Booking Holdings Inc. (NASDAQ:BKNG)

The financial performance, as measured by economic profit, demonstrates a significant improvement over the observed period. Initially, the entity experienced an economic loss, but subsequently achieved and maintained positive economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased substantially from 2021 to 2022, growing from US$671 million to US$2,965 million. This growth continued into 2023, reaching US$3,758 million, and peaked in 2024 at US$6,151 million before decreasing slightly to US$5,449 million in 2025. This indicates a strong operational performance with increasing profitability, although the most recent year shows a modest decline.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating between 17.98% and 18.35%. A slight decrease to 18.01% is observed in the final year. This consistency suggests a stable risk profile and financing structure for the entity.

Invested Capital

Invested capital decreased from US$15,004 million in 2021 to US$11,415 million in 2023. A subsequent increase occurred in 2024, reaching US$12,973 million, and remained relatively consistent in 2025 at US$12,912 million. The initial decline may reflect strategic divestitures or improved capital efficiency, while the later increases suggest reinvestment in the business.

Economic Profit

Economic profit transitioned from a loss of US$-2,055 million in 2021 to a profit of US$512 million in 2022. This positive trend continued, with economic profit increasing to US$1,667 million in 2023 and reaching US$3,770 million in 2024. While remaining positive, economic profit decreased slightly to US$3,124 million in 2025. The substantial improvement in economic profit demonstrates the entity’s ability to generate returns exceeding its cost of capital.

The observed trends suggest a period of significant value creation, driven by substantial increases in NOPAT. While invested capital fluctuated, the entity consistently generated economic profit in the later years of the period, indicating effective capital allocation and strong financial performance.

Net operating profit after taxes (NOPAT) demonstrates a significant upward trend over the observed period, though with a recent moderation. Initial values are substantially lower than subsequent years, indicating a period of growth. While net income also increased, the growth rate of NOPAT appears more pronounced in the earlier part of the period.

Overall Trend

NOPAT experienced substantial growth from 2021 to 2024. The value increased from US$671 million in 2021 to US$6,151 million in 2024, representing a considerable expansion. However, growth slowed in 2025, with NOPAT decreasing to US$5,449 million.

Growth Rates

The period between 2021 and 2022 saw a substantial increase in NOPAT. The growth rate decelerated between 2022 and 2023, but remained positive. The most significant growth occurred between 2023 and 2024. The decline in NOPAT between 2024 and 2025 warrants further investigation.

Relationship to Net Income

Both net income and NOPAT increased over the period. However, the magnitude of the increase in NOPAT was greater than that of net income in the initial years, suggesting changes in the company’s operating efficiency or capital structure. The difference in growth rates between the two metrics narrowed in 2025, coinciding with the decrease in NOPAT.

Recent Performance

The decrease in NOPAT from 2024 to 2025 is a notable development. While net income also decreased, the relative decline in NOPAT suggests potential issues with operational profitability or increased costs not fully reflected in net income. This recent trend breaks the previously established pattern of consistent growth.

Income tax expense and cash operating taxes both demonstrate increasing values over the observed period. However, the magnitude and pattern of change differ between the two metrics.

Income Tax Expense

Income tax expense increased from US$300 million in 2021 to US$1,428 million in 2025. The most substantial increase occurred between 2021 and 2022, rising by US$565 million. Growth moderated in subsequent years, with increases of US$327 million (2022-2023), US$218 million (2023-2024), and US$18 million (2024-2025). This suggests a decelerating rate of growth in reported income tax expense.

Cash Operating Taxes

Cash operating taxes also exhibited an upward trend, moving from US$758 million in 2021 to US$2,096 million in 2025. Similar to income tax expense, the largest increase was observed between 2021 and 2022, with a rise of US$404 million. A significant increase of US$488 million occurred between 2022 and 2023. The rate of increase slowed in 2024, with a decrease of US$105 million, before resuming growth with an increase of US$741 million in 2025. This pattern indicates potential fluctuations influenced by factors beyond simple proportional growth.

Relationship between Metrics

Cash operating taxes consistently exceeded income tax expense throughout the period. The difference between the two metrics varied annually. In 2021, cash operating taxes were approximately 2.5 times income tax expense (US$758 million vs. US$300 million). This ratio decreased over time, reaching approximately 1.47 times in 2025 (US$2,096 million vs. US$1,428 million). This narrowing gap suggests a potential shift in the timing of tax payments relative to reported income, or changes in non-cash tax items.

The observed trends suggest increasing tax obligations for the entity. The divergence in growth rates and the relationship between income tax expense and cash operating taxes warrant further investigation to understand the underlying drivers and potential implications for future financial performance.

The composition of invested capital exhibits notable shifts over the five-year period. Total reported debt & leases consistently increased, while stockholders’ equity experienced a significant decline, ultimately resulting in a deficit by the end of 2023. Despite these underlying changes, invested capital itself demonstrates a more moderate fluctuation.

Debt & Leases

Total reported debt & leases increased steadily from US$11,430 million in 2021 to US$19,414 million in 2025. This represents a cumulative increase of approximately 70% over the period. The rate of increase appears relatively consistent year-over-year.

Stockholders’ Equity

Stockholders’ equity decreased substantially from US$6,178 million in 2021 to a deficit of US$5,578 million in 2025. The decline was particularly pronounced between 2022 and 2023, transitioning from a positive equity position to a negative one. This negative trend continued through 2024 and 2025, with the deficit widening each year.

Invested Capital

Invested capital decreased from US$15,004 million in 2021 to US$11,415 million in 2023, a decline of approximately 24%. It then showed a modest recovery, increasing to US$12,973 million in 2024 and remaining relatively stable at US$12,912 million in 2025. The fluctuations in invested capital appear to be influenced by the offsetting movements in debt and equity, but are less dramatic than the changes observed in either component individually.

The increasing reliance on debt financing, coupled with the erosion of stockholders’ equity, suggests a shift in the company’s capital structure. While invested capital has not mirrored the full extent of the equity decline, the trend warrants further investigation to understand the implications for financial risk and future performance.

The economic spread ratio demonstrates a significant improvement over the observed period. Initially negative, the ratio transitions to positive values and exhibits a generally increasing trend, although with some moderation in the most recent year presented.

Economic Spread Ratio

In 2021, the economic spread ratio is reported at -13.70%, indicating that the company’s return on invested capital was less than its cost of capital. A substantial positive shift is observed in 2022, with the ratio increasing to 3.75%.

The upward trend continues through 2023, reaching 14.60%, and accelerates further in 2024 to 29.06%. This suggests a growing ability to generate returns exceeding the cost of capital.

However, the rate of increase slows in 2025, with the economic spread ratio moderating to 24.19%. While still representing a strong performance, this suggests potential stabilization or a decrease in the rate of value creation relative to invested capital.

The economic spread ratio’s movement correlates with changes in economic profit. The negative economic profit in 2021 aligns with the negative spread ratio, while the positive economic profits from 2022 onwards correspond with the positive and increasing spread ratio.

Relationship to Invested Capital

Invested capital decreased from 2021 to 2023, then increased slightly in 2024 and remained relatively stable in 2025. The increasing economic spread ratio, despite the initial decrease in invested capital, suggests improved efficiency in capital utilization.

The stabilization of invested capital in the latter years, coupled with a slight decrease in the economic spread ratio in 2025, may indicate diminishing returns on further investment or increased cost of capital.

Overall, the analysis indicates a substantial improvement in the company’s ability to generate economic profit relative to its invested capital. The trend suggests increasing value creation, although the moderation in the economic spread ratio in the final year warrants further investigation.

The economic profit margin demonstrates a significant improvement over the observed period. Initially negative, the metric transitions to positive values and exhibits increasing growth before stabilizing. This suggests a strengthening of the company’s ability to generate returns exceeding its cost of capital.

Economic Profit Margin Trend

In 2021, the economic profit margin is reported at -18.76%. This indicates that the company’s economic profit was negative, meaning returns did not cover the cost of capital. A substantial positive shift is observed in 2022, with the margin increasing to 2.99%. This improvement continues through 2023, reaching 7.80%, and accelerates further in 2024 to 15.88%. The rate of increase moderates in 2025, with the economic profit margin settling at 11.61%.

The economic profit margin’s trajectory closely mirrors the trend in revenues. Revenues increased substantially from 2021 to 2025, and the corresponding increase in the economic profit margin suggests that revenue growth is translating into improved profitability relative to the cost of capital. The slight decrease in the economic profit margin in 2025, despite continued revenue growth, warrants further investigation to determine if cost of capital changes or operational inefficiencies contributed to this outcome.

Relationship to Economic Profit

The economic profit margin is directly influenced by the absolute value of economic profit. The transition from a negative economic profit of US$2,055 million in 2021 to positive values in subsequent years (US$512 million in 2022, US$1,667 million in 2023, US$3,770 million in 2024, and US$3,124 million in 2025) is reflected in the increasing economic profit margin. The decrease in economic profit from 2024 to 2025 is also mirrored in the margin.

Overall, the economic profit margin indicates a positive trend in value creation. The company has demonstrably improved its ability to generate returns above its cost of capital, although the slight moderation in margin improvement in the most recent year suggests a need for continued monitoring and potential strategic adjustments.