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
Expedia Group Inc., economic profit calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,614 – 19.49% × 17,498 = -796
The analysis of economic profit from 2017 to 2021 reveals a consistent inability to generate value above the cost of capital, characterized by extreme volatility in operating performance and a high capital hurdle.
- Net Operating Profit After Taxes (NOPAT) Volatility
- A growth trajectory was evident between 2017 and 2019, with NOPAT increasing from US$ 1,026 million to US$ 1,922 million. This progression was disrupted in 2020 by a severe contraction, resulting in a loss of US$ 5,503 million. A substantial recovery followed in 2021, with NOPAT reaching a period peak of US$ 2,614 million.
- Invested Capital and Cost of Capital Dynamics
- Invested capital demonstrated a general upward trend, rising from US$ 14,039 million in 2017 to US$ 17,498 million in 2021, despite a slight decrease during the 2020 fiscal year. Concurrently, the cost of capital remained relatively stable, fluctuating within a narrow range between 17.81% and 20.80%, which maintained a high benchmark for achieving positive economic value added.
- Economic Profit and Value Creation
- Economic profit remained negative for all five years analyzed, indicating that the returns on invested capital failed to exceed the cost of capital. While the deficit narrowed from US$ 1,710 million in 2017 to US$ 1,214 million in 2019, a critical collapse occurred in 2020, with economic profit plummeting to negative US$ 8,310 million. Although 2021 showed a significant recovery to negative US$ 796 million—the lowest deficit in the period—the result confirms continued value destruction relative to the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Expedia Group Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in deferred merchant bookings and deferred revenue.
4 Addition of increase (decrease) in restructuring and related reorganization accrued liability.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Expedia Group, Inc..
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437 × 3.50% = 15
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 366 × 21.00% = 77
8 Addition of after taxes interest expense to net income (loss) attributable to Expedia Group, Inc..
9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9 × 21.00% = 2
10 Elimination of after taxes investment income.
The financial performance from 2017 through 2021 is characterized by a period of steady expansion, a severe contraction in 2020, and a divergent recovery in 2021. The data reveals a significant volatility in both bottom-line profitability and core operating performance, with the latter showing a more robust rebound following the 2020 downturn.
- Net Income Trends
- A consistent growth pattern was observed between 2017 and 2019, with net income increasing from 378 million US$ to 565 million US$. This trend was abruptly reversed in 2020, resulting in a substantial loss of 2,612 million US$. By 2021, the company returned to a positive position, although the net income of 12 million US$ represents only a marginal recovery compared to pre-2020 levels.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT exhibited a strong upward trajectory in the initial three years, rising from 1,026 million US$ in 2017 to a peak of 1,922 million US$ in 2019. The contraction in 2020 was more pronounced for NOPAT than for net income, with a deficit reaching 5,503 million US$. However, a significant recovery occurred in 2021, with NOPAT climbing to 2,614 million US$, surpassing all previous years in the analyzed period.
- Comparative Operating Performance
- A significant divergence is observed between operating profitability and net income, particularly in 2021. While NOPAT reached its five-year high of 2,614 million US$, net income remained near the break-even point at 12 million US$. This discrepancy indicates that while the core operations regained and exceeded their previous profitability, non-operating expenses or other financial obligations continued to exert substantial downward pressure on the final net profit.
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Cash Operating Taxes
Expedia Group Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
An analysis of tax dynamics from 2017 to 2021 reveals a significant divergence between accrual-based income tax expenses and actual cash operating tax outflows. While income tax expenses transitioned from positive charges to tax benefits in the latter portion of the period, cash tax payments remained positive, indicating a decoupling of accounting tax figures from immediate cash liquidity requirements.
- Income Tax Expense Trends
- From 2017 to 2019, income tax expenses demonstrated a consistent upward trajectory, increasing from US$ 45 million to US$ 203 million. This trend reversed sharply in 2020, when the company recorded a tax benefit of US$ 423 million, followed by a smaller benefit of US$ 53 million in 2021.
- Cash Operating Tax Patterns
- Cash operating taxes experienced a peak in 2018 at US$ 427 million. Following this peak, a downward trend occurred, with outflows decreasing to US$ 323 million in 2019 and reaching a period low of US$ 142 million in 2020, before slightly recovering to US$ 167 million in 2021.
- Analysis of Accrual vs. Cash Divergence
- A pronounced disparity between the two metrics is evident in 2020 and 2021. During these years, the company reported negative income tax expenses (tax benefits), yet continued to incur positive cash operating tax payments. This gap suggests that the accounting benefits were driven by non-cash adjustments, such as the recognition of deferred tax assets or valuation allowances, which did not translate into cash inflows during those fiscal years.
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Invested Capital
Expedia Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
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 merchant bookings and deferred revenue.
5 Addition of restructuring and related reorganization accrued liability.
6 Addition of equity equivalents to total Expedia Group, Inc. stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of projects in progress.
9 Subtraction of investments.
The overall trajectory of invested capital exhibits a general upward trend between 2017 and 2021, increasing from US$ 14,039 million to US$ 17,498 million. While there was a marginal contraction in 2020, the capital base reached its peak at the end of the analysis period, indicating an expansion in the total resources deployed to generate economic value.
- Debt and Lease Obligations
- A significant increase in total reported debt and leases is observed, particularly starting in 2020. After remaining relatively stable between 2017 and 2019, debt levels surged from US$ 5,589 million in 2019 to US$ 8,855 million in 2020, maintaining a high plateau of US$ 8,887 million by 2021. This represents an approximate 80% increase over the five-year period.
- Stockholders' Equity
- A consistent downward trend is evident in stockholders' equity. The balance declined from US$ 4,522 million in 2017 to US$ 2,057 million in 2021. The most pronounced reductions occurred between 2019 and 2021, where equity fell by more than 48%, signaling a substantial reduction in the equity portion of the capital structure.
- Capital Structure Composition
- The growth in total invested capital was primarily driven by debt accumulation rather than equity contributions. An inverse relationship is observable between debt and equity; as stockholders' equity eroded, the organization increasingly relied on debt and leases to sustain and expand its invested capital base. This shift indicates a transition toward a more highly leveraged financial position by the end of 2021.
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Cost of Capital
Expedia Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,924) | 29,924) | ÷ | 39,561) | = | 0.76 | 0.76 | × | 24.86% | = | 18.80% | ||
| Series A Preferred Stock | —) | —) | ÷ | 39,561) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 9,200) | 9,200) | ÷ | 39,561) | = | 0.23 | 0.23 | × | 3.57% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 437) | 437) | ÷ | 39,561) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 39,561) | 1.00 | 19.49% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 21,078) | 21,078) | ÷ | 31,839) | = | 0.66 | 0.66 | × | 24.86% | = | 16.46% | ||
| Series A Preferred Stock | 1,022) | 1,022) | ÷ | 31,839) | = | 0.03 | 0.03 | × | 7.34% | = | 0.24% | ||
| Long-term debt, including current maturities3 | 9,100) | 9,100) | ÷ | 31,839) | = | 0.29 | 0.29 | × | 4.68% × (1 – 21.00%) | = | 1.06% | ||
| Operating lease liability4 | 639) | 639) | ÷ | 31,839) | = | 0.02 | 0.02 | × | 3.60% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 31,839) | 1.00 | 17.81% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,191) | 17,191) | ÷ | 22,961) | = | 0.75 | 0.75 | × | 24.86% | = | 18.61% | ||
| Series A Preferred Stock | —) | —) | ÷ | 22,961) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 5,119) | 5,119) | ÷ | 22,961) | = | 0.22 | 0.22 | × | 4.05% × (1 – 21.00%) | = | 0.71% | ||
| Operating lease liability4 | 651) | 651) | ÷ | 22,961) | = | 0.03 | 0.03 | × | 3.50% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 22,961) | 1.00 | 19.40% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,252) | 19,252) | ÷ | 23,739) | = | 0.81 | 0.81 | × | 24.86% | = | 20.16% | ||
| Series A Preferred Stock | —) | —) | ÷ | 23,739) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 3,728) | 3,728) | ÷ | 23,739) | = | 0.16 | 0.16 | × | 4.31% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 759) | 759) | ÷ | 23,739) | = | 0.03 | 0.03 | × | 4.31% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 23,739) | 1.00 | 20.80% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,791) | 15,791) | ÷ | 20,941) | = | 0.75 | 0.75 | × | 24.86% | = | 18.74% | ||
| Series A Preferred Stock | —) | —) | ÷ | 20,941) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Long-term debt, including current maturities3 | 4,458) | 4,458) | ÷ | 20,941) | = | 0.21 | 0.21 | × | 4.66% × (1 – 35.00%) | = | 0.64% | ||
| Operating lease liability4 | 692) | 692) | ÷ | 20,941) | = | 0.03 | 0.03 | × | 4.66% × (1 – 35.00%) | = | 0.10% | ||
| Total: | 20,941) | 1.00 | 19.49% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Expedia Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (796) | (8,310) | (1,214) | (1,651) | (1,710) | |
| Invested capital2 | 17,498) | 15,765) | 16,161) | 14,424) | 14,039) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.55% | -52.71% | -7.51% | -11.44% | -12.18% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Amazon.com Inc. | -1.84% | — | — | — | — | |
| Home Depot Inc. | 12.23% | — | — | — | — | |
| Lowe’s Cos. Inc. | 9.20% | — | — | — | — | |
| TJX Cos. Inc. | -12.63% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -796 ÷ 17,498 = -4.55%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by consistent negative economic value creation, although a notable recovery trend emerged toward the end of the period. While invested capital generally expanded, the economic spread ratio remained negative throughout the timeframe, indicating that returns did not exceed the weighted average cost of capital.
- Invested Capital Trends
- Invested capital demonstrated a general upward trajectory, increasing from 14,039 million US dollars in 2017 to 17,498 million US dollars by 2021. A brief contraction occurred in 2020, where capital decreased to 15,765 million US dollars, before resuming growth in the final year of the period.
- Economic Profit Dynamics
- Economic profit remained negative for all five years, signifying consistent value destruction. A gradual improvement was observed between 2017 and 2019, as losses narrowed from 1,710 million US dollars to 1,214 million US dollars. This trend was sharply reversed in 2020 by a substantial deficit of 8,310 million US dollars. However, 2021 saw a significant recovery, with losses reducing to 796 million US dollars, the lowest level recorded in the sequence.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrored the volatility of economic profit. Between 2017 and 2019, the ratio improved from -12.18% to -7.51%. A severe contraction occurred in 2020, with the ratio falling to -52.71%, reflecting a critical misalignment between invested capital returns and the cost of capital. By 2021, the ratio rebounded to -4.55%, representing the strongest performance in the period and a marked shift toward economic break-even.
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Economic Profit Margin
Expedia Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (796) | (8,310) | (1,214) | (1,651) | (1,710) | |
| Revenue | 8,598) | 5,199) | 12,067) | 11,223) | 10,060) | |
| Add: Increase (decrease) in deferred merchant bookings and deferred revenue | 2,575) | (2,721) | 1,309) | 1,146) | 645) | |
| Adjusted revenue | 11,173) | 2,478) | 13,376) | 12,369) | 10,705) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.12% | -335.34% | -9.07% | -13.35% | -15.98% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Amazon.com Inc. | -0.79% | — | — | — | — | |
| Home Depot Inc. | 4.60% | — | — | — | — | |
| Lowe’s Cos. Inc. | 2.91% | — | — | — | — | |
| TJX Cos. Inc. | -8.79% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -796 ÷ 11,173 = -7.12%
3 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by a consistent failure to generate positive economic profit, indicating that the company did not exceed its cost of capital during this period. However, the trajectory of this deficit shows distinct phases of gradual improvement, a severe systemic shock, and a subsequent recovery.
- Economic Profit Trends
- From 2017 to 2019, a steady reduction in economic losses was observed, with the deficit narrowing from -1,710 million US$ to -1,214 million US$. This trend was abruptly reversed in 2020, where economic profit plummeted to -8,310 million US$, representing the most significant loss in the observed period. By 2021, a substantial recovery occurred, with losses reducing to -796 million US$, the lowest deficit recorded across the five-year span.
- Adjusted Revenue Correlation
- Revenue exhibited growth from 2017 through 2019, rising from 10,705 million US$ to 13,376 million US$. This growth coincided with the improving economic profit margin. The catastrophic decline in 2020, where revenue fell to 2,478 million US$, served as the primary driver for the expansion of economic losses. The 2021 rebound in revenue to 11,173 million US$ mirrored the improvement in economic profit.
- Economic Profit Margin Volatility
- The economic profit margin demonstrated a pattern of narrowing losses from -15.98% in 2017 to -9.07% in 2019. The year 2020 saw an extreme deviation, with the margin expanding to -335.34%, reflecting the disproportionate impact of revenue collapse against the cost of capital. The period concluded with the margin reaching its highest point in 2021 at -7.12%, suggesting a trend toward economic value creation, although the threshold for positive economic profit remained unmet.
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