Economic Value Added (EVA)
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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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e.l.f. Beauty, Inc. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Assets
- Common Stock Valuation Ratios
- Selected Financial Data since 2016
- Operating Profit Margin since 2016
- Return on Assets (ROA) since 2016
- Total Asset Turnover since 2016
- Price to Earnings (P/E) since 2016
- Price to Sales (P/S) since 2016
- Aggregate Accruals
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Economic Profit
e.l.f. Beauty, Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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 performance over the five-year period ending March 31, 2024, is characterized by significant growth in operating profitability that has been offset by a substantial increase in invested capital and a high cost of capital, resulting in persistent negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but strong upward trajectory is observed in NOPAT. Following a sharp decline in 2021 to 618 thousand US$, profitability recovered in 2022 and entered a phase of accelerated growth, reaching 132,182 thousand US$ by March 31, 2024. This represents a substantial increase in the company's ability to generate operating income after taxes.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable between 2020 and 2022, followed by a moderate increase in 2023 and a sharp expansion in 2024, where it nearly doubled to 936,268 thousand US$. Simultaneously, the cost of capital has remained consistently high, fluctuating within a narrow range between 20.79% and 23.86%. This high hurdle rate implies a significant requirement for returns on all deployed capital.
- Economic Profit Analysis
- Despite the exponential growth in NOPAT, economic profit has remained negative throughout the entire period. The economic loss fluctuated from a low of -60,462 thousand US$ in 2020 to -89,068 thousand US$ in 2024. The widening of the economic loss in the final year, despite record-high NOPAT, is directly attributable to the massive surge in invested capital, which increased the total capital charge beyond the growth in operating profits.
In summary, the company is experiencing rapid operational scaling, but the returns generated from its invested capital are currently insufficient to cover the high cost of that capital. The increase in capital deployment in 2024 has temporarily decoupled NOPAT growth from economic profit improvement.
Net Operating Profit after Taxes (NOPAT)
e.l.f. Beauty, Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
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.
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 analysis of the financial performance over the reported periods reveals significant fluctuations and an overall strong upward trend in profitability metrics.
- Net Income
- The net income experienced a notable decline from 17,884 thousand USD in 2020 to 6,232 thousand USD in 2021, indicating a decrease in profitability. However, from 2021 onwards, the net income showed a robust recovery and growth, rising substantially to 21,770 thousand USD in 2022 and accelerating sharply to 61,530 thousand USD in 2023. This growth continued into 2024, with net income reaching 127,663 thousand USD, reflecting a significant improvement in the company's earnings over the five-year span.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a somewhat similar pattern, starting at 26,428 thousand USD in 2020 and dumping dramatically to 618 thousand USD in 2021, which suggests operational challenges or increased expenses during that year. Subsequently, NOPAT rebounded to 20,327 thousand USD in 2022 and increased strongly to 57,046 thousand USD in 2023. The upward trajectory persisted, with NOPAT climbing to 132,182 thousand USD in 2024, indicating enhanced operational efficiency and profitability after accounting for taxes.
Overall, the data indicates that despite a difficult year in 2021, both net income and NOPAT improved significantly in the following years, culminating in record-high results in 2024. This suggests effective management strategies, operational improvements, or market conditions that positively impacted profitability and operational performance.
Cash Operating Taxes
e.l.f. Beauty, Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
- Provision (benefit) for income taxes
- The provision for income taxes displayed notable volatility over the analyzed periods. In the year ending March 31, 2020, there was a positive provision amounting to 6,185 thousand US dollars, which turned into a tax benefit (negative provision) of 2,542 thousand US dollars in the subsequent year. The provision reverted to a positive figure of 3,661 thousand US dollars for the year ending March 31, 2022, then increased slightly to 2,544 thousand US dollars in 2023, followed by a substantial rise to 13,327 thousand US dollars in 2024. This substantial increase in 2024 suggests a significant rise in taxable income or changes in tax strategy or rates affecting the provision.
- Cash operating taxes
- Cash operating taxes exhibited a consistent upward trajectory throughout the analyzed timeline. Starting at 5,178 thousand US dollars in 2020, this figure increased year-over-year, reaching 7,044 thousand US dollars in 2021, 7,989 thousand US dollars in 2022, then 9,455 thousand US dollars in 2023. The most pronounced increase occurred between 2023 and 2024, when cash operating taxes nearly doubled to 18,383 thousand US dollars. This trend indicates increasing cash outflows related to tax obligations, potentially reflecting higher taxable profits, changes in tax regulations, or improved collection and payment practices.
Invested Capital
e.l.f. Beauty, Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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 stockholders’ equity.
5 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases showed a declining trend from March 31, 2020, through March 31, 2023, decreasing from $152.978 million to $82.167 million. This represents a substantial reduction in debt and lease obligations over this period. However, as of March 31, 2024, there was a significant increase to $290.601 million, indicating a sharp rise in leverage or financing commitments in the most recent year.
- Stockholders' Equity
- Stockholders' equity demonstrated consistent growth over the five-year period. Starting at $242.171 million in March 2020, it increased steadily each year, reaching $642.572 million by March 2024. This reflects a strong accumulation of equity, potentially through retained earnings and/or capital infusions, suggesting an improvement in the company's net assets and financial strength.
- Invested Capital
- Invested capital rose gradually from $418.026 million in March 2020 to $496.463 million in March 2023. Notably, there was a considerable jump to $936.268 million as of March 2024. This substantial increase parallels the surge in total debt and leases, possibly indicating increased investments or assets financed by the higher debt levels. The overall trend suggests expansion or significant investment activities in the latest fiscal year.
Cost of Capital
e.l.f. Beauty, Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
e.l.f. Beauty, Inc., economic spread ratio calculation, comparison to benchmarks
| Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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.
An analysis of the economic value added metrics reveals a persistent inability to generate positive economic profit over the five-year period ending March 31, 2024. While the company has significantly expanded its capital base, it has consistently operated with a negative economic spread, indicating that the return on invested capital has remained below the cost of capital.
- Economic Profit Trends
- Economic profit remained in negative territory throughout the observed timeframe. After an initial decline from -60.462 million in 2020 to a period low of -95.456 million in 2021, the deficit narrowed slightly over the following two years. However, the most recent reporting period ending March 31, 2024, shows an increase in the economic loss to -89.068 million, signaling a continued failure to create economic value.
- Invested Capital Expansion
- There is a clear upward trajectory in invested capital, which grew modestly from 418.026 million in 2020 to 496.463 million in 2023. A significant shift occurred in the 2024 fiscal year, where invested capital surged to 936.268 million. This sharp increase represents a substantial expansion of the company's asset base and investment intensity.
- Economic Spread Ratio Performance
- Despite the negative absolute economic profit, the economic spread ratio demonstrates a trend of incremental improvement. After hitting a low of -21.99% in 2021, the ratio moved closer to the break-even point, reaching -12.37% in 2023 and -9.51% in 2024. This improvement suggests that while value is still being eroded, the efficiency of the invested capital relative to its cost has improved, partly due to the significant increase in the total capital base during the final period.
Economic Profit Margin
e.l.f. Beauty, Inc., economic profit margin calculation, comparison to benchmarks
| Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the five-year period is characterized by a significant expansion in top-line revenue contrasted with a persistent deficit in economic profit. While absolute economic profit has remained negative throughout the analyzed timeframe, the efficiency of value creation relative to sales has demonstrated a consistent upward trajectory following the 2021 fiscal year.
- Net Sales Growth
- A strong and accelerating growth pattern is observed in net sales, which increased from US$ 282,851 thousand in 2020 to US$ 1,023,932 thousand in 2024. This represents a substantial scaling of operations, with total sales more than tripling over the five-year duration.
- Economic Profit Trends
- Economic profit has remained negative for the entire period, indicating that the net operating profit has not yet exceeded the company's cost of capital. The deficit fluctuated over the period, reaching a peak loss of US$ 95,456 thousand in 2021, improving to US$ 61,418 thousand in 2023, and subsequently widening to US$ 89,068 thousand in 2024.
- Economic Profit Margin Analysis
- The economic profit margin exhibits a clear trend of recovery. After bottoming at -30.01% in 2021, the margin improved sequentially to -19.77% in 2022, -10.61% in 2023, and -8.70% in 2024. This suggests that the rapid growth in net sales is effectively diluting the economic deficit, reducing the relative gap between actual profits and the required return on capital.