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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Zoetis Inc. pages available for free this week:
- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Price to FCFE (P/FCFE)
- Debt to Equity since 2012
- Total Asset Turnover since 2012
- Analysis of Revenues
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Economic Profit
Zoetis Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) generally increased over the five-year span, though with some variation. The cost of capital remained relatively stable, while invested capital exhibited an increasing trend, followed by a decrease in the most recent year. These factors combined to produce a dynamic pattern in economic profit.
- NOPAT Trend
- NOPAT increased from US$1,570 million in 2019 to US$1,727 million in 2020, representing a growth of approximately 10%. A significant increase was then observed in 2021, reaching US$2,131 million. However, NOPAT decreased to US$1,958 million in 2022 before recovering strongly to US$2,410 million in 2023, the highest value recorded during the period.
- Cost of Capital
- The cost of capital remained consistently around 13% throughout the period, fluctuating between 12.92% and 13.16%. This relative stability suggests consistent risk and financing conditions over the five years.
- Invested Capital
- Invested capital increased steadily from US$9,838 million in 2019 to US$11,557 million in 2020, and continued to rise to US$11,612 million in 2021. Further growth was seen in 2022, reaching US$12,542 million. However, in 2023, invested capital decreased to US$11,550 million, potentially indicating divestitures or reduced capital expenditure.
- Economic Profit
- Economic profit showed a fluctuating pattern. It began at US$295 million in 2019, decreased to US$234 million in 2020, then increased substantially to US$610 million in 2021. A decline to US$310 million was noted in 2022, followed by a significant increase to US$890 million in 2023, the highest economic profit recorded during the period. The increase in 2023 appears to be driven by the combination of higher NOPAT and a slight decrease in invested capital.
Overall, the economic profit trend suggests improving value creation in 2021 and 2023, despite fluctuations in NOPAT and invested capital. The relative stability of the cost of capital provides a consistent benchmark against which to assess performance.
Net Operating Profit after Taxes (NOPAT)
Zoetis Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in restructuring accruals.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Zoetis Inc..
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2023 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Zoetis Inc..
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net income attributable to Zoetis Inc.
- The net income shows a consistent upward trend across the five-year period. Starting at 1,500 million USD in 2019, it increased each year, reaching 2,344 million USD by the end of 2023. The growth was steady, with notable acceleration between 2020 and 2021, and continuing to rise through 2023, indicating improving profitability over time.
- Net operating profit after taxes (NOPAT)
- NOPAT generally trended upwards from 1,570 million USD in 2019 to 2,410 million USD in 2023. There was a significant increase between 2019 and 2021, peaking at 2,131 million USD. A decline was observed in 2022, dropping to 1,958 million USD, before rebounding strongly in 2023 to the highest level in the period. This pattern suggests strong operational performance with some volatility in 2022, followed by recovery and growth.
Cash Operating Taxes
Zoetis Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Provision for Taxes on Income
- The provision for taxes on income exhibits a consistent upward trend over the five-year period. Starting at $301 million in 2019, the amount increased each subsequent year, reaching $596 million in 2023. The growth appears steady, with noticeable jumps especially between 2020 and 2021, and continuing through 2022 and 2023. This indicates increasing tax liabilities or higher taxable income over time.
- Cash Operating Taxes
- Cash operating taxes generally increased from 2019 to 2022, starting at $422 million and peaking at $867 million in 2022. However, there is a significant decline observed in 2023, dropping to $687 million. While the overall trend is upward through most years, the decrease in the last year suggests changes in tax payment timing, effective tax rates, or operational adjustments impacting cash taxes paid.
- Comparative Insights
- Although both provisions for taxes on income and cash operating taxes increased overall, the divergence in 2023 is noteworthy. The provision continues to rise, whereas cash taxes paid decline, which may signal temporary timing differences or more efficient tax planning. The increasing provision paired with fluctuating cash taxes suggests that the accrual for taxes is rising in anticipation of income growth despite a recent drop in cash outflows for taxes.
Invested Capital
Zoetis Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 restructuring accruals.
5 Addition of equity equivalents to total Zoetis Inc. equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
8 Subtraction of available-for-sale debt securities.
- Total reported debt & leases
- The total reported debt and lease obligations exhibited some fluctuation over the five-year period. Initially, the debt increased from $6,646 million in 2019 to $7,402 million in 2020. This was followed by a decrease to $6,784 million in 2021. Subsequently, there was a noticeable rise to the peak value of $8,133 million in 2022, before dropping again to $6,812 million in 2023. Overall, the pattern shows volatility with a tendency to revert toward levels close to those observed at the beginning of the period.
- Total Zoetis Inc. equity
- The equity of the company demonstrated a generally upward trend throughout the period. Starting at $2,708 million in 2019, equity increased steadily, reaching $3,769 million in 2020 and continuing to $4,543 million in 2021. There was a slight decline in 2022 to $4,405 million, but equity rebounded to its highest value of $4,997 million by 2023. This upward trajectory indicates strengthening shareholder value over time despite the minor dip in 2022.
- Invested capital
- Invested capital rose consistently from $9,838 million in 2019 to $11,557 million in 2020. It then experienced marginal growth to $11,612 million in 2021, followed by a more pronounced increase to $12,542 million in 2022. In 2023, invested capital decreased to $11,550 million, marking a reversal after several years of growth. Overall, the data points to an expanding investment base, with some retrenchment in the latest year.
Cost of Capital
Zoetis Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Zoetis Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates fluctuating economic performance. Economic profit exhibited volatility, beginning at US$295 million in 2019, decreasing to US$234 million in 2020, then increasing substantially to US$610 million in 2021, followed by a decline to US$310 million in 2022, and culminating in a significant rise to US$890 million in 2023. Invested capital generally increased from 2019 to 2022, peaking at US$12,542 million, before decreasing to US$11,550 million in 2023. The economic spread ratio mirrors the profit fluctuations, showing a corresponding pattern of change.
- Economic Spread Ratio Trend
- The economic spread ratio began at 2.99% in 2019, decreased to 2.03% in 2020, experienced a substantial increase to 5.25% in 2021, then decreased to 2.47% in 2022. A significant increase was observed in 2023, reaching 7.71%. This indicates a strengthening of the return generated relative to the capital employed in that year, following a period of more moderate returns.
The most notable shifts occurred between 2020 and 2021, and again between 2022 and 2023. The increase in economic profit from 2020 to 2021, coupled with a relatively stable invested capital, drove the substantial improvement in the economic spread ratio. Similarly, the large increase in economic profit in 2023, combined with a slight decrease in invested capital, resulted in a further substantial increase in the economic spread ratio. The decrease in economic profit from 2021 to 2022 had the opposite effect, leading to a lower economic spread ratio.
- Invested Capital and Economic Profit Relationship
- While invested capital generally trended upward until 2022, the economic profit did not consistently follow. This suggests that changes in operational efficiency or external factors impacting profitability played a significant role in the fluctuations of economic profit. The decrease in invested capital in 2023, alongside a substantial increase in economic profit, further supports this observation.
Overall, the period demonstrates a dynamic relationship between invested capital, economic profit, and the resulting economic spread ratio. The significant increase in the economic spread ratio in 2023 suggests improved capital allocation efficiency or enhanced profitability relative to the capital employed.
Economic Profit Margin
Zoetis Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit and economic profit margin exhibited fluctuating performance between 2019 and 2023. Economic profit initially decreased before experiencing substantial growth, while the economic profit margin mirrored this pattern with notable volatility.
- Economic Profit
- Economic profit decreased from US$295 million in 2019 to US$234 million in 2020, representing a decline of approximately 20.7%. A significant increase was then observed in 2021, with economic profit reaching US$610 million. This was followed by a decrease to US$310 million in 2022. The most recent year, 2023, saw a further substantial increase, with economic profit reaching US$890 million, the highest value within the observed period.
- Revenue
- Revenue demonstrated a consistent upward trend throughout the period. From US$6,260 million in 2019, revenue grew to US$6,675 million in 2020, US$7,776 million in 2021, US$8,080 million in 2022, and ultimately reached US$8,544 million in 2023. While growth rates varied annually, the overall trajectory indicates positive revenue performance.
- Economic Profit Margin
- The economic profit margin displayed considerable fluctuation. It began at 4.71% in 2019, decreased to 3.51% in 2020, and then rose sharply to 7.85% in 2021. A decline to 3.84% occurred in 2022, before increasing significantly to 10.42% in 2023. This represents the highest economic profit margin observed during the analyzed timeframe. The margin’s movement suggests a changing relationship between profitability and revenue generation.
The substantial increase in both economic profit and economic profit margin in 2021 and 2023, coupled with consistent revenue growth, suggests improved operational efficiency and/or pricing power during those years. The dip in 2020 and 2022 warrants further investigation to understand the underlying factors contributing to the reduced profitability relative to revenue.