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 – 15.13% × 11,550 = 663
The financial performance between 2019 and 2023 is characterized by a general expansion in operational profitability and a volatile but consistently positive economic profit. While the net operating profit after taxes (NOPAT) exhibited a strong upward trend, the resulting economic value creation fluctuated, reaching a five-year peak in the final year of the period.
- Net Operating Profit After Taxes (NOPAT)
- A consistent growth trajectory is observed in NOPAT, which increased from 1,570 million US$ in 2019 to 2,410 million US$ in 2023. Despite a marginal contraction in 2022 to 1,958 million US$, the overall trend indicates a robust expansion of core operating earnings.
- Cost of Capital
- The cost of capital remained highly stable throughout the analyzed period, maintaining a narrow range between 14.84% and 15.13%. This stability suggests that the fluctuations in economic profit were not driven by changes in the required rate of return or the risk profile of the capital, but rather by operational and investment variables.
- Invested Capital
- Invested capital showed a steady increase from 2019 to 2022, rising from 9,838 million US$ to a peak of 12,542 million US$. However, a reversal occurred in 2023, with invested capital decreasing to 11,550 million US$, indicating a reduction in the capital base during the same period that NOPAT reached its maximum.
- Economic Profit
- Economic profit experienced significant volatility, starting at 105 million US$ in 2019 and dropping to a low of 12 million US$ in 2020. Subsequent recoveries were observed in 2021 and 2023. The surge to 663 million US$ in 2023 represents the most efficient period of value creation, resulting from the combination of record-high NOPAT and a reduced amount of invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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.
The financial trajectory from 2019 to 2023 is characterized by a general upward trend in both net income and net operating profit after taxes (NOPAT), although the two metrics exhibit different patterns of volatility.
- Net Income Progression
- Net income attributable to Zoetis Inc. experienced uninterrupted growth over the five-year period. Starting at 1,500 million US$ in 2019, the figure rose to 2,344 million US$ by 2023. The most pronounced increase occurred between 2020 and 2021, during which net income grew by approximately 24.3%.
- NOPAT Performance and Volatility
- Net operating profit after taxes followed a growth pattern similar to net income until 2021, reaching 2,131 million US$. However, a contraction was observed in 2022, with NOPAT decreasing to 1,958 million US$. This decline was followed by a substantial recovery in 2023, resulting in a period high of 2,410 million US$.
- Correlation Analysis
- A divergence between the two metrics is evident in 2022, where net income increased despite a decrease in NOPAT. This indicates that the net income growth in 2022 was likely driven by non-operating gains or a reduction in non-operating expenses rather than core operational efficiency. In all other years, the two metrics moved in tandem, with NOPAT consistently remaining higher than net income, reflecting the impact of non-operating adjustments on the final bottom line.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
Zoetis Inc., cash operating taxes calculation
US$ 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).
Analysis of tax expenditures between 2019 and 2023 reveals a consistent upward trajectory in tax provisions, contrasted by more volatile fluctuations in actual cash tax payments.
- Provision for Taxes on Income
- A steady and uninterrupted increase is observed in the provision for taxes on income, which rose from US$ 301 million in 2019 to US$ 596 million by the end of 2023. This represents a cumulative growth of approximately 98% over the five-year period, indicating a consistent expansion of the company's reported tax obligations.
- Cash Operating Taxes
- Cash operating taxes exhibited a strong upward trend from 2019 through 2022, increasing from US$ 422 million to a peak of US$ 867 million. However, 2023 marked a notable reversal of this trend, with cash payments decreasing to US$ 687 million. This decline occurred despite the simultaneous increase in the tax provision for the same period.
- Comparative Variance Analysis
- Cash operating taxes consistently exceeded the provision for taxes on income across all five years analyzed. The divergence peaked in 2022, where cash outflows for taxes were US$ 322 million higher than the reported provision. By 2023, this gap narrowed significantly as cash payments decreased and provisions continued to rise, suggesting potential shifts in tax timing or the utilization of deferred tax assets.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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.
Invested capital exhibited a general upward trajectory from 2019 to 2022, peaking at US$ 12,542 million before contracting by approximately 7.9% in 2023 to US$ 11,550 million.
- Invested Capital Trajectory
- A significant expansion occurred between 2019 and 2020, with invested capital rising from US$ 9,838 million to US$ 11,557 million. Growth remained relatively stable through 2021 and reached a five-year peak in 2022. The subsequent decline in 2023 returned the total invested capital to levels nearly identical to those recorded in 2020.
- Equity Growth Trends
- Total equity demonstrated a consistent and sustained growth pattern, increasing from US$ 2,708 million in 2019 to US$ 4,997 million in 2023. Aside from a marginal dip in 2022, the equity base expanded steadily, indicating a strengthening of the company's internal funding capacity.
- Debt and Lease Volatility
- Total reported debt and leases exhibited higher volatility compared to equity. Debt levels rose to US$ 7,402 million in 2020, dipped in 2021, and peaked at US$ 8,133 million in 2022. A substantial reduction followed in 2023, with debt falling to US$ 6,812 million, which served as the primary driver for the overall contraction of invested capital in the final year.
The composition of invested capital shifted over the observed period, moving toward a higher proportion of equity financing. While debt levels fluctuated, the steady increase in equity suggests a strategic reduction in financial leverage by the end of 2023.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 | × | 16.06% | = | 14.89% | ||
| 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 | 15.13% | ||||||||||
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 | × | 16.06% | = | 14.87% | ||
| 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 | 15.10% | ||||||||||
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 | × | 16.06% | = | 14.84% | ||
| 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 | 15.06% | ||||||||||
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 | × | 16.06% | = | 14.57% | ||
| 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 | 14.84% | ||||||||||
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 | × | 16.06% | = | 14.62% | ||
| 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 | 14.89% | ||||||||||
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 | 663) | 64) | 383) | 12) | 105) | |
| Invested capital2 | 11,550) | 12,542) | 11,612) | 11,557) | 9,838) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 5.74% | 0.51% | 3.30% | 0.11% | 1.07% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | -3.93% | 5.49% | 4.87% | — | — | |
| Amgen Inc. | 2.28% | 6.80% | 6.80% | — | — | |
| Bristol-Myers Squibb Co. | 1.55% | -1.21% | 1.09% | — | — | |
| Danaher Corp. | -11.64% | -6.63% | -5.80% | — | — | |
| Eli Lilly & Co. | 1.42% | 8.52% | 10.19% | — | — | |
| Gilead Sciences Inc. | 2.85% | -0.27% | 6.76% | — | — | |
| Johnson & Johnson | 0.03% | 5.29% | 10.35% | — | — | |
| Merck & Co. Inc. | -8.94% | 11.24% | 11.41% | — | — | |
| Pfizer Inc. | -9.48% | 17.97% | 11.14% | — | — | |
| Regeneron Pharmaceuticals Inc. | 13.44% | 18.80% | 62.56% | — | — | |
| Thermo Fisher Scientific Inc. | -8.72% | -6.97% | -4.95% | — | — | |
| Vertex Pharmaceuticals Inc. | 11.09% | 13.84% | 15.05% | — | — | |
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 × 663 ÷ 11,550 = 5.74%
4 Click competitor name to see calculations.
The analysis of value creation from 2019 to 2023 reveals a pattern of significant volatility in economic performance, characterized by fluctuating margins of return above the cost of capital. While the company consistently maintained positive economic profit, the magnitude of this value creation varied substantially year-over-year, culminating in a peak performance in 2023.
- Economic Spread Ratio Trends
- The economic spread ratio exhibits a cyclical and volatile trajectory. A notable contraction occurred in 2020, where the ratio dropped to 0.11%, indicating that returns were barely exceeding the cost of capital. This was followed by a recovery to 3.30% in 2021, another decline to 0.51% in 2022, and a significant expansion to 5.74% in 2023. The 2023 figure represents the highest spread in the period analyzed, suggesting a substantial improvement in capital efficiency and value generation.
- Economic Profit Volatility
- Economic profit mirrored the fluctuations seen in the spread ratio. Profits declined sharply from US$ 105 million in 2019 to US$ 12 million in 2020. Despite a strong rebound to US$ 383 million in 2021, profit levels retreated to US$ 64 million in 2022. The period concluded with a sharp increase to US$ 663 million in 2023, marking a significant surge in the absolute amount of wealth created beyond the required return on invested capital.
- Invested Capital Dynamics
- Invested capital showed a general upward trend from 2019 through 2022, growing from US$ 9,838 million to a peak of US$ 12,542 million. However, in 2023, invested capital decreased to US$ 11,550 million. The convergence of a reduced capital base and a sharp increase in economic profit in 2023 contributed to the substantial expansion of the economic spread ratio, indicating higher productivity of the deployed capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
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 | 663) | 64) | 383) | 12) | 105) | |
| Revenue | 8,544) | 8,080) | 7,776) | 6,675) | 6,260) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 7.76% | 0.79% | 4.92% | 0.19% | 1.68% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | -4.94% | 7.77% | 8.31% | — | — | |
| Amgen Inc. | 5.93% | 10.90% | 11.26% | — | — | |
| Bristol-Myers Squibb Co. | 2.33% | -1.87% | 1.88% | — | — | |
| Danaher Corp. | -38.22% | -16.48% | -14.50% | — | — | |
| Eli Lilly & Co. | 1.22% | 7.25% | 9.40% | — | — | |
| Gilead Sciences Inc. | 4.86% | -0.46% | 11.95% | — | — | |
| Johnson & Johnson | 0.03% | 6.34% | 10.83% | — | — | |
| Merck & Co. Inc. | -10.41% | 14.02% | 16.57% | — | — | |
| Pfizer Inc. | -24.66% | 19.67% | 11.89% | — | — | |
| Regeneron Pharmaceuticals Inc. | 12.26% | 18.93% | 42.30% | — | — | |
| Thermo Fisher Scientific Inc. | -17.42% | -12.85% | -10.07% | — | — | |
| Vertex Pharmaceuticals Inc. | 14.88% | 20.42% | 18.65% | — | — | |
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 × 663 ÷ 8,544 = 7.76%
3 Click competitor name to see calculations.
Revenue grew consistently from 2019 to 2023, increasing from US$ 6,260 million to US$ 8,544 million. However, this steady top-line growth contrasts with significant volatility in economic profit and the corresponding economic profit margin throughout the same period.
- Revenue Growth Trajectory
- A continuous upward trend is observed in revenue, with an overall increase of approximately 36% over the five-year period. This indicates a stable expansion of the company's scale of operations.
- Economic Profit Volatility
- Economic profit exhibited a cyclical pattern of sharp contractions and expansions. After a significant drop to US$ 12 million in 2020, the figure recovered to US$ 383 million in 2021, declined again to US$ 64 million in 2022, and reached a period peak of US$ 663 million in 2023.
- Economic Profit Margin Performance
- The economic profit margin mirrored the fluctuations of absolute economic profit. The margin experienced deep troughs in 2020 (0.19%) and 2022 (0.79%), interspersed with periods of strong value creation, culminating in a high of 7.76% in 2023.
- Analysis of Capital Efficiency
- The divergence between steady revenue growth and erratic economic profit indicates that the company's ability to generate returns exceeding its cost of capital was inconsistent. The substantial margin expansion in 2023 suggests a significant improvement in the efficiency of capital employment or a favorable shift in the relationship between operating income and the cost of invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?