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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- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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Economic Profit
Alphabet Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a significant increase from 41,262 million US dollars in 2020 to 77,747 million US dollars in 2021, followed by a considerable decline to 52,578 million US dollars in 2022. Subsequently, it recovered to 65,370 million US dollars in 2023 and further rose sharply to 93,781 million US dollars in 2024. This pattern indicates volatility with an overall upward trajectory across the observed period.
- Cost of Capital
- The cost of capital has remained relatively stable over the five years, fluctuating marginally between 14.75% and 14.86%. This steadiness suggests consistent market and financing conditions impacting the company's cost of funds.
- Invested Capital
- Invested capital shows an increasing trend overall, rising from 145,844 million US dollars in 2020 to 171,408 million in 2021 and continuing up to 202,355 million in 2022. Although there was a decrease to 189,779 million in 2023, the invested capital increased again to reach 227,952 million US dollars in 2024. This pattern indicates ongoing investments with occasional periods of divestment or asset optimization.
- Economic Profit
- Economic profit grew substantially from 19,747 million US dollars in 2020 to 52,335 million in 2021, dropped to 22,714 million in 2022, then increased again to 37,253 million in 2023 and reached 59,907 million in 2024. These fluctuations reflect variations in profitability relative to the capital cost, demonstrating a general improvement in value creation over the period despite interim declines.
Net Operating Profit after Taxes (NOPAT)
Alphabet Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses on accounts receivable.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data indicates a fluctuating yet generally positive trend in profitability over the observed periods. Net income shows substantial growth from 40,269 million US dollars at the end of 2020 to 76,033 million in 2021, marking a significant increase. However, there is a notable decline in 2022 to 59,972 million, followed by a recovery in 2023 to 73,795 million and further growth reaching 100,118 million by the end of 2024. This pattern suggests some volatility but an overall upward trajectory in net income over the five-year span.
Similarly, the Net Operating Profit After Taxes (NOPAT) mirrors this trend with initial growth from 41,262 million US dollars in 2020 to 77,747 million in 2021. This is followed by a decrease in 2022 to 52,578 million, reflecting a sharper drop compared to net income. The subsequent years in 2023 and 2024 show a recovery and increase to 65,370 million and 93,781 million respectively. This indicates a similar pattern of variability but with a strong recuperation in operating profitability after taxes.
- Overall Trends
- Both net income and NOPAT experienced high growth in the early years, a decline in the middle period (2022), and recovery with substantial growth towards the end of the timeline (2023-2024).
- Volatility and Recovery
- The mid-period decrease in both measures suggests external or internal challenges impacting profitability, but the rebound in later years indicates effective management or favorable market conditions leading to enhanced earnings.
- Profitability Insights
- The data suggests that despite periods of decreased profitability, the company's financial health and earnings capacity improved significantly by 2024, reaching the highest recorded values in both net income and NOPAT within the given timeframe.
Cash Operating Taxes
Alphabet Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
The analysis of the financial data indicates significant fluctuations and trends in the provisions and payments related to income taxes over the examined five-year period.
- Provision for Income Taxes
- This item shows an overall increasing trend from 2020 to 2024. It more than doubled from approximately $7.8 billion in 2020 to nearly $14.7 billion in 2021, followed by a decline in 2022 to about $11.4 billion. Subsequently, the provision slightly increased in 2023 to approximately $11.9 billion and then escalated sharply to almost $19.7 billion in 2024. This pattern suggests volatility in tax provisions with a recent marked increase.
- Cash Operating Taxes
- Cash taxes paid display a steady and significant upward trend throughout the entire period. Starting at around $6.0 billion in 2020, the cash operating taxes rose sharply to about $12.6 billion in 2021 and continued to climb to $19.5 billion in 2022. The 2023 figure slightly declined to approximately $19.3 billion but rebounded in 2024 to reach its highest value, about $24.4 billion. This demonstrates a consistent increase in actual cash outflows for tax payments, with minor fluctuation in 2023.
In summary, while provision for income taxes has shown volatility with notable increases and decreases, the cash operating taxes have generally increased robustly over the period. The substantial rise in cash paid taxes indicates increasing tax obligations or payments, which may reflect higher profitability, changes in tax regulation, or shifts in the company’s taxable income profile. The divergence and patterns between provisions and cash taxes merit further examination to understand their drivers and implications on financial strategy and tax planning.
Invested Capital
Alphabet Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of assets not yet in service.
8 Subtraction of marketable securities.
- Total reported debt & leases
-
The total reported debt and leases have exhibited a gradual increase over the observed period. Starting from approximately 27.9 billion US dollars at the end of 2020, this figure rose steadily to reach about 30.4 billion dollars by the end of 2024. The increase is relatively moderate and consistent, without significant fluctuations, indicating stable debt management practices.
- Stockholders’ equity
-
Stockholders’ equity has shown a strong upward trend throughout the years. Beginning at roughly 222.5 billion dollars in 2020, equity increased each year, reaching approximately 325.1 billion dollars by the end of 2024. The growth is particularly notable in the last two years, suggesting either retained earnings accumulation, additional equity infusions, or positive revaluation impacts. This trend points to a strengthening financial position from an equity perspective.
- Invested capital
-
Invested capital experienced initial growth from 145.8 billion dollars in 2020 to over 202.3 billion dollars in 2022. However, there was a decline in 2023, dropping to about 189.8 billion dollars, followed by a substantial rise back to around 228.0 billion dollars in 2024. This pattern indicates some volatility in capital investment or asset base management, with a brief contraction before a strong recovery in the most recent year.
- General observations
-
Overall, the financial data indicates increasing capital structure strength with growing stockholders’ equity outpacing the moderate rise in debt and leases. The company's invested capital shows some fluctuations but trends upwards over the longer term. The stable debt levels alongside rising equity suggest improving solvency and financial robustness. The recent increase in invested capital may reflect new investments or asset expansion initiatives.
Cost of Capital
Alphabet 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: 2024-12-31).
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: 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 »
Economic Spread Ratio
Alphabet Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
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.
- Economic Profit
- The economic profit demonstrated significant fluctuations over the observed periods. Starting at 19,747 million US dollars in 2020, it experienced a sharp increase to 52,335 million in 2021. This was followed by a decline to 22,714 million in 2022. Economic profit then rose again in the subsequent years, reaching 37,253 million in 2023 and further increasing to 59,907 million in 2024. This pattern indicates periods of variability with an overall upward trajectory by the end of the timeline.
- Invested Capital
- Invested capital showed a consistent upward trend from 2020 through 2024, indicating ongoing investment and asset accumulation. The value increased from 145,844 million US dollars in 2020 to 171,408 million in 2021, then continued to rise to 202,355 million in 2022. Although a slight decrease occurred in 2023 to 189,779 million, the capital surged again in 2024 to 227,952 million. This suggests sustained strategic investment despite minor year-to-year variations.
- Economic Spread Ratio
- The economic spread ratio exhibited considerable volatility but overall improvement across the period. Starting at 13.54% in 2020, it more than doubled to 30.53% in 2021, indicating an exceptional increase in profitability relative to invested capital. A decrease to 11.22% occurred in 2022, but subsequent years showed recovery, with the ratio climbing to 19.63% in 2023 and further to 26.28% in 2024. This trend denotes fluctuations in efficiency but a generally positive trend in generating returns over cost.
- Overall Analysis
- The company shows a dynamic financial profile with notable volatility in economic profit and economic spread ratio, contrasting with a generally increasing invested capital base. The fluctuations in profitability metrics may reflect changes in operational performance, market conditions, or capital utilization efficiency. The increasing invested capital indicates ongoing commitment to growth or asset expansion. The overall upward movement in economic profit and economic spread ratio by the end of 2024 suggests improving profitability and value creation potential, despite interim variations.
Economic Profit Margin
Alphabet Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- Economic profit demonstrates a volatile yet generally upward trend over the five-year period. It increased significantly from 19,747 million US dollars in 2020 to 52,335 million in 2021, followed by a notable decline to 22,714 million in 2022. Subsequently, economic profit rebounded to 37,253 million in 2023 and further rose to 59,907 million by 2024. This suggests phases of strong profitability interspersed with a temporary setback.
- Adjusted Revenues
- Adjusted revenues show a consistent and steady growth throughout the period. Starting at 183,285 million US dollars in 2020, revenues increased annually, reaching 258,436 million in 2021, 283,520 million in 2022, 307,935 million in 2023, and ultimately 350,970 million in 2024. This pattern indicates sustained top-line expansion year over year.
- Economic Profit Margin
- The economic profit margin follows a pattern similar to economic profit, reflecting profitability efficiency relative to revenues. It rose sharply from 10.77% in 2020 to 20.25% in 2021, then dropped significantly to 8.01% in 2022. Afterward, it recovered to 12.1% in 2023 and improved further to 17.07% in 2024. These fluctuations suggest varying levels of cost management or shifts in profit generation efficiency over time.
- Overall Insights
- The data reveals a company experiencing robust revenue growth accompanied by fluctuations in economic profit and profit margin. Despite some volatility in profitability metrics, the overall trend by 2024 indicates strong improvement in economic profit and margin, aligning with the steadily increasing revenue base. This suggests an improving ability to convert growing revenues into economic profit, although the irregularities imply potential challenges or strategic shifts impacting profitability in specific years.