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
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2012
- Price to Earnings (P/E) since 2012
- Price to Sales (P/S) since 2012
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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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes showed an overall upward trend from 2019 to 2023. Beginning at $1,570 million in 2019, it increased steadily each year except for a slight decline in 2022, when it fell to $1,958 million from $2,131 million in 2021. The profit then rebounded strongly in 2023, reaching a peak of $2,410 million. This indicates a positive operating performance with some short-term variability.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating slightly between 12.72% and 12.96%. There was a marginal increase over the years, starting at 12.76% in 2019 and ending at 12.96% in 2023, suggesting consistent financing costs or required returns over the analyzed period.
- Invested Capital
- Invested capital increased from $9,838 million in 2019 to a peak of $12,542 million in 2022, showing growth in the company's capital base. However, in 2023, the invested capital declined to $11,550 million, indicating either asset sales, reduced investments, or improvements in capital efficiency in that year.
- Economic Profit
- The economic profit experienced significant fluctuations. After starting at $314 million in 2019, it decreased to $257 million in 2020, then surged substantially in 2021 to $633 million. Following that, there was a decline to $335 million in 2022, but a remarkable increase occurred in 2023, with economic profit reaching $913 million, the highest in the period. This volatility suggests changing dynamics in value creation relative to the cost of capital, with especially strong value generation in the last reported year.
- Overall Insights
- The data highlights an improving operating profit and fluctuating economic profit which suggest periods of enhanced profitability and capital efficiency, especially apparent in 2021 and 2023. The stable cost of capital indicates consistent external financial conditions, while the varying invested capital suggests adjustments in the asset base or capital allocation strategies. The notable surge in economic profit in 2023 points towards a significant increase in returns above the cost of capital that year, reflecting improved operational effectiveness or strategic initiatives.
Net Operating Profit after Taxes (NOPAT)
Zoetis Inc., NOPAT calculation
US$ 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.
- Economic Profit Trends
- The economic profit exhibited notable fluctuations over the observed period. Starting at US$314 million in 2019, it declined to US$257 million in 2020, indicating a decrease during that year. Subsequently, it rose sharply to US$633 million in 2021, followed by a decrease to US$335 million in 2022. The latest figure in 2023 shows a significant increase to US$913 million, marking the highest value in the series and suggesting a strong improvement in value creation in that year.
- Invested Capital Trends
- Invested capital generally increased during the period from US$9,838 million in 2019 to a peak of US$12,542 million in 2022. However, in 2023, there was a reduction to US$11,550 million. This suggests a growth in asset base over most of the period, with a recent contraction in the latest year that may reflect asset disposals, efficiency measures, or strategic shifts.
- Economic Spread Ratio Analysis
- The economic spread ratio shows considerable volatility. It started at 3.19% in 2019, decreased to 2.22% in 2020, then sharply increased to 5.45% in 2021. In 2022, it declined again to 2.67%, followed by a substantial increase to 7.91% in 2023. This ratio’s pattern indicates variability in the company’s return relative to its cost of capital, with marked improvements notably in 2021 and particularly in 2023.
- Overall Insights
- The company’s financial performance demonstrates cyclical characteristics with economic profit and spread ratios experiencing ups and downs throughout the five-year period. The strong rebound in 2023 in both economic profit and economic spread ratio suggests improved operational efficiency or higher profitability relative to invested capital costs. Meanwhile, invested capital’s initial increase followed by a decline in 2023 may indicate strategic realignment or optimization of asset usage. The patterns suggest responsiveness to market conditions or internal management actions affecting profitability and capital efficiency.
Economic Profit Margin
Zoetis Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
- Revenue
- Revenue exhibited a consistent upward trend over the five-year period, increasing from $6,260 million in 2019 to $8,544 million in 2023. This represents a steady growth trajectory, with the most notable increases occurring between 2020 and 2021, and continuing through 2023, although the growth rate moderately slowed in the last year.
- Economic Profit
- Economic profit showed significant volatility across the years. It began at $314 million in 2019, then decreased to $257 million in 2020, before sharply rising to $633 million in 2021. This was followed by a decline to $335 million in 2022, and a substantial increase to $913 million in 2023, marking the highest value in the period. These fluctuations suggest variability in profitability or capital cost efficiency despite revenue growth.
- Economic Profit Margin
- The economic profit margin displayed a pattern similar to economic profit, evidencing notable fluctuations. It started at 5.02% in 2019, dropped to 3.85% in 2020, then more than doubled to 8.14% in 2021. The margin declined again to 4.15% in 2022 before reaching a peak of 10.69% in 2023. This variability indicates inconsistent utilization of capital to generate economic profit relative to revenue, with an overall improving trend by the end of the period.
- Overall Insights
- The company demonstrated continuous revenue growth, which reflects a stable expansion in business scale and market presence. However, the economic profit and corresponding margin fluctuated considerably, suggesting that while revenue increased, the efficiency in generating value over capital employed was subject to external or internal factors affecting profitability. The peak in economic profit and margin in 2023 indicates a return to enhanced capital efficiency and profitability after a downturn in 2022, signaling potentially improved operational performance or cost management in the latest year.