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
Abiomed Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 140,811 – 21.93% × 693,367 = -11,261
The period under review demonstrates a fluctuating pattern in economic profit. Initially, a strong upward trend is evident, followed by a decline in the most recent year. Net operating profit after taxes (NOPAT) and invested capital both increased significantly over the first four years, contributing to the initial rise in economic profit. However, while NOPAT experienced a decrease in the final year, invested capital also saw a reduction, though less pronounced.
- Economic Profit Trend
- Economic profit increased substantially from $30.302 million in 2017 to $144.524 million in 2019, representing significant value creation. A subsequent decrease to $98.086 million in 2021 was observed, and a further decline resulted in a negative economic profit of -$11.261 million in 2022. This indicates that in the latest year, the company’s returns did not exceed its cost of capital.
- NOPAT Performance
- Net operating profit after taxes exhibited substantial growth between 2017 and 2019, increasing from $79.888 million to $253.605 million. A slight decrease to $239.725 million occurred in 2020, followed by a return to growth in 2021 with $259.982 million. However, 2022 saw a significant reduction in NOPAT to $140.811 million, contributing to the negative economic profit.
- Invested Capital Evolution
- Invested capital consistently increased from $226.723 million in 2017 to $737.876 million in 2021. This growth suggests expansion of operations or increased investment in assets. A modest decrease to $693.367 million was noted in 2022, potentially reflecting asset sales or reduced investment.
- Cost of Capital Stability
- The cost of capital remained relatively stable throughout the period, fluctuating between 21.87% and 21.94%. This consistency suggests that the company’s risk profile and financing structure remained largely unchanged during the observed timeframe. The minimal variation in cost of capital indicates that changes in economic profit are primarily driven by fluctuations in NOPAT and invested capital.
The shift to negative economic profit in 2022 warrants further investigation. While the decrease in NOPAT is a primary driver, the continued high level of invested capital suggests that the company is not yet generating sufficient returns to cover its capital costs. Monitoring future performance will be crucial to determine if this is a temporary setback or the beginning of a longer-term trend.
Net Operating Profit after Taxes (NOPAT)
Abiomed Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 9,507 × 1.61% = 153
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 153 × 21.00% = 32
8 Addition of after taxes interest expense to net income.
- Net Income
- The net income demonstrates an overall increasing trend from 2017 to 2021, starting at 52,116 thousand US dollars in 2017 and more than quadrupling to 225,525 thousand US dollars by 2021. However, in the latest period reported (2022), net income declined significantly to 136,505 thousand US dollars, representing a reduction of approximately 39.5% compared to 2021. This sharp decrease after several years of growth may indicate emerging operational challenges or external factors impacting profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT follows a similar upward pattern from 2017 to 2021, increasing from 79,888 thousand US dollars to a peak of 259,982 thousand US dollars in 2021. This progressive increase suggests improving operating efficiency and strong core profitability over this period. However, like net income, NOPAT experienced a noteworthy contraction in 2022, falling to 140,811 thousand US dollars, which constitutes a decrease of approximately 45.8% relative to 2021. The decrease in NOPAT correlates with the drop in net income, reinforcing the indication of decreased operational performance in the latest year.
- Comparative Insights
- Both profitability measures show consistent and substantial growth over the first five years reviewed, reflecting positive business momentum. The alignment in trends between net income and NOPAT suggests that the company’s profitability changes are primarily driven by operating activities rather than non-operating factors. The pronounced decline in 2022 in both metrics represents a notable deviation from prior periods, which warrants further investigation into causes such as market conditions, cost structure changes, or other external influences.
Cash Operating Taxes
Abiomed Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
- Income Tax Provision
- The income tax provision fluctuates considerably over the period analyzed. It initially increased from 39,227 thousand US dollars in March 2017 to a peak of 48,267 thousand US dollars in March 2018. Subsequently, it sharply declined to 4,344 thousand US dollars in March 2019, indicating a significant reduction in tax liabilities or adjustments for that year. However, it rebounded markedly to 53,816 thousand US dollars in March 2020 and continued to rise to 62,695 thousand US dollars in March 2021 before decreasing again to 54,055 thousand US dollars in March 2022. This pattern suggests considerable variability likely influenced by changes in taxable income, tax planning strategies, or tax legislation.
- Cash Operating Taxes
- Cash operating taxes show an inconsistent but generally upward trend over the years. Starting at 13,626 thousand US dollars in March 2017, there is a notable decline to 5,738 thousand US dollars in March 2018. This is followed by a recovery to 12,089 thousand US dollars in March 2019. From March 2020 onwards, cash operating taxes consistently increase, reaching 20,943 thousand US dollars, 33,340 thousand US dollars in March 2021, and peaking at 51,674 thousand US dollars by March 2022. The sharp increase in recent years could reflect higher taxable operational earnings or timing differences between accounting income and tax payments.
- Comparative Insights
- The contrasting patterns between income tax provision and cash operating taxes are of note. While income tax provision shows extreme variability, cash operating taxes trend more steadily upwards after an initial decline. This discrepancy might indicate differences between accrued tax expenses and actual cash tax payments, possibly due to deferred tax assets or liabilities, tax credits, or changes in accounting estimates. The rise in cash taxes despite fluctuations in tax provision could imply a strengthening of the company's cash tax outflows in recent years.
Invested Capital
Abiomed Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
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 deferred revenue.
5 Addition of product warranty.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
The financial data over the six-year period reveals notable trends in the capital structure and equity position. There is a pronounced fluctuation in total reported debt and leases, with an initial sharp decline from 23,800 thousand USD in 2017 to 10,089 thousand USD in 2018. This is followed by moderate increases and decreases over the subsequent years, culminating in a value of 9,507 thousand USD in 2022, which remains below the initial figure in 2017. This suggests efforts to reduce or manage debt levels with some variability year-over-year.
The stockholders’ equity demonstrates consistent and substantial growth throughout the period. Starting at 452,071 thousand USD in 2017, it more than triples by 2022, reaching 1,503,326 thousand USD. This steady increase signals strengthening equity financing and accumulation of retained earnings or capital contributions, indicating a robust equity base and potentially improved financial stability over time.
Invested capital shows an overall increasing trend from 226,723 thousand USD in 2017 to a peak of 737,876 thousand USD in 2021, before a slight decline to 693,367 thousand USD in 2022. This upward movement may reflect ongoing investments in business operations, assets, or strategic initiatives. The minor decrease in the final year could be indicative of divestments, asset disposals, or revaluation adjustments.
- Total Reported Debt & Leases
- Initial significant reduction followed by moderate fluctuations, ending below the initial value, suggesting active debt management.
- Stockholders’ Equity
- Consistent and strong growth, tripling over the period, reflecting enhanced financial strength and shareholder value.
- Invested Capital
- General upward trend with a peak in 2021 and slight decline in 2022, indicating increased capital investment with some recent contraction.
Cost of Capital
Abiomed Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,741,698) | 10,741,698) | ÷ | 10,751,205) | = | 1.00 | 1.00 | × | 21.95% | = | 21.93% | ||
| Capital lease obligation3 | —) | —) | ÷ | 10,751,205) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 9,507) | 9,507) | ÷ | 10,751,205) | = | 0.00 | 0.00 | × | 1.61% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 10,751,205) | 1.00 | 21.93% | ||||||||||
Based on: 10-K (reporting date: 2022-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,682,874) | 12,682,874) | ÷ | 12,688,990) | = | 1.00 | 1.00 | × | 21.95% | = | 21.94% | ||
| Capital lease obligation3 | —) | —) | ÷ | 12,688,990) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 6,116) | 6,116) | ÷ | 12,688,990) | = | 0.00 | 0.00 | × | 1.96% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 12,688,990) | 1.00 | 21.94% | ||||||||||
Based on: 10-K (reporting date: 2021-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,825,950) | 8,825,950) | ÷ | 8,838,170) | = | 1.00 | 1.00 | × | 21.95% | = | 21.92% | ||
| Capital lease obligation3 | —) | —) | ÷ | 8,838,170) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 12,220) | 12,220) | ÷ | 8,838,170) | = | 0.00 | 0.00 | × | 3.12% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 8,838,170) | 1.00 | 21.92% | ||||||||||
Based on: 10-K (reporting date: 2020-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 11,851,559) | 11,851,559) | ÷ | 11,865,833) | = | 1.00 | 1.00 | × | 21.95% | = | 21.92% | ||
| Capital lease obligation3 | —) | —) | ÷ | 11,865,833) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 14,274) | 14,274) | ÷ | 11,865,833) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 11,865,833) | 1.00 | 21.92% | ||||||||||
Based on: 10-K (reporting date: 2019-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,544,728) | 17,544,728) | ÷ | 17,554,817) | = | 1.00 | 1.00 | × | 21.95% | = | 21.94% | ||
| Capital lease obligation3 | —) | —) | ÷ | 17,554,817) | = | 0.00 | 0.00 | × | 0.00% × (1 – 31.50%) | = | 0.00% | ||
| Operating lease liability4 | 10,089) | 10,089) | ÷ | 17,554,817) | = | 0.00 | 0.00 | × | 0.00% × (1 – 31.50%) | = | 0.00% | ||
| Total: | 17,554,817) | 1.00 | 21.94% | ||||||||||
Based on: 10-K (reporting date: 2018-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,954,171) | 5,954,171) | ÷ | 5,977,971) | = | 1.00 | 1.00 | × | 21.95% | = | 21.86% | ||
| Capital lease obligation3 | 16,338) | 16,338) | ÷ | 5,977,971) | = | 0.00 | 0.00 | × | 2.99% × (1 – 35.00%) | = | 0.01% | ||
| Operating lease liability4 | 7,462) | 7,462) | ÷ | 5,977,971) | = | 0.00 | 0.00 | × | 2.99% × (1 – 35.00%) | = | 0.00% | ||
| Total: | 5,977,971) | 1.00 | 21.87% | ||||||||||
Based on: 10-K (reporting date: 2017-03-31).
1 US$ in thousands
2 Equity. See details »
3 Capital lease obligation. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Abiomed Inc., economic spread ratio calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (11,261) | 98,086) | 109,308) | 144,524) | 99,829) | 30,302) | |
| Invested capital2 | 693,367) | 737,876) | 594,867) | 497,537) | 273,719) | 226,723) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -1.62% | 13.29% | 18.38% | 29.05% | 36.47% | 13.36% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Abbott Laboratories | -2.19% | -1.72% | — | — | — | — | |
| Elevance Health Inc. | 0.49% | 1.80% | — | — | — | — | |
| Intuitive Surgical Inc. | -3.55% | 12.06% | — | — | — | — | |
| Medtronic PLC | -5.65% | -7.31% | -6.31% | — | — | — | |
| UnitedHealth Group Inc. | 4.47% | 4.33% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -11,261 ÷ 693,367 = -1.62%
4 Click competitor name to see calculations.
The economic spread ratio demonstrates a fluctuating performance over the observed period. Initially, the ratio exhibits substantial growth, followed by a period of decline culminating in a negative value. This analysis details the observed trends in economic profit, invested capital, and the resulting economic spread ratio.
- Economic Spread Ratio Trend
- The economic spread ratio increased significantly from 13.36% in 2017 to 36.47% in 2018, indicating a substantial improvement in the return generated relative to the cost of capital. This upward momentum continued, albeit at a slower pace, reaching 29.05% in 2019. A subsequent decline is observed, with the ratio decreasing to 18.38% in 2020 and further to 13.29% in 2021. Notably, the ratio turned negative in 2022, registering at -1.62%, signifying that the company’s return on invested capital fell below its cost of capital.
- Economic Profit and Invested Capital Relationship
- Economic profit increased consistently from US$30,302 thousand in 2017 to US$144,524 thousand in 2019, driving the initial increase in the economic spread ratio. While economic profit decreased to US$109,308 thousand in 2020 and US$98,086 thousand in 2021, it remained positive. However, in 2022, economic profit became negative at -US$11,261 thousand. Invested capital demonstrated a consistent upward trend from US$226,723 thousand in 2017 to US$737,876 thousand in 2021. A slight decrease in invested capital was observed in 2022, falling to US$693,367 thousand. The combination of declining economic profit and relatively stable invested capital contributed to the negative economic spread ratio in 2022.
The observed trends suggest a weakening of the company’s ability to generate returns exceeding its cost of capital. The substantial growth in invested capital, coupled with the eventual decline in economic profit, appears to be a key driver of this shift. Further investigation into the factors influencing both economic profit and invested capital is warranted.
Economic Profit Margin
Abiomed Inc., economic profit margin calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (11,261) | 98,086) | 109,308) | 144,524) | 99,829) | 30,302) | |
| Revenue | 1,031,753) | 847,522) | 840,883) | 769,432) | 593,749) | 445,304) | |
| Add: Increase (decrease) in deferred revenue | 2,040) | 5,175) | 2,754) | 1,423) | 4,475) | 1,717) | |
| Adjusted revenue | 1,033,793) | 852,697) | 843,637) | 770,855) | 598,224) | 447,021) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -1.09% | 11.50% | 12.96% | 18.75% | 16.69% | 6.78% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Abbott Laboratories | -3.08% | -2.47% | — | — | — | — | |
| Elevance Health Inc. | 0.21% | 0.84% | — | — | — | — | |
| Intuitive Surgical Inc. | -3.07% | 9.49% | — | — | — | — | |
| Medtronic PLC | -12.40% | -17.53% | -15.53% | — | — | — | |
| UnitedHealth Group Inc. | 2.29% | 2.13% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -11,261 ÷ 1,033,793 = -1.09%
3 Click competitor name to see calculations.
The economic profit margin exhibited a generally positive trend from 2017 through 2021, followed by a significant decline in 2022. Economic profit itself demonstrated substantial growth over the same initial period, peaking in 2019, before experiencing a marked decrease culminating in a loss in 2022. Adjusted revenue consistently increased throughout the observed period, although the rate of growth varied.
- Economic Profit Margin
- The economic profit margin increased from 6.78% in 2017 to a high of 18.75% in 2019, indicating improving profitability relative to capital employed. This growth slowed in 2020 to 12.96% and continued to decline to 11.50% in 2021. A substantial decrease was observed in 2022, with the margin falling to -1.09%, signifying that the company’s economic profit was negative relative to its adjusted revenue.
- Economic Profit
- Economic profit increased significantly from US$30,302 thousand in 2017 to US$144,524 thousand in 2019, demonstrating a strong ability to generate returns exceeding the cost of capital. A decrease to US$109,308 thousand occurred in 2020, followed by a further reduction to US$98,086 thousand in 2021. The most notable change occurred in 2022, where economic profit became negative, reaching -US$11,261 thousand. This suggests the company’s capital was not deployed effectively enough to cover its cost during that year.
- Adjusted Revenue
- Adjusted revenue consistently increased throughout the period, rising from US$447,021 thousand in 2017 to US$1,033,793 thousand in 2022. The growth rate was highest between 2017 and 2019, slowing somewhat in 2020 and 2021 before accelerating again in 2022. Despite the consistent revenue growth, the decline in economic profit margin and eventual negative economic profit in 2022 indicate that revenue increases alone were insufficient to maintain profitability relative to capital employed.
The divergence between revenue growth and economic profit in 2022 warrants further investigation. Factors contributing to this decline could include increased costs, a higher cost of capital, or less efficient capital allocation.