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
Keurig Dr Pepper 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).
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
= 2,588 – 10.94% × 44,109 = -2,237
The financial performance from 2018 to 2021 indicates a consistent improvement in economic profit, although the company continued to operate below its cost of capital throughout the period. While the economic profit remained negative, the deficit narrowed from -3,582 million US$ in 2018 to -2,237 million US$ in 2021, reflecting a positive trajectory in value creation efficiency.
- Net Operating Profit After Taxes (NOPAT)
- A significant upward trend in NOPAT is evident, with values increasing from 903 million US$ in 2018 to 2,588 million US$ in 2021. This substantial growth suggests a marked improvement in operational profitability and core earnings generation over the four-year window.
- Cost of Capital
- The cost of capital experienced a steady increase, rising from 10.05% in 2018 to 10.94% in 2021. This upward movement indicates a rising hurdle rate, which increases the financial threshold required to achieve a positive economic profit.
- Invested Capital
- Invested capital remained relatively stable, fluctuating slightly around the 44 billion US$ mark. Following a slight decline from 44,635 million US$ in 2018 to 43,835 million US$ in 2020, it rose marginally to 44,109 million US$ by 2021. The stability of this metric suggests that the increase in NOPAT was driven by operational efficiencies rather than significant expansions in the capital base.
- Economic Profit Synthesis
- The combination of increasing NOPAT and stable invested capital resulted in a reduction of the overall economic loss. Despite the rising cost of capital acting as a headwind, the operational gains were sufficient to improve the economic profit position by approximately 1,345 million US$ over the period, narrowing the gap toward achieving positive economic value added.
AI Ask an analyst for more
Net Operating Profit after Taxes (NOPAT)
Keurig Dr Pepper 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).
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 product warranties.
4 Addition of increase (decrease) in restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to KDP.
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 684 × 4.30% = 29
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 529 × 21.00% = 111
8 Addition of after taxes interest expense to net income attributable to KDP.
Cash Operating Taxes
Keurig Dr Pepper 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).
Invested Capital
Keurig Dr Pepper 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).
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 product warranties.
5 Addition of restructuring liabilities.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction-in-progress.
Cost of Capital
Keurig Dr Pepper Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 51,976) | 51,976) | ÷ | 66,587) | = | 0.78 | 0.78 | × | 13.19% | = | 10.30% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 13,927) | 13,927) | ÷ | 66,587) | = | 0.21 | 0.21 | × | 3.67% × (1 – 21.00%) | = | 0.61% | ||
| Operating lease liability4 | 684) | 684) | ÷ | 66,587) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 66,587) | 1.00 | 10.94% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,428) | 43,428) | ÷ | 60,119) | = | 0.72 | 0.72 | × | 13.19% | = | 9.53% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 16,039) | 16,039) | ÷ | 60,119) | = | 0.27 | 0.27 | × | 4.00% × (1 – 21.00%) | = | 0.84% | ||
| Operating lease liability4 | 652) | 652) | ÷ | 60,119) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 60,119) | 1.00 | 10.41% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,733) | 39,733) | ÷ | 56,055) | = | 0.71 | 0.71 | × | 13.19% | = | 9.35% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 15,826) | 15,826) | ÷ | 56,055) | = | 0.28 | 0.28 | × | 3.90% × (1 – 21.00%) | = | 0.87% | ||
| Operating lease liability4 | 496) | 496) | ÷ | 56,055) | = | 0.01 | 0.01 | × | 4.60% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 56,055) | 1.00 | 10.25% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,363) | 35,363) | ÷ | 51,421) | = | 0.69 | 0.69 | × | 13.19% | = | 9.07% | ||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | 15,812) | 15,812) | ÷ | 51,421) | = | 0.31 | 0.31 | × | 3.92% × (1 – 21.00%) | = | 0.95% | ||
| Operating lease liability4 | 246) | 246) | ÷ | 51,421) | = | 0.00 | 0.00 | × | 6.18% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 51,421) | 1.00 | 10.05% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Keurig Dr Pepper Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (2,237) | (2,777) | (2,773) | (3,582) | |
| Invested capital2 | 44,109) | 43,835) | 44,138) | 44,635) | |
| Performance Ratio | |||||
| Economic spread ratio3 | -5.07% | -6.33% | -6.28% | -8.02% | |
| Benchmarks | |||||
| Economic Spread Ratio, Competitors4 | |||||
| Coca-Cola Co. | 5.44% | — | — | — | |
| Mondelēz International Inc. | -0.70% | — | — | — | |
| PepsiCo Inc. | 4.97% | — | — | — | |
| Philip Morris International Inc. | 26.31% | — | — | — | |
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,237 ÷ 44,109 = -5.07%
4 Click competitor name to see calculations.
The financial performance regarding economic value added indicates a consistent state of negative economic profit over the four-year period ending December 31, 2021. However, a progressive recovery trend is evident, as the magnitude of value destruction decreased steadily over the analyzed timeframe.
- Economic Profit
- Economic profit remained negative throughout the period, though the deficit narrowed from -3,582 million USD in 2018 to -2,237 million USD by 2021. A period of relative stagnation occurred between 2019 and 2020, with values holding steady near -2,770 million USD before further improving in the final year.
- Invested Capital
- The invested capital base demonstrated significant stability, fluctuating within a narrow range between 43,835 million USD and 44,635 million USD. The lack of substantial volatility in the capital base suggests that the improvements in economic profit were not a result of significant deleveraging or capital reductions.
- Economic Spread Ratio
- The economic spread ratio exhibited a consistent upward trajectory, improving from -8.02% in 2018 to -5.07% in 2021. This trend indicates a narrowing gap between the return on invested capital and the cost of capital, reflecting an overall improvement in the efficiency of capital utilization despite the ratio remaining in negative territory.
AI Ask an analyst for more
Economic Profit Margin
Keurig Dr Pepper Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | (2,237) | (2,777) | (2,773) | (3,582) | |
| Net sales | 12,683) | 11,618) | 11,120) | 7,442) | |
| Performance Ratio | |||||
| Economic profit margin2 | -17.64% | -23.90% | -24.93% | -48.13% | |
| Benchmarks | |||||
| Economic Profit Margin, Competitors3 | |||||
| Coca-Cola Co. | 11.29% | — | — | — | |
| Mondelēz International Inc. | -1.50% | — | — | — | |
| PepsiCo Inc. | 4.37% | — | — | — | |
| Philip Morris International Inc. | 24.42% | — | — | — | |
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).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -2,237 ÷ 12,683 = -17.64%
3 Click competitor name to see calculations.
An analysis of the period from 2018 to 2021 reveals a consistent trajectory of improvement in economic performance. While the company operated with a negative economic profit throughout the interval, there is a clear trend of narrowing losses coupled with substantial revenue expansion, indicating a gradual recovery in capital efficiency.
- Economic Profit Trends
- Economic profit remained negative over the four-year period but showed a general trend of improvement. The deficit decreased from US$ 3,582 million in 2018 to US$ 2,237 million in 2021. This reduction suggests that the gap between the company's net operating profit after taxes and the required return on its invested capital is closing.
- Net Sales Growth
- A strong upward trend in net sales is observed, with values rising from US$ 7,442 million in 2018 to US$ 12,683 million in 2021. This represents significant top-line growth, providing a larger revenue base to support the coverage of the cost of capital.
- Economic Profit Margin Analysis
- The economic profit margin experienced a marked improvement, shifting from -48.13% in 2018 to -17.64% in 2021. The substantial contraction of this negative margin indicates that the company is becoming more effective at generating returns relative to the capital employed, moving closer to a point of economic value creation.
AI Ask an analyst for more