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.
Economic Profit
e.l.f. Beauty, Inc., economic profit 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 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
= 132,182 – 23.70% × 936,268 = -89,759
The financial performance from March 31, 2020, to March 31, 2024, is characterized by a significant increase in operational profitability that has not yet been sufficient to offset the cost of capital employed. While net operating profit after taxes has shown aggressive growth in the latter years, the economic profit remains negative throughout the entire period, indicating that the returns generated are lower than the required return on the invested capital base.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but overall upward trajectory is observed. After a sharp decline to US$ 618 thousand in 2021, NOPAT grew exponentially, reaching US$ 132,182 thousand by March 31, 2024. This suggests a strong recovery and a substantial increase in the company's ability to generate operating earnings.
- Cost of Capital
- The cost of capital has remained consistently high and relatively stable, ranging from a low of 20.85% in 2020 to a peak of 23.94% in 2023, ending at 23.70% in 2024. This high hurdle rate necessitates significant operational returns to achieve positive economic value addition.
- Invested Capital
- There is a clear trend of capital expansion. Invested capital rose from US$ 418,026 thousand in 2020 to US$ 936,268 thousand in 2024. The most aggressive growth occurred between 2023 and 2024, where the capital base increased by approximately 88%.
- Economic Profit
- Economic profit remained negative for the duration of the analysis, reflecting a consistent destruction of economic value. Although NOPAT increased significantly, the simultaneous expansion of the invested capital base—multiplied by a high cost of capital—outpaced the growth in operating profits. Consequently, the economic profit shifted from negative US$ 60,730 thousand in 2020 to negative US$ 89,759 thousand in 2024.
In summary, the company has successfully scaled its operations and increased its net operating profit; however, the capital intensity of this growth, paired with a high cost of capital, has prevented the transition to positive economic profit. The widening gap between operating returns and the cost of capital in 2024 suggests that the recent surge in invested capital has not yet yielded proportional economic gains.
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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
= 28,475 × 5.10% = 1,452
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 13,292 × 21.00% = 2,791
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
= 4,817 × 21.00% = 1,012
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.
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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.
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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 $936.268 million as of March 2024. This substantial increase parallels the surge in total debt and leases, possibly indicating increased investments or assets financed by the higher debt levels. The overall trend suggests expansion or significant investment activities in the latest fiscal year.
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Cost of Capital
e.l.f. Beauty, Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,335,864) | 10,335,864) | ÷ | 10,627,271) | = | 0.97 | 0.97 | × | 24.22% | = | 23.56% | ||
| Long-term debt, including current portion3 | 262,932) | 262,932) | ÷ | 10,627,271) | = | 0.02 | 0.02 | × | 6.83% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 28,475) | 28,475) | ÷ | 10,627,271) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 10,627,271) | 1.00 | 23.70% | ||||||||||
Based on: 10-K (reporting date: 2024-03-31).
1 US$ 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 | 5,610,256) | 5,610,256) | ÷ | 5,692,850) | = | 0.99 | 0.99 | × | 24.22% | = | 23.87% | ||
| Long-term debt, including current portion3 | 66,883) | 66,883) | ÷ | 5,692,850) | = | 0.01 | 0.01 | × | 6.17% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 15,711) | 15,711) | ÷ | 5,692,850) | = | 0.00 | 0.00 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 5,692,850) | 1.00 | 23.94% | ||||||||||
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 | 1,287,478) | 1,287,478) | ÷ | 1,405,282) | = | 0.92 | 0.92 | × | 24.22% | = | 22.19% | ||
| Long-term debt, including current portion3 | 97,669) | 97,669) | ÷ | 1,405,282) | = | 0.07 | 0.07 | × | 2.31% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 20,135) | 20,135) | ÷ | 1,405,282) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 1,405,282) | 1.00 | 22.35% | ||||||||||
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 | 1,473,056) | 1,473,056) | ÷ | 1,624,221) | = | 0.91 | 0.91 | × | 24.22% | = | 21.97% | ||
| Long-term debt, including current portion3 | 126,789) | 126,789) | ÷ | 1,624,221) | = | 0.08 | 0.08 | × | 3.23% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 24,376) | 24,376) | ÷ | 1,624,221) | = | 0.02 | 0.02 | × | 2.80% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 1,624,221) | 1.00 | 22.20% | ||||||||||
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 | 828,650) | 828,650) | ÷ | 981,837) | = | 0.84 | 0.84 | × | 24.22% | = | 20.45% | ||
| Long-term debt, including current portion3 | 138,865) | 138,865) | ÷ | 981,837) | = | 0.14 | 0.14 | × | 3.24% × (1 – 21.00%) | = | 0.36% | ||
| Operating lease liability4 | 14,322) | 14,322) | ÷ | 981,837) | = | 0.01 | 0.01 | × | 3.70% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 981,837) | 1.00 | 20.85% | ||||||||||
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 | (89,759) | (61,789) | (77,824) | (95,755) | (60,730) | |
| Invested capital2 | 936,268) | 496,463) | 439,123) | 434,062) | 418,026) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -9.59% | -12.45% | -17.72% | -22.06% | -14.53% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | 5.88% | 5.70% | 6.10% | 5.69% | — | |
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 × -89,759 ÷ 936,268 = -9.59%
4 Click competitor name to see calculations.
The analysis of economic value creation from fiscal year 2020 to 2024 indicates a consistent failure to achieve positive economic profit, suggesting that the company has not generated returns in excess of its cost of capital during this period.
- Economic Profit Trends
- Economic profit remained negative throughout the five-year duration. After reaching a low of -95,755 thousand USD in 2021, the figure showed a gradual recovery through 2023, reaching -61,789 thousand USD. However, this trend reversed in 2024, with economic profit declining to -89,759 thousand USD.
- Invested Capital Growth
- Invested capital exhibited a steady upward trajectory, growing from 418,026 thousand USD in 2020 to 496,463 thousand USD in 2023. A substantial increase occurred in 2024, where invested capital rose to 936,268 thousand USD, representing a significant expansion of the capital base compared to previous years.
- Economic Spread Ratio Analysis
- The economic spread ratio has been consistently negative, reflecting a persistent gap between the return on invested capital and the cost of capital. A significant deterioration was observed in 2021, with the ratio dropping to -22.06%. Since then, a steady improvement has occurred, with the ratio narrowing to -9.59% by 2024. The improvement in 2024 is particularly notable as it occurred despite a decline in absolute economic profit, indicating that the massive increase in invested capital has mathematically reduced the spread ratio.
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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 | (89,759) | (61,789) | (77,824) | (95,755) | (60,730) | |
| Net sales | 1,023,932) | 578,844) | 392,155) | 318,110) | 282,851) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -8.77% | -10.67% | -19.85% | -30.10% | -21.47% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | 6.83% | 6.71% | 7.15% | 7.11% | — | |
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 × -89,759 ÷ 1,023,932 = -8.77%
3 Click competitor name to see calculations.
The financial trajectory between fiscal year 2020 and 2024 is characterized by aggressive top-line expansion contrasted with a persistent inability to generate positive economic profit. While the scale of operations has increased substantially, the entity continues to operate below its cost of capital, although the efficiency of this relationship has evolved.
- Net Sales Growth
- A consistent and accelerating upward trend in net sales is observed, rising from 282.85 million US dollars in 2020 to 1.02 billion US dollars in 2024. The growth rate accelerated significantly in the final period, with sales increasing by approximately 76% between 2023 and 2024.
- Economic Profit Analysis
- Economic profit remained negative throughout the five-year period, indicating that the company did not create value above its cost of capital. The absolute loss fluctuated, widening to 95.76 million US dollars in 2021 before narrowing to 61.79 million US dollars by 2023. However, in 2024, the economic loss widened again to 89.76 million US dollars, suggesting that the capital requirements for rapid expansion outweighed the gains in operational profit during that period.
- Economic Profit Margin Trends
- An improving trend in the economic profit margin is evident since 2021. After reaching a low of -30.10% in 2021, the margin steadily narrowed to -19.85% in 2022, -10.67% in 2023, and finally -8.77% in 2024. This narrowing margin indicates that the company is enhancing its ability to cover the cost of capital relative to its revenue growth, reflecting improved operational leverage despite the absolute increase in economic loss in the most recent year.
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