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:
- Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Current Ratio since 2005
- Total Asset Turnover 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 distinct trends in the company's profitability, capital cost, invested capital, and economic profit over a five-year span.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed growth from 24,311 million USD in 2020 to a peak of 29,903 million USD in 2021, indicating improved operational efficiency or revenue gains. This was followed by a decline to 28,039 million USD in 2022 and a sharp fall to 19,450 million USD in 2023, suggesting operational challenges or increased costs during that period. In 2024, there was a partial recovery to 24,675 million USD, though levels remained below the 2021 peak.
- Cost of Capital
- The cost of capital decreased gradually from 7.69% in 2020 to 7.29% in 2022, reflecting possibly lower market risk or more favorable financing conditions. This trend reversed slightly thereafter, with increases to 7.40% in 2023 and 7.46% in 2024, suggesting a marginal rise in the company’s capital expenses or perceived risk during the latter years.
- Invested Capital
- Invested capital displayed a consistent upward trend, rising from 247,730 million USD in 2020 to 307,881 million USD in 2024. This indicates steady investment in assets or operations, potentially to support growth or maintain competitive positioning. The growth pace slowed somewhat after 2022 but remained positive throughout the period.
- Economic Profit
- Economic profit increased significantly from 5,259 million USD in 2020 to 8,001 million USD in 2021, aligning with increased NOPAT and a relatively stable cost of capital. However, economic profit dropped to 6,071 million USD in 2022 and turned negative at -3,088 million USD in 2023, highlighting that the returns did not cover the cost of capital in that year. In 2024, economic profit recovered to 1,702 million USD, indicating some restoration of value creation but still lower than earlier years.
Overall, the data reflects a strong performance in 2021 with both NOPAT and economic profit peaking. Following this, a period of operational and financial stress occurred in 2022 and 2023, with declines in profitability and negative economic profit in 2023. The specific increase in invested capital without commensurate profit gains in those years may suggest inefficiencies or delayed returns on investment. The partial recovery in 2024 points to improvements but also indicates ongoing challenges in fully restoring value beyond the cost of 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.
The analysis of the financial data over the five-year period reveals notable fluctuations in economic profit, invested capital, and economic spread ratio.
- Economic Profit
- Economic profit exhibited a generally volatile trend. It increased from 5,259 million USD in 2020 to a peak of 8,001 million USD in 2021, indicating strong financial performance during that period. However, this was followed by a decline to 6,071 million USD in 2022. A significant downturn occurred in 2023, where economic profit turned negative to -3,088 million USD, suggesting operational or market challenges. The figure partially recovered in 2024, reaching 1,702 million USD, but remained substantially below the earlier peak levels.
- Invested Capital
- The invested capital demonstrated a steady upward progression throughout the period. Beginning at 247,730 million USD in 2020, it rose consistently each year to reach 307,881 million USD by 2024. This gradual increase indicates ongoing investment in assets or operations, reflecting perhaps expansion or maintenance of the capital base despite fluctuations in profitability.
- Economic Spread Ratio
- The economic spread ratio, which reflects the return generated over the cost of capital, mirrored the economic profit's variability. It rose from 2.12% in 2020 to a high of 2.76% in 2021, confirming strong value creation. The ratio then declined to 2.01% in 2022 and sharply dropped to -1.01% in 2023, corresponding to the negative economic profit of that year. In 2024, there was a modest improvement to 0.55%, indicating a recovery in returns but still below the levels associated with positive economic profit.
Overall, the data suggest that while the invested capital steadily increased, the economic profit and economic spread ratio fluctuated significantly, culminating in a negative performance in 2023 with some recovery in 2024. The decline in these profitability measures despite rising capital investment may point to challenges in generating returns on new or existing investments during the period, meriting further investigation into operational efficiency, market conditions, or cost management during these years.
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 noteworthy trends in the analyzed periods.
- Economic Profit
- The economic profit demonstrated an overall fluctuation throughout the years. It increased significantly from 5,259 million US dollars in 2020 to 8,001 million US dollars in 2021, representing a strong improvement. However, there was a decline in 2022 to 6,071 million US dollars, followed by a sharp and notable negative economic profit of -3,088 million US dollars in 2023. In 2024, a recovery is observed with a positive economic profit of 1,702 million US dollars, although this level remains below the earlier peak in 2021.
- Operating Revenues
- Operating revenues showed a steady increase from 128,292 million US dollars in 2020 to 136,835 million US dollars in 2022. This was followed by a slight decrease to 133,974 million US dollars in 2023 and a marginal rise to 134,788 million US dollars in 2024. The revenue trend suggests relative stability with moderate growth early on, but some signs of stagnation or slight decline in the most recent years.
- Economic Profit Margin
- The economic profit margin mirrored the trend of economic profit, improving from 4.1% in 2020 to a peak of 5.99% in 2021. Subsequently, it declined to 4.44% in 2022 and moved into negative territory at -2.3% in 2023. There was partial recovery to a positive margin of 1.26% in 2024. This indicates fluctuating efficiency and profitability relative to revenues, with a critical dip in 2023 followed by a moderate rebound.
In summary, while operating revenues experienced steady growth early in the period with slight recent decline, economic profit and economic profit margin showed more volatility, particularly with a substantial downturn in 2023. The recovery in 2024 suggests potential stabilization, but profitability remains below the peak levels seen in 2021.