Stock Analysis on Net
Stock Analysis on Net

Verizon Communications Inc. (NYSE:VZ)

Economic Value Added (EVA)

Microsoft Excel LibreOffice Calc

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

Verizon Communications Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net operating profit after taxes (NOPAT)1 24,311  25,313  20,719  19,605  15,635 
Cost of capital2 6.20% 6.12% 5.57% 5.13% 5.27%
Invested capital3 247,730  220,656  215,363  202,485  185,164 
 
Economic profit4 8,950  11,805  8,728  9,209  5,870 

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 24,3116.20% × 247,730 = 8,950

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Verizon Communications Inc.’s economic profit increased from 2018 to 2019 but then slightly decreased from 2019 to 2020 not reaching 2018 level.

Net Operating Profit after Taxes (NOPAT)

Verizon Communications Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income attributable to Verizon 17,801  19,265  15,528  30,101  13,127 
Deferred income tax expense (benefit)1 1,553  1,232  389  (14,463) (1,063)
Increase (decrease) in allowance for credit losses2 519  (32) (174) 94  (37)
Increase (decrease) in equity equivalents3 2,072  1,200  215  (14,369) (1,100)
Interest expense 4,247  4,730  4,833  4,733  4,376 
Interest expense, operating lease liability4 752  866  912  641  536 
Adjusted interest expense 4,999  5,596  5,745  5,374  4,912 
Tax benefit of interest expense5 (1,050) (1,175) (1,206) (1,881) (1,719)
Adjusted interest expense, after taxes6 3,949  4,421  4,538  3,493  3,193 
(Gain) loss on marketable securities (9) (1) (24) (42)
Interest income (65) (121) (94) (82) (59)
Investment income, before taxes (74) (122) (93) (106) (101)
Tax expense (benefit) of investment income7 16  26  20  37  35 
Investment income, after taxes8 (58) (96) (73) (69) (66)
Net income (loss) attributable to noncontrolling interest 547  523  511  449  481 
Net operating profit after taxes (NOPAT) 24,311  25,313  20,719  19,605  15,635 

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

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 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 21,485 × 3.50% = 752

5 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 4,999 × 21.00% = 1,050

6 Addition of after taxes interest expense to net income attributable to Verizon.

7 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 74 × 21.00% = 16

8 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Verizon Communications Inc.’s NOPAT increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Cash Operating Taxes

Verizon Communications Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Income tax provision (benefit) 5,619  2,945  3,584  (9,956) 7,378 
Less: Deferred income tax expense (benefit) 1,553  1,232  389  (14,463) (1,063)
Add: Tax savings from interest expense 1,050  1,175  1,206  1,881  1,719 
Less: Tax imposed on investment income 16  26  20  37  35 
Cash operating taxes 5,100  2,863  4,382  6,351  10,125 

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Verizon Communications Inc.’s cash operating taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Invested Capital

Verizon Communications Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Debt maturing within one year 5,889  10,777  7,190  3,453  2,645 
Long-term debt, excluding maturing within one year 123,173  100,712  105,873  113,642  105,433 
Operating lease liability1 21,485  21,654  22,236  17,801  15,327 
Total reported debt & leases 150,547  133,143  135,299  134,896  123,405 
Equity attributable to Verizon 67,842  61,395  53,145  43,096  22,524 
Net deferred tax (assets) liabilities2 35,623  34,619  33,726  31,201  45,964 
Allowance for credit losses3 1,252  733  765  939  845 
Equity equivalents4 36,875  35,352  34,491  32,140  46,809 
Accumulated other comprehensive (income) loss, net of tax5 71  (998) (2,370) (2,659) (2,673)
Noncontrolling interests 1,430  1,440  1,565  1,591  1,508 
Adjusted equity attributable to Verizon 106,218  97,189  86,831  74,168  68,168 
Work in progress6 (8,576) (9,234) (6,362) (6,139) (5,710)
Marketable securities7 (459) (442) (405) (440) (699)
Invested capital 247,730  220,656  215,363  202,485  185,164 

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

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.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Verizon Communications Inc.’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

Cost of Capital

Verizon Communications Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 233,805  233,805  ÷ 413,326  = 0.57 0.57 × 6.60% = 3.73%
Short- and long-term debt, including finance leases3 158,036  158,036  ÷ 413,326  = 0.38 0.38 × 7.69% × (1 – 21.00%) = 2.32%
Operating lease liability4 21,485  21,485  ÷ 413,326  = 0.05 0.05 × 3.50% × (1 – 21.00%) = 0.14%
Total: 413,326  1.00 6.20%

Based on: 10-K (filing date: 2021-02-25).

1 US$ in millions

2 Equity. See details »

3 Short- and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 240,707  240,707  ÷ 392,677  = 0.61 0.61 × 6.60% = 4.05%
Short- and long-term debt, including finance leases3 130,316  130,316  ÷ 392,677  = 0.33 0.33 × 7.25% × (1 – 21.00%) = 1.90%
Operating lease liability4 21,654  21,654  ÷ 392,677  = 0.06 0.06 × 4.00% × (1 – 21.00%) = 0.17%
Total: 392,677  1.00 6.12%

Based on: 10-K (filing date: 2020-02-21).

1 US$ in millions

2 Equity. See details »

3 Short- and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 227,924  227,924  ÷ 369,600  = 0.62 0.62 × 6.60% = 4.07%
Short- and long-term debt, including finance leases3 119,440  119,440  ÷ 369,600  = 0.32 0.32 × 5.10% × (1 – 21.00%) = 1.30%
Operating lease liability4 22,236  22,236  ÷ 369,600  = 0.06 0.06 × 4.10% × (1 – 21.00%) = 0.19%
Total: 369,600  1.00 5.57%

Based on: 10-K (filing date: 2019-02-15).

1 US$ in millions

2 Equity. See details »

3 Short- and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 196,998  196,998  ÷ 344,478  = 0.57 0.57 × 6.60% = 3.77%
Short- and long-term debt, including finance leases3 129,678  129,678  ÷ 344,478  = 0.38 0.38 × 5.06% × (1 – 35.00%) = 1.24%
Operating lease liability4 17,801  17,801  ÷ 344,478  = 0.05 0.05 × 3.60% × (1 – 35.00%) = 0.12%
Total: 344,478  1.00 5.13%

Based on: 10-K (filing date: 2018-02-23).

1 US$ in millions

2 Equity. See details »

3 Short- and long-term debt, including finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 201,513  201,513  ÷ 335,374  = 0.60 0.60 × 6.60% = 3.97%
Short- and long-term debt, including finance leases3 118,534  118,534  ÷ 335,374  = 0.35 0.35 × 5.24% × (1 – 35.00%) = 1.20%
Operating lease liability4 15,327  15,327  ÷ 335,374  = 0.05 0.05 × 3.50% × (1 – 35.00%) = 0.10%
Total: 335,374  1.00 5.27%

Based on: 10-K (filing date: 2017-02-21).

1 US$ in millions

2 Equity. See details »

3 Short- 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

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 8,950  11,805  8,728  9,209  5,870 
Invested capital2 247,730  220,656  215,363  202,485  185,164 
Performance Ratio
Economic spread ratio3 3.61% 5.35% 4.05% 4.55% 3.17%
Benchmarks
Economic Spread Ratio, Competitors4
AT&T Inc. -5.12% -1.21% -0.23% -1.20% -0.55%
T-Mobile US Inc. -1.71% 1.76% 1.69% 0.92% 0.59%

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

1 Economic profit. See details »

2 Invested capital. See details »

3 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 8,950 ÷ 247,730 = 3.61%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Verizon Communications Inc.’s economic spread ratio improved from 2018 to 2019 but then deteriorated significantly from 2019 to 2020.

Economic Profit Margin

Verizon Communications Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Economic profit1 8,950  11,805  8,728  9,209  5,870 
Operating revenues 128,292  131,868  130,863  126,034  125,980 
Performance Ratio
Economic profit margin2 6.98% 8.95% 6.67% 7.31% 4.66%
Benchmarks
Economic Profit Margin, Competitors3
AT&T Inc. -12.28% -2.93% -0.59% -2.68% -1.08%
T-Mobile US Inc. -4.41% 2.87% 2.64% 1.45% 0.93%

Based on: 10-K (filing date: 2021-02-25), 10-K (filing date: 2020-02-21), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21).

1 Economic profit. See details »

2 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × 8,950 ÷ 128,292 = 6.98%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Verizon Communications Inc.’s economic profit margin improved from 2018 to 2019 but then slightly deteriorated from 2019 to 2020 not reaching 2018 level.