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
CoStar Group Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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
= 321,495 – 15.43% × 8,182,919 = -940,899
The financial performance from 2018 to 2022 is characterized by a persistent negative economic profit, indicating that the return generated on invested capital consistently failed to meet the company's cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits an overall upward but volatile trajectory. After growing from 240.4 million in 2018 to 333.2 million in 2019, a decline occurred in 2020, followed by a peak of 362.4 million in 2021 and a subsequent contraction to 321.5 million in 2022. While the absolute value of operating profit is higher at the end of the period than at the beginning, the growth has not been linear.
- Invested Capital
- There is a significant and aggressive expansion of the capital base. Invested capital increased from 3.3 billion in 2018 to 8.2 billion in 2022. A critical inflection point is observed between 2019 and 2020, where invested capital surged by approximately 79%, suggesting a period of heavy investment or acquisition that substantially increased the company's asset base.
- Cost of Capital
- The cost of capital remained remarkably stable over the five-year period, fluctuating within a narrow band between 15.24% and 15.85%. This stability indicates that the required rate of return for investors and the company's risk profile remained constant despite the significant increase in the scale of invested capital.
- Economic Profit and Value Creation
- Economic profit remained negative throughout the entire duration, with the deficit deepening significantly from 281.7 million in 2018 to 940.9 million in 2022. This trend demonstrates that the increase in the capital charge—driven by the growth in invested capital—far outpaced the growth in NOPAT. Consequently, the gap between the actual operating return and the required return widened, leading to an acceleration in economic value destruction over the analyzed period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
CoStar Group Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 equity equivalents to net income.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 112,056 × 3.10% = 3,474
6 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 35,799 × 21.00% = 7,518
7 Addition of after taxes interest expense to net income.
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 64,450 × 21.00% = 13,535
9 Elimination of after taxes investment income.
An analysis of the financial performance from 2018 to 2022 reveals a general upward trajectory in profitability, characterized by a notable period of volatility between 2020 and 2022. While both net income and net operating profit after taxes (NOPAT) exhibit growth over the five-year horizon, their trajectories diverged significantly in the final year of the period.
- Net Income Trends
- Net income demonstrated a consistent growth pattern, rising from 238,334 thousand US$ in 2018 to a peak of 369,453 thousand US$ in 2022. A temporary contraction occurred in 2020, where earnings fell to 227,128 thousand US$, representing the lowest point in the series. However, a strong recovery followed, with sequential increases in 2021 and 2022, indicating a robust capacity for bottom-line growth.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited greater volatility than net income. After an initial increase from 240,403 thousand US$ in 2018 to 333,240 thousand US$ in 2019, a decline to 250,569 thousand US$ was recorded in 2020. The metric reached its five-year peak in 2021 at 362,411 thousand US$ before retreating to 321,495 thousand US$ in 2022.
- Comparative Analysis of Net Income and NOPAT
- Between 2018 and 2021, NOPAT consistently remained higher than net income, suggesting that operating performance was a primary driver of value and that non-operating expenses or interest costs were impacting the final net income. However, a significant inversion occurred in 2022; during this period, net income reached its highest level (369,453 thousand US$) while NOPAT declined from its previous year's peak. This divergence indicates that the increase in 2022 net income was likely driven by non-operating gains, tax adjustments, or other financial items rather than an increase in core operating efficiency.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
CoStar Group Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data indicates a general upward trajectory in tax-related expenditures from 2018 to 2022, characterized by a significant increase in actual cash outflows relative to accounting provisions in the final year of the period.
- Provision for Income Taxes Trends
- The provision for income taxes exhibited substantial volatility between 2018 and 2022. After an initial increase from 45,681 thousand US$ in 2018 to 75,986 thousand US$ in 2019, a sharp decline occurred in 2020, reaching 43,852 thousand US$. This was followed by a rapid recovery and growth phase, with the provision peaking at 117,004 thousand US$ by December 31, 2022.
- Cash Operating Taxes Trends
- Cash operating taxes demonstrated a more consistent growth pattern than the accounting provisions. Starting at 39,802 thousand US$ in 2018, these payments grew steadily, reaching 142,190 thousand US$ by 2022. Notably, while the provision for taxes dropped significantly in 2020, cash operating taxes remained relatively stable during that period, declining only marginally to 60,078 thousand US$, suggesting a disconnect between recognized tax expenses and actual cash disbursements.
- Comparative Analysis and EVA Implications
- A critical divergence is observed in 2022, where cash operating taxes exceeded the provision for income taxes by 25,186 thousand US$. In contrast, for the majority of the period between 2018 and 2021, the provision generally remained higher than the cash tax payments. From the perspective of Economic Value Added (EVA), the steady and accelerating increase in cash operating taxes represents a growing cash drain that directly reduces the Net Operating Profit After Tax (NOPAT), potentially impacting the company's ability to generate economic value if not matched by proportional increases in operating profit.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
CoStar Group Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
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 available-for-sale investments.
Invested capital exhibited substantial growth between 2018 and 2022, increasing from approximately 3.31 billion to 8.18 billion. This expansion reflects a significant scale-up in the capital base used to generate economic value, characterized by a strategic shift in leverage and consistent equity accumulation.
- Invested Capital Growth
- The total invested capital increased by approximately 147% over the five-year period. A pivotal expansion occurred in 2020, where invested capital grew by nearly 80% year-over-year, rising from 3.71 billion to 6.66 billion. Following this surge, the growth trajectory continued at a more moderate pace, reaching 8.18 billion by the end of 2022.
- Debt and Lease Obligations
- Financial leverage remained relatively low and stable during 2018 and 2019. A sharp increase is observed in 2020, with total reported debt and leases rising from 149.8 million to 1.12 billion. This spike indicates a significant acquisition of liabilities or a change in lease accounting/structure. From 2020 through 2022, these obligations plateaued, exhibiting a slight downward trend to 1.10 billion.
- Stockholders' Equity Trends
- Stockholders' equity demonstrated consistent upward momentum throughout the analyzed period. Equity grew from 3.02 billion in 2018 to 6.87 billion in 2022. The growth was most pronounced between 2019 and 2020, where equity increased by approximately 57%, contributing significantly to the overall rise in invested capital.
- Capital Structure Composition
- The composition of invested capital shifted notably in 2020. Prior to 2020, the capital base was overwhelmingly funded by equity. Post-2020, while equity remained the primary funding source, the introduction of over 1 billion in debt and lease obligations created a more diversified capital structure, though equity continued to be the dominant driver of the total invested capital increase through 2022.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
CoStar Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,340,495) | 29,340,495) | ÷ | 30,441,761) | = | 0.96 | 0.96 | × | 15.92% | = | 15.35% | ||
| Long-term debt, net3 | 989,210) | 989,210) | ÷ | 30,441,761) | = | 0.03 | 0.03 | × | 2.80% × (1 – 21.00%) | = | 0.07% | ||
| Operating lease liability4 | 112,056) | 112,056) | ÷ | 30,441,761) | = | 0.00 | 0.00 | × | 3.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 30,441,761) | 1.00 | 15.43% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 21,131,842) | 21,131,842) | ÷ | 22,245,424) | = | 0.95 | 0.95 | × | 15.92% | = | 15.13% | ||
| Long-term debt, net3 | 987,944) | 987,944) | ÷ | 22,245,424) | = | 0.04 | 0.04 | × | 2.80% × (1 – 21.00%) | = | 0.10% | ||
| Operating lease liability4 | 125,638) | 125,638) | ÷ | 22,245,424) | = | 0.01 | 0.01 | × | 3.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 22,245,424) | 1.00 | 15.24% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 32,955,011) | 32,955,011) | ÷ | 34,079,703) | = | 0.97 | 0.97 | × | 15.92% | = | 15.40% | ||
| Long-term debt, net3 | 986,715) | 986,715) | ÷ | 34,079,703) | = | 0.03 | 0.03 | × | 2.80% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 137,977) | 137,977) | ÷ | 34,079,703) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 34,079,703) | 1.00 | 15.47% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,002,702) | 25,002,702) | ÷ | 25,152,525) | = | 0.99 | 0.99 | × | 15.92% | = | 15.83% | ||
| Long-term debt, net3 | —) | —) | ÷ | 25,152,525) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 149,823) | 149,823) | ÷ | 25,152,525) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 25,152,525) | 1.00 | 15.85% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, net. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,676,712) | 16,676,712) | ÷ | 16,845,790) | = | 0.99 | 0.99 | × | 15.92% | = | 15.76% | ||
| Long-term debt, net3 | —) | —) | ÷ | 16,845,790) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 169,078) | 169,078) | ÷ | 16,845,790) | = | 0.01 | 0.01 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 16,845,790) | 1.00 | 15.76% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, net. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
CoStar Group Inc., economic spread ratio calculation
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -940,899 ÷ 8,182,919 = -11.50%
The analysis of economic value addition from 2018 to 2022 reveals a persistent trend of negative economic profit, indicating that the company failed to generate returns in excess of its cost of capital throughout the period. While a marginal improvement in economic profit occurred in 2019, the subsequent years saw a significant deterioration, with the deficit expanding to its widest point of approximately 940.9 million US dollars by the end of 2022.
- Invested Capital Growth
- There was a consistent and substantial increase in invested capital over the five-year period, rising from 3.31 billion US dollars in 2018 to 8.18 billion US dollars in 2022. A notable acceleration occurred in 2020, when invested capital nearly doubled from the previous year's level, reflecting a period of aggressive capital deployment.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative for the duration of the analysis, confirming that the return on invested capital was consistently lower than the required rate of return. The ratio reached its highest point in 2019 at -6.87% before dropping sharply to -11.71% in 2020. Despite a slight recovery to -10.09% in 2021, the ratio declined again to -11.50% by the end of 2022.
- Value Destruction Patterns
- A correlation is observed between the expansion of the capital base and the deepening of economic losses. The sharp increase in invested capital in 2020 coincides with a significant drop in both economic profit and the economic spread ratio, suggesting that the capital investments made during this period did not yield immediate returns sufficient to cover their cost.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Economic Profit Margin
CoStar Group Inc., economic profit margin calculation
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -940,899 ÷ 2,189,457 = -42.97%
The financial trajectory from 2018 to 2022 is characterized by a stark divergence between consistent revenue expansion and a deteriorating economic profit profile. While adjusted revenues grew steadily throughout the period, economic profit remained consistently negative and exhibited an overall downward trend, indicating that the returns generated were insufficient to cover the company's cost of capital.
- Adjusted Revenue Growth
- Adjusted revenues demonstrated a continuous and sustained upward trajectory, increasing from US$ 1,199,321 thousand in 2018 to US$ 2,189,457 thousand by 2022. This represents consistent top-line expansion over the five-year observation period.
- Economic Profit Trends
- Economic profit remained in deficit throughout the entire period. A marginal improvement was noted in 2019, with the deficit narrowing to -US$ 254,868 thousand. However, a significant deterioration occurred in 2020, where the economic profit dropped to -US$ 780,112 thousand. Despite a slight recovery in 2021, the value reached its lowest point in 2022 at -US$ 940,899 thousand.
- Economic Profit Margin Volatility
- The economic profit margin exhibited significant volatility and failed to correlate positively with revenue growth. The margin improved from -23.49% in 2018 to -17.96% in 2019, but then experienced a sharp decline to -46.83% in 2020. Although it recovered to -36.13% in 2021, it ended the period at -42.97% in 2022, suggesting that the capital intensity or cost of funding required to drive revenue growth has disproportionately increased.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?