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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Verizon Communications Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
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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 analysis of the financial performance over the five-year period reveals several notable trends and fluctuations.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT increased from $24,311 million in 2020 to a peak of $29,903 million in 2021, showing a significant improvement in operating efficiency or profitability. In 2022, there was a decline to $28,039 million, followed by a more pronounced drop to $19,450 million in 2023. The figure rebounded to $24,675 million in 2024, although it did not fully recover to the earlier high levels.
- Cost of Capital
- The cost of capital demonstrated a slightly downward trend from 7.68% in 2020 to 7.28% in 2022, indicating a marginal reduction in the required rate of return or risk perceived by investors during this period. It experienced a modest increase thereafter, reaching 7.45% by 2024, which may imply a slight rise in market risk or financing costs in the later years.
- Invested Capital
- Invested capital steadily increased over the years, from $247,730 million in 2020 to $307,881 million in 2024. This consistent growth suggests ongoing investment activities, expansion, or capital expenditure, reflecting the company’s commitment to growth or maintenance of its asset base.
- Economic Profit
- The economic profit showed a strong positive value of $5,282 million in 2020, increasing to $8,025 million in 2021, indicative of value creation above the cost of capital. However, a decline to $6,095 million in 2022 preceded a sharp reversal to a negative economic profit of -$3,064 million in 2023, suggesting that the firm’s returns failed to cover its capital costs that year. A recovery to a positive $1,728 million in 2024 signals a partial restoration of value creation, though at a reduced level compared to earlier years.
In summary, the company experienced a period of strong profitability and economic value creation up to 2021, followed by a decline and a temporary negative economic profit in 2023. The invested capital consistently grew, but the rising cost of capital towards the latter years and the decline in NOPAT contributed to the fluctuations in economic profit. The partial recovery in 2024 indicates some improvement in operational or financial performance, though challenges remain in sustaining high levels of economic profit relative to invested capital.
Net Operating Profit after Taxes (NOPAT)
Verizon Communications Inc., NOPAT calculation
US$ 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 exhibited a fluctuating trend over the analyzed period. It increased significantly from 5,282 million US dollars at the end of 2020 to a peak of 8,025 million in 2021. Subsequently, it declined to 6,095 million in 2022, then turned negative, reaching -3,064 million in 2023. In the latest period, it recovered to 1,728 million, indicating a partial rebound.
- Invested Capital
- The invested capital showed a consistent upward trajectory throughout the years. Starting from 247,730 million US dollars at the close of 2020, it rose steadily each year, reaching 290,004 million in 2021, then 301,478 million in 2022, and continuing to increase to 304,400 million in 2023 and 307,881 million in 2024. This suggests ongoing investment and asset accumulation.
- Economic Spread Ratio
- The economic spread ratio mirrored some volatility observed in economic profit. It started at 2.13% in 2020 and improved to 2.77% in 2021. Thereafter, it declined to 2.02% in 2022, dropped sharply to a negative value of -1.01% in 2023, before recovering slightly to 0.56% in 2024. This reflects variations in the returns generated over the cost of capital during the period.
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.
- Operating Revenues
- The operating revenues exhibited a generally increasing trend from 2020 to 2024. The revenues rose from $128,292 million in 2020 to a peak of $136,835 million in 2022. Subsequently, there was a minor decline to $133,974 million in 2023, followed by a slight recovery to $134,788 million in 2024. Despite the small fluctuations after 2022, the overall revenue growth over the five-year period is noticeable.
- Economic Profit
- Economic profit displayed more volatility compared to operating revenues. It started at $5,282 million in 2020, increased significantly to $8,025 million in 2021, and then declined to $6,095 million in 2022. A notable negative economic profit of -$3,064 million was observed in 2023, indicating a significant loss in economic value during that year. However, a recovery occurred in 2024, with economic profit turning positive again at $1,728 million, although still below the levels seen in the earlier years.
- Economic Profit Margin
- The economic profit margin mirrored the pattern of economic profit, reflecting fluctuations in profitability relative to revenues. It increased from 4.12% in 2020 to a high of 6.01% in 2021, followed by a decline to 4.45% in 2022. The margin turned negative at -2.29% in 2023, consistent with the negative economic profit that year, before improving to 1.28% in 2024. This indicates that the company faced profitability challenges in 2023 but managed to improve its margin by 2024, albeit remaining at a modest level.
- Summary of Trends
- The data reveals robust operating revenue growth with minor dips in the latter years, while economic profit showed substantial fluctuations, including a significant downturn in 2023. The negative economic profit and margin in 2023 suggest that the company's operations or cost structure faced considerable challenges that year. The subsequent recovery in 2024, although positive, did not reach the previous peak levels, indicating potential ongoing pressures. Overall, the financial performance indicates a stable revenue base with variability in profitability, highlighting the need to address factors impacting economic profit and margins to sustain long-term value creation.