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.
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Keurig Dr Pepper Inc. pages available for free this week:
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2008
- Current Ratio since 2008
- Price to Earnings (P/E) since 2008
- Price to Book Value (P/BV) since 2008
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Economic Profit
Keurig Dr Pepper Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||
| Cost of capital2 | |||||
| Invested capital3 | |||||
| Economic profit4 | |||||
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
= – × =
The financial data reveals several notable trends over the four-year period from 2018 to 2021. The net operating profit after taxes (NOPAT) demonstrates a significant upward trend, nearly tripling from 903 million US dollars in 2018 to 2588 million US dollars by the end of 2021. This indicates improved operational efficiency and profitability over the period.
Concurrently, the cost of capital shows a gradual increase, rising from 8.74% in 2018 to 9.45% in 2021. This upward trend suggests a slightly higher risk environment or increased capital costs that the company faces when financing its operations or investments.
The level of invested capital remains relatively stable throughout the period, hovering around the 44 billion US dollars mark with minimal fluctuations. This stability in invested capital indicates that the company maintained a consistent asset base, neither significantly expanding nor contracting its investments.
Despite the increase in NOPAT, the economic profit remains negative for all years, although there is a clear improvement over time. The economic loss decreases from -2996 million US dollars in 2018 to -1580 million US dollars in 2021. This improvement suggests that while the firm's profitability is increasing, it is still not sufficient to exceed the cost of capital and generate positive economic profit.
- Net Operating Profit After Taxes (NOPAT)
- Strong growth from 903 to 2588 million US dollars over four years, indicating increased operational profitability.
- Cost of Capital
- Gradual increase from 8.74% to 9.45%, reflecting higher financing costs or risk premiums.
- Invested Capital
- Relatively stable around 44 billion US dollars, demonstrating consistent investment levels.
- Economic Profit
- Negative throughout but improving significantly, from -2996 million to -1580 million US dollars, pointing to better operating performance though still below the cost of capital.
Overall, the data suggests a company making operational gains and improving profitability, yet still facing challenges in achieving returns above its capital costs. Stability in invested capital combined with rising NOPAT and cost of capital highlights the importance of further efficiency improvements or strategic initiatives to convert economic losses into positive value creation.
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
= × =
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to KDP.
The financial performance over the four-year period demonstrates a notably positive trend in profitability measures.
- Net Income Attributable to KDP
- The net income attributable to the company increased substantially, starting at 586 million US dollars in 2018 and rising to 2,146 million US dollars by the end of 2021. This represents a more than threefold increase over the period, with a particularly strong jump between 2020 and 2021, where net income grew by approximately 62%. The steady increases in the prior years reflect consistent growth in profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited strong growth, increasing from 903 million US dollars in 2018 to 2,588 million US dollars in 2021. The year-over-year increases indicate robust operating profitability improvements, with the most significant rise observed in the last year, mirroring the trend seen in net income. The growth rate from 2020 to 2021 was approximately 45%, demonstrating enhanced operational efficiency and effective tax management contributing to increased net operating profits.
Overall, the data indicates significant and sustained financial improvement in key profitability metrics, with the largest gains occurring in the most recent year. This suggests successful management strategies and operational execution leading to stronger earnings and operational results over time.
Cash Operating Taxes
Keurig Dr Pepper Inc., cash operating taxes calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Provision for income taxes | |||||
| Less: Deferred income tax expense (benefit) | |||||
| Add: Tax savings from interest expense | |||||
| Cash operating taxes |
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).
The financial data reveals the trends in tax-related expenses over the four-year period ending December 31, 2021. There is an upward trajectory in both the provision for income taxes and cash operating taxes, though the growth rates and amounts vary between these two categories.
- Provision for Income Taxes
- This figure rose from 202 million US dollars in 2018 to 653 million US dollars in 2021. The largest year-over-year increase occurred between 2020 and 2021, with an increase of 225 million US dollars. The provision more than tripled over the four years, indicating a substantial increase in income tax expenses recognized during this period.
- Cash Operating Taxes
- Cash operating taxes demonstrated a consistent upward trend, increasing from 381 million US dollars in 2018 to 733 million US dollars in 2021. The increase across the period was approximately 92%, with the most significant jump occurring between 2018 and 2019 (224 million US dollars). The growth in cash taxes paid suggests rising tax obligations or improved tax payment alignments within the company.
Overall, the data reflects a significant increase in both accrued income tax provisions and actual cash tax payments over the examined period. The increases may be indicative of growing profitability, changes in tax regulation, or alterations in financial strategies related to tax expenses. The sharper rise in the provision for income taxes in the final year suggests a possible anticipation of higher tax liability.
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.
The financial data reveals a consistent trend in the company's capital structure over the analyzed period from 2018 to 2021. There is a clear decline in the total reported debt and leases, indicating a steady reduction in liabilities.
- Total reported debt & leases
- Starting at 16,236 million US dollars in 2018, this figure decreases each year, reaching 13,266 million US dollars by the end of 2021. This downward trend suggests a strategic effort to reduce financial leverage or improve the balance sheet strength.
- Stockholders’ equity
- Stockholders' equity shows a gradual increase across the same timeframe, moving from 22,533 million US dollars in 2018 to 24,972 million US dollars in 2021. This incremental rise indicates growth in the company’s net assets, which may reflect retained earnings accumulation or capital infusions.
- Invested capital
- Invested capital remains relatively stable, fluctuating slightly without a clear upward or downward trajectory. It begins at 44,635 million US dollars in 2018, decreases marginally to 43,835 million US dollars in 2020, and recovers slightly to 44,109 million US dollars in 2021. This stability may imply consistent investment levels despite changing debt and equity components.
Overall, the reduction in debt combined with the increase in equity suggests an improvement in the financial robustness and potentially a lower risk profile. The steadiness of invested capital implies that the company maintained its asset base, possibly reflecting controlled investment or capital expenditure activities balanced by depreciation or disposals.
Cost of Capital
Keurig Dr Pepper Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (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 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 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (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 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 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | |||||
| Invested capital2 | |||||
| Performance Ratio | |||||
| Economic spread ratio3 | |||||
| Benchmarks | |||||
| Economic Spread Ratio, Competitors4 | |||||
| Coca-Cola Co. | |||||
| Mondelēz International Inc. | |||||
| PepsiCo Inc. | |||||
| Philip Morris International Inc. | |||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a consistent improvement over the four-year period. Starting at a negative 2996 million US dollars in 2018, it increased to a negative 1580 million US dollars by the end of 2021. Although the values remain negative, indicating losses, the reduction in magnitude suggests a trend toward better financial performance.
- Invested Capital
- Invested capital remained relatively stable throughout the period, fluctuating slightly around the 44,000 million US dollars mark. It started at 44,635 million in 2018, experienced small decreases in the subsequent years, and ended at 44,109 million in 2021. This indicates a steady level of capital investment without significant expansion or divestiture.
- Economic Spread Ratio
- The economic spread ratio, which measures the return on invested capital relative to the cost of capital, remained negative but showed a notable upward trend from -6.71% in 2018 to -3.58% in 2021. This improvement aligns with the reduction in economic loss, indicating an enhancement in value generation efficiency, although the company had not yet achieved a positive spread.
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 | |||||
| Net sales | |||||
| Performance Ratio | |||||
| Economic profit margin2 | |||||
| Benchmarks | |||||
| Economic Profit Margin, Competitors3 | |||||
| Coca-Cola Co. | |||||
| Mondelēz International Inc. | |||||
| PepsiCo Inc. | |||||
| Philip Morris International Inc. | |||||
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 × ÷ =
3 Click competitor name to see calculations.
- Net Sales
- Net sales demonstrated a consistent upward trajectory over the period analyzed, increasing from 7,442 million US dollars in 2018 to 12,683 million US dollars in 2021. This represents a significant growth in revenue, indicating successful market expansion or enhanced sales strategies.
- Economic Profit
- Economic profit, although remaining negative throughout all reported years, showed a marked improvement. The loss decreased from -2,996 million US dollars in 2018 to -1,580 million US dollars in 2021, suggesting enhanced operational efficiency or cost management, leading to a reduction in economic losses.
- Economic Profit Margin
- The economic profit margin also improved notably, rising from a negative 40.26% in 2018 to negative 12.46% in 2021. This trend reflects a narrowing gap between costs and returns, aligning with the improved economic profit figures and indicating progress toward profitability.
- Overall Analysis
- The data reveals a pattern of robust sales growth accompanied by a progressive reduction in economic losses and an improving profit margin. While the company remained unprofitable from an economic profit perspective during the entire period, the trends suggest positive momentum toward financial health. Continued focus on cost efficiency and revenue growth could potentially drive the company toward achieving positive economic profit in the future.