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.
Economic Profit
Zoetis Inc., economic profit 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 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
= 2,410 – 12.96% × 11,550 = 914
The financial data of the company over the five-year period reveals several noteworthy trends and patterns related to profitability, capital efficiency, and value creation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a generally upward trend from 2019 to 2023, increasing from 1,570 million USD in 2019 to 2,410 million USD in 2023. There was a steady rise from 2019 through 2021, peaking at 2,131 million USD, followed by a slight decline in 2022 to 1,958 million USD. However, the figure rebounded strongly in 2023, reaching a new high. This indicates a generally improving operational profitability over the period, albeit with some short-term variability.
- Cost of Capital
- The cost of capital remained relatively stable over the years, fluctuating narrowly around 12.7% to 13.0%. This minor increase in the cost of capital from 12.76% in 2019 to 12.96% in 2023 suggests that the company faced slightly higher capital costs towards the end of the period but maintained a consistent risk and financing profile throughout the timeframe.
- Invested Capital
- Invested capital showed an upward trend from 9,838 million USD in 2019 to a peak of 12,542 million USD in 2022. However, a noticeable decline to 11,550 million USD occurred in 2023. This pattern reflects an expansion phase in the earlier years followed by a capital reduction or optimization phase in the final year analyzed. The decline in invested capital after 2022 may indicate efforts to improve capital efficiency or a divestment of certain assets.
- Economic Profit
- Economic profit, calculated as the difference between NOPAT and the cost of capital charge on invested capital, exhibited significant variation across the five years. Starting at 314 million USD in 2019, economic profit dipped to 258 million USD in 2020, then surged to a high of 634 million USD in 2021. A decline followed in 2022 to 336 million USD, but the figure sharply increased again in 2023 to 914 million USD, the highest in the period. This volatility highlights fluctuating but generally improving value creation, with 2023 standing out as a year of exceptional economic profit performance.
Overall, the company demonstrated increased profitability and value creation despite a relatively stable cost of capital. The peak economic profits in 2021 and especially in 2023 suggest effective management of capital and operational efficiency. The fluctuation in invested capital in the last year may indicate strategic adjustments aimed at sustaining or enhancing future profitability and economic profit generation.
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
= 236 × 3.41% = 8
6 2023 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 247 × 21.00% = 52
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
= 105 × 21.00% = 22
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 $11,550 million, marking a reversal after several years of growth. Overall, the data points to an expanding investment base, with some retrenchment in the latest year.
Cost of Capital
Zoetis Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 84,014) | 84,014) | ÷ | 90,581) | = | 0.93 | 0.93 | × | 13.72% | = | 12.72% | ||
| Debt and finance lease liabilities3 | 6,331) | 6,331) | ÷ | 90,581) | = | 0.07 | 0.07 | × | 4.09% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 236) | 236) | ÷ | 90,581) | = | 0.00 | 0.00 | × | 3.41% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 90,581) | 1.00 | 12.96% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | 79,656) | 79,656) | ÷ | 85,995) | = | 0.93 | 0.93 | × | 13.72% | = | 12.71% | ||
| Debt and finance lease liabilities3 | 6,110) | 6,110) | ÷ | 85,995) | = | 0.07 | 0.07 | × | 3.95% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 229) | 229) | ÷ | 85,995) | = | 0.00 | 0.00 | × | 2.78% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 85,995) | 1.00 | 12.94% | ||||||||||
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 | 93,337) | 93,337) | ÷ | 100,972) | = | 0.92 | 0.92 | × | 13.72% | = | 12.68% | ||
| Debt and finance lease liabilities3 | 7,443) | 7,443) | ÷ | 100,972) | = | 0.07 | 0.07 | × | 3.63% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 192) | 192) | ÷ | 100,972) | = | 0.00 | 0.00 | × | 2.81% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 100,972) | 1.00 | 12.90% | ||||||||||
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 | 79,030) | 79,030) | ÷ | 87,072) | = | 0.91 | 0.91 | × | 13.72% | = | 12.45% | ||
| Debt and finance lease liabilities3 | 7,839) | 7,839) | ÷ | 87,072) | = | 0.09 | 0.09 | × | 3.61% × (1 – 21.00%) | = | 0.26% | ||
| Operating lease liability4 | 203) | 203) | ÷ | 87,072) | = | 0.00 | 0.00 | × | 3.12% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 87,072) | 1.00 | 12.71% | ||||||||||
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 | 68,837) | 68,837) | ÷ | 75,623) | = | 0.91 | 0.91 | × | 13.72% | = | 12.49% | ||
| Debt and finance lease liabilities3 | 6,587) | 6,587) | ÷ | 75,623) | = | 0.09 | 0.09 | × | 3.84% × (1 – 21.00%) | = | 0.26% | ||
| Operating lease liability4 | 199) | 199) | ÷ | 75,623) | = | 0.00 | 0.00 | × | 3.67% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 75,623) | 1.00 | 12.76% | ||||||||||
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 | 914) | 336) | 634) | 258) | 314) | |
| Invested capital2 | 11,550) | 12,542) | 11,612) | 11,557) | 9,838) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 7.91% | 2.68% | 5.46% | 2.23% | 3.20% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | -4.70% | 4.74% | 4.18% | -3.59% | — | |
| Amgen Inc. | 2.72% | 7.29% | 7.27% | 11.59% | — | |
| Bristol-Myers Squibb Co. | 1.18% | -1.63% | 0.70% | -14.81% | — | |
| Danaher Corp. | -8.55% | -3.59% | -2.90% | -4.28% | — | |
| Eli Lilly & Co. | 1.89% | 9.25% | 10.98% | 17.66% | — | |
| Gilead Sciences Inc. | 5.31% | 2.26% | 8.98% | -4.08% | — | |
| Johnson & Johnson | -0.41% | 4.86% | 9.91% | 4.72% | — | |
| Merck & Co. Inc. | -9.00% | 11.18% | 11.35% | 4.19% | — | |
| Pfizer Inc. | -9.59% | 17.83% | 11.01% | -3.65% | — | |
| Regeneron Pharmaceuticals Inc. | 17.92% | 23.28% | 66.97% | 38.47% | — | |
| Thermo Fisher Scientific Inc. | -5.12% | -3.34% | -1.47% | -0.51% | — | |
| Vertex Pharmaceuticals Inc. | 11.22% | 13.97% | 15.18% | 28.45% | — | |
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 × 914 ÷ 11,550 = 7.91%
4 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period from 2019 to 2023. The economic profit experienced fluctuations, with an initial value of 314 million US dollars in 2019, followed by a decline to 258 million in 2020. This was succeeded by a significant increase to 634 million in 2021, a subsequent decrease to 336 million in 2022, and then a marked rise to the highest value of 914 million in 2023.
Invested capital showed a general upward trend from 9,838 million US dollars in 2019 to a peak of 12,542 million in 2022, followed by a decrease to 11,550 million in 2023. This suggests some level of capital adjustment or divestment occurring in the final year after consistent growth.
The economic spread ratio, which indicates the return spread on invested capital, demonstrated considerable volatility. After starting at 3.2% in 2019, it dropped to 2.23% in 2020, followed by a sharp increase to 5.46% in 2021. It then declined to 2.68% in 2022 before reaching an all-time high of 7.91% in 2023. This pattern indicates fluctuations in profitability relative to the capital invested, with a particularly strong performance in the final year.
- Economic Profit
- Showed a cyclical pattern with decreases in 2020 and 2022 and significant gains in 2021 and 2023, culminating in the highest reported figure in 2023.
- Invested Capital
- Generally increased over the period until 2022, with a reduction noted in 2023, which could reflect strategic capital management or asset reallocation.
- Economic Spread Ratio
- Experienced wide fluctuations, with particularly strong increases in 2021 and 2023, implying varying efficiency in generating returns from invested capital during the timeframe.
Overall, the data suggests a dynamic financial performance with varying levels of profitability and capital deployment. The year 2023 stands out as a period of enhanced economic profit and optimal economic spread despite a reduction in invested capital, indicating improved capital efficiency and stronger economic returns.
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 | 914) | 336) | 634) | 258) | 314) | |
| Revenue | 8,544) | 8,080) | 7,776) | 6,675) | 6,260) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 10.69% | 4.16% | 8.15% | 3.86% | 5.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | -5.90% | 6.71% | 7.14% | -8.12% | — | |
| Amgen Inc. | 7.07% | 11.67% | 12.04% | 18.54% | — | |
| Bristol-Myers Squibb Co. | 1.77% | -2.53% | 1.21% | -31.40% | — | |
| Danaher Corp. | -28.09% | -8.93% | -7.25% | -12.55% | — | |
| Eli Lilly & Co. | 1.63% | 7.87% | 10.14% | 17.68% | — | |
| Gilead Sciences Inc. | 9.03% | 3.82% | 15.89% | -8.42% | — | |
| Johnson & Johnson | -0.48% | 5.82% | 10.37% | 5.62% | — | |
| Merck & Co. Inc. | -10.48% | 13.94% | 16.48% | 4.99% | — | |
| Pfizer Inc. | -24.94% | 19.52% | 11.75% | -8.89% | — | |
| Regeneron Pharmaceuticals Inc. | 16.35% | 23.43% | 45.29% | 37.48% | — | |
| Thermo Fisher Scientific Inc. | -10.21% | -6.16% | -2.98% | -0.97% | — | |
| Vertex Pharmaceuticals Inc. | 15.06% | 20.61% | 18.81% | 37.34% | — | |
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 × 914 ÷ 8,544 = 10.69%
3 Click competitor name to see calculations.
The annual financial data indicates a fluctuating but generally improving economic profit profile over the five-year period ending in 2023. Economic profit experiences a decline from 314 million US dollars in 2019 to 258 million in 2020, followed by a significant increase to 634 million in 2021. This profit then drops again to 336 million in 2022 before rising sharply to 914 million in 2023, suggesting volatility with an overall upward trajectory.
Revenue shows a consistent upward trend throughout the period, starting at 6,260 million US dollars in 2019 and increasing annually to reach 8,544 million in 2023. This steady revenue growth reflects a positive performance in sales or service generation capabilities.
The economic profit margin, which represents economic profit as a percentage of revenue, aligns with the economic profit trend and indicates variability. It declines from 5.02% in 2019 to 3.86% in 2020, then sharply increases to 8.15% in 2021. This is followed by a decrease to 4.16% in 2022, before rising significantly to 10.69% in 2023. The margin's peak in 2023 highlights enhanced profitability relative to revenue during that year.
- Economic Profit
- Shows volatility but overall substantial growth over the five years, with peaks in 2021 and 2023.
- Revenue
- Exhibits consistent and steady growth year-over-year from 2019 to 2023.
- Economic Profit Margin
- Varies in close correlation with economic profit, indicating fluctuating efficiency or cost management, culminating in a marked improvement in 2023.
Overall, the data suggests the company has effectively increased revenue while managing to improve economic profitability margins, particularly in the most recent year assessed. Despite fluctuations, the trends indicate strengthening financial performance and enhanced value creation in 2023 relative to prior years.