 with a loss of 3,110 million USD. By 2024, a partial recovery to 1,679 million USD is observed, though the value remains below the earlier peak levels. This volatility suggests challenges in maintaining consistent profitability.
- Invested Capital
- Invested capital demonstrates a steady upward trend throughout the period, increasing from 247,730 million USD in 2020 to 307,881 million USD in 2024. The continuous growth in invested capital indicates ongoing investment or expansion despite fluctuations in economic profit, reflecting commitment to long-term resource allocation.
- Economic Spread Ratio
- The economic spread ratio, which measures the return on invested capital relative to its cost, mirrors the economic profit trend to some extent. It rises from 2.11% in 2020 to 2.75% in 2021, supporting the observation of improved profitability. Subsequently, it falls to 2.01% in 2022 and notably turns negative at -1.02% in 2023, indicating that the company’s returns did not cover the cost of capital that year. In 2024, the ratio recovers slightly to 0.55% but remains positive and significantly lower than the peaks in earlier years. This suggests the company faced challenges achieving adequate returns during the latter part of the period.
In summary, the company experienced a period of strong economic profit growth early in the timeframe, followed by a marked decline culminating in a negative economic profit and spread ratio in 2023. Despite these profitability fluctuations, invested capital steadily increased, signaling sustained investment efforts. The partial recovery in 2024 indicates some improvement, though profitability and returns on investment have not yet returned to prior peak levels. These trends highlight the importance of addressing the factors contributing to the profit decline and improving capital efficiency going forward.
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 analysis of the financial data over the five-year period reveals several key trends concerning the company's economic profit, operating revenues, and economic profit margin.
- Operating Revenues
- The operating revenues demonstrated a generally upward trend from 2020 to 2022, increasing from approximately 128.3 billion USD to 136.8 billion USD. However, there was a slight decline in 2023, with revenues decreasing to about 134.0 billion USD before a modest rebound to 134.8 billion USD in 2024. This pattern suggests relative stability in revenue streams with minor fluctuations in recent years.
- Economic Profit
- The economic profit exhibited significant variability during the period. Initially, there was a strong increase from 5.2 billion USD in 2020 to nearly 8.0 billion USD in 2021, followed by a decline to approximately 6.0 billion USD in 2022. Notably, 2023 saw a sharp drop into negative territory, with an economic loss of about 3.1 billion USD. By 2024, economic profit recovered moderately to around 1.7 billion USD but remained considerably lower than the peak in 2021. This volatility indicates fluctuating profitability and possible challenges affecting value creation during the latter years.
- Economic Profit Margin
- The economic profit margin trends align with the economic profit figures. After improving from 4.1% in 2020 to a peak of 6.0% in 2021, the margin declined to 4.4% in 2022. A significant downturn is observed in 2023 with a negative margin of -2.3%, implying that the company’s economic losses that year were substantial relative to revenue. In 2024, there was a partial recovery to a positive margin of 1.3%, though it remains below the levels seen in the earlier part of the period. The margin changes reflect fluctuations in profitability efficiency.
Overall, while operating revenues have remained relatively steady with mild growth and minor contraction, the company’s economic profit and corresponding margin have experienced greater instability, including a notable loss in 2023. The recovery seen in 2024 suggests some improvement in profitability, but the financial performance has not returned to peak levels observed in 2021.