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
Paramount Global, economic profit calculation
US$ in millions
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
= 1,431 – 13.81% × 44,287 = -4,685
Analysis of the financial performance from 2018 to 2022 reveals a consistent failure to generate positive economic profit, indicating that the returns on invested capital remained below the required cost of capital throughout the period. The organization experienced a substantial expansion of its capital base, which, coupled with volatile operating profits, exacerbated the destruction of economic value.
- Net Operating Profit After Taxes (NOPAT)
- A growth trend was observed in NOPAT between 2018 and 2021, rising from US$ 2,342 million to a peak of US$ 5,241 million. This upward trajectory was abruptly reversed in 2022, when NOPAT dropped to US$ 1,431 million, reflecting a severe contraction in operational profitability.
- Invested Capital
- Invested capital saw a dramatic increase between 2018 and 2019, jumping from US$ 15,419 million to US$ 37,244 million. This growth continued through 2021, reaching a maximum of US$ 45,938 million before experiencing a slight reduction to US$ 44,287 million in 2022. The rapid expansion of the capital base significantly increased the financial burden required to achieve a positive economic return.
- Cost of Capital
- The cost of capital remained relatively volatile, fluctuating between a high of 16.35% in 2018 and 2020 and a low of 12.46% in 2019. By 2022, the cost of capital stabilized at approximately 13.81%. Despite these fluctuations, the cost of capital remained high enough to place significant pressure on the ability to generate economic value.
- Economic Profit
- Economic profit remained negative for all five years analyzed, confirming that the company did not cover its cost of capital. The economic loss widened significantly from US$ -179 million in 2018 to US$ -2,864 million in 2020. Although a temporary recovery occurred in 2021 with a loss of US$ -1,108 million, the situation deteriorated sharply in 2022, resulting in the period's largest economic loss of US$ -4,685 million. This final decline was driven by the simultaneous collapse of NOPAT and the maintenance of a high level of invested capital.
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Net Operating Profit after Taxes (NOPAT)
Paramount Global, NOPAT calculation
US$ in millions
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 revenues.
4 Addition of increase (decrease) in restructuring liability.
5 Addition of increase (decrease) in equity equivalents to net earnings attributable to Paramount.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,720 × 3.60% = 62
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 993 × 21.00% = 209
8 Addition of after taxes interest expense to net earnings attributable to Paramount.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 108 × 21.00% = 23
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
- Net Earnings Attributable to Paramount
- The net earnings displayed fluctuations over the observed period. Starting at 1,960 million US$ in 2018, the earnings increased significantly to 3,308 million US$ in 2019. In 2020, there was a decline to 2,422 million US$, followed by a marked recovery in 2021 reaching 4,543 million US$. However, by the end of 2022, net earnings experienced a sharp decrease to 1,104 million US$.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT trend showed consistent growth from 2018 through 2021. Beginning at 2,342 million US$ in 2018, it rose steadily to 3,590 million US$ in 2019 and 3,726 million US$ in 2020, before peaking at 5,241 million US$ in 2021. In 2022, NOPAT declined significantly to 1,431 million US$.
- Overall Financial Performance Trend
- Both net earnings and NOPAT illustrate overall growth periods until 2021, suggesting improved operational efficiency and profitability. The substantial decrease in both indicators in 2022 could reflect adverse conditions impacting profitability, warranting further investigation into underlying causes during this period.
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Cash Operating Taxes
Paramount Global, cash operating taxes calculation
US$ in millions
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).
- Provision (benefit) for income taxes
- The provision for income taxes exhibited significant volatility over the observed period. In 2018, the provision was a positive amount of 273 million USD, which then notably shifted to a benefit (negative provision) of 9 million USD in 2019. This reversal indicates that the company likely recorded a tax credit or adjustment during that year. Subsequently, in 2020, the provision sharply increased to 535 million USD, followed by a further increase to 646 million USD in 2021. However, in 2022, the provision decreased substantially to 227 million USD, yet remained positive. These fluctuations suggest variations in taxable income, tax strategies, or changes in tax regulations impacting the company’s effective tax expense year over year.
- Cash operating taxes
- Cash operating taxes showed a rising trend from 2018 to 2019, increasing markedly from 322 million USD to 967 million USD, which reflects a substantial increase in cash taxes paid or payable. In 2020, this figure declined significantly to 633 million USD and then rose again to 766 million USD in 2021. The amount decreased once more in 2022 to 519 million USD. Despite the fluctuations, cash operating taxes remained considerably higher than the 2018 level throughout the remaining years, indicating sustained elevated tax payments on an operational cash basis despite some volatility.
- Overall Tax Trends
- The disparity between the provision for income taxes and cash operating taxes suggests possible timing differences, tax deferrals, or differences between book and taxable income recognition. The volatility in the provision for income taxes compared to the somewhat elevated but fluctuating cash operating taxes indicates complex tax positions and possibly varying tax credits or adjustments over the years. The data reflects an environment of changing tax expenses and cash outflows related to taxes, which should be monitored further for underlying causes such as changes in profitability, tax law, or tax planning initiatives.
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Invested Capital
Paramount Global, invested capital calculation (financing approach)
US$ in millions
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 revenues.
5 Addition of restructuring liability.
6 Addition of equity equivalents to total Paramount stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
The financial data reveals significant shifts in the company's capital structure and financial position over the five-year period ending December 31, 2022.
- Total Reported Debt & Leases
- The total reported debt and leases initially increased sharply from $11,083 million in 2018 to a peak of $21,622 million in 2020. After this peak, a downward trend is evident, as the figure declined to $19,632 million in 2021 and further to $17,566 million in 2022. This suggests a partial deleveraging strategy following a period of increasing debt levels.
- Total Paramount Stockholders’ Equity
- Stockholders' equity exhibited a marked rise throughout the timeframe. It grew substantially from $2,804 million in 2018 to $13,207 million in 2019, followed by a steady increase each year, reaching $23,036 million by 2022. This consistent equity growth indicates strengthening capitalization and possibly improved retained earnings or equity infusions over the period.
- Invested Capital
- Invested capital expanded dramatically from $15,419 million in 2018 to $41,069 million in 2020, continuing upward to a peak of $45,938 million in 2021 before slightly decreasing to $44,287 million in 2022. The general upward trend reflects substantial investment in assets or operational scaling, with a minor contraction in the final year.
In summary, the company significantly increased its equity base and invested capital over the five years, alongside an initial expansion and subsequent reduction in debt levels. The reduction in debt combined with rising equity suggests improved financial stability and potentially enhanced capacity for future investment or debt management.
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Cost of Capital
Paramount Global, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,287) | 15,287) | ÷ | 31,220) | = | 0.49 | 0.49 | × | 24.07% | = | 11.79% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | 248) | 248) | ÷ | 31,220) | = | 0.01 | 0.01 | × | 5.75% | = | 0.05% | ||
| Debt3 | 13,965) | 13,965) | ÷ | 31,220) | = | 0.45 | 0.45 | × | 5.16% × (1 – 21.00%) | = | 1.82% | ||
| Operating lease liability4 | 1,720) | 1,720) | ÷ | 31,220) | = | 0.06 | 0.06 | × | 3.60% × (1 – 21.00%) | = | 0.16% | ||
| Total: | 31,220) | 1.00 | 13.81% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 23,343) | 23,343) | ÷ | 47,319) | = | 0.49 | 0.49 | × | 24.07% | = | 11.87% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | 502) | 502) | ÷ | 47,319) | = | 0.01 | 0.01 | × | 5.75% | = | 0.06% | ||
| Debt3 | 21,551) | 21,551) | ÷ | 47,319) | = | 0.46 | 0.46 | × | 4.94% × (1 – 21.00%) | = | 1.78% | ||
| Operating lease liability4 | 1,923) | 1,923) | ÷ | 47,319) | = | 0.04 | 0.04 | × | 3.40% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 47,319) | 1.00 | 13.82% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 40,646) | 40,646) | ÷ | 67,156) | = | 0.61 | 0.61 | × | 24.07% | = | 14.57% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 67,156) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 24,621) | 24,621) | ÷ | 67,156) | = | 0.37 | 0.37 | × | 4.80% × (1 – 21.00%) | = | 1.39% | ||
| Operating lease liability4 | 1,889) | 1,889) | ÷ | 67,156) | = | 0.03 | 0.03 | × | 4.00% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 67,156) | 1.00 | 16.05% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,976) | 17,976) | ÷ | 41,520) | = | 0.43 | 0.43 | × | 24.07% | = | 10.42% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 41,520) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 21,343) | 21,343) | ÷ | 41,520) | = | 0.51 | 0.51 | × | 4.61% × (1 – 21.00%) | = | 1.87% | ||
| Operating lease liability4 | 2,201) | 2,201) | ÷ | 41,520) | = | 0.05 | 0.05 | × | 4.10% × (1 – 21.00%) | = | 0.17% | ||
| Total: | 41,520) | 1.00 | 12.46% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,887) | 18,887) | ÷ | 30,016) | = | 0.63 | 0.63 | × | 24.07% | = | 15.15% | ||
| 5.75% Series A Mandatory Convertible Preferred Stock | —) | —) | ÷ | 30,016) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 10,197) | 10,197) | ÷ | 30,016) | = | 0.34 | 0.34 | × | 4.18% × (1 – 21.00%) | = | 1.12% | ||
| Operating lease liability4 | 931) | 931) | ÷ | 30,016) | = | 0.03 | 0.03 | × | 3.59% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 30,016) | 1.00 | 16.35% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Paramount Global, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (4,685) | (1,108) | (2,864) | (1,052) | (179) | |
| Invested capital2 | 44,287) | 45,938) | 41,069) | 37,244) | 15,419) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.58% | -2.41% | -6.97% | -2.82% | -1.16% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | 7.41% | 26.70% | — | — | — | |
| Comcast Corp. | -7.61% | -2.61% | — | — | — | |
| Meta Platforms Inc. | 0.45% | 22.73% | — | — | — | |
| Netflix Inc. | -10.78% | -6.17% | — | — | — | |
| Trade Desk Inc. | -17.25% | -10.44% | — | — | — | |
| Walt Disney Co. | -15.30% | -18.29% | -20.54% | — | — | |
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 × -4,685 ÷ 44,287 = -10.58%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 reflects a sustained period of value destruction, characterized by persistent negative economic profits and a deteriorating economic spread ratio. The inability to generate returns above the cost of capital is evident throughout the five-year period, with a pronounced decline in value creation observed in the final year of the analysis.
- Economic Profit Trends
- Economic profit remained negative for the entire duration, escalating from a loss of 179 million USD in 2018 to a peak loss of 4.685 billion USD in 2022. Although a partial recovery occurred in 2021, where losses narrowed to 1.108 billion USD, the subsequent sharp increase in losses during 2022 suggests a failure to stabilize operational efficiency relative to capital costs.
- Invested Capital Allocation
- A substantial expansion in invested capital was recorded between 2018 and 2021, rising from 15.419 billion USD to 45.938 billion USD. This significant increase in the capital base did not correlate with improved economic returns; rather, it coincided with deepening economic losses, indicating that the additional capital deployed failed to generate a return exceeding the weighted average cost of capital.
- Economic Spread Ratio Analysis
- The economic spread ratio remained consistently negative, confirming that the company failed to achieve a positive spread over its cost of capital. The ratio deteriorated from -1.16% in 2018 to -10.58% in 2022. The volatility of this ratio, specifically the decline to -6.97% in 2020 and the collapse to -10.58% in 2022, highlights a widening gap between the actual return on invested capital and the required minimum return for shareholders.
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Economic Profit Margin
Paramount Global, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (4,685) | (1,108) | (2,864) | (1,052) | (179) | |
| Revenues | 30,154) | 28,586) | 25,285) | 27,812) | 14,514) | |
| Add: Increase (decrease) in deferred revenues | (140) | 80) | 212) | 165) | (10) | |
| Adjusted revenues | 30,014) | 28,666) | 25,497) | 27,977) | 14,504) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -15.61% | -3.87% | -11.23% | -3.76% | -1.24% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | 5.29% | 17.71% | — | — | — | |
| Comcast Corp. | -13.43% | -5.14% | — | — | — | |
| Meta Platforms Inc. | 0.39% | 17.86% | — | — | — | |
| Netflix Inc. | -12.86% | -7.21% | — | — | — | |
| Trade Desk Inc. | -20.40% | -13.43% | — | — | — | |
| Walt Disney Co. | -31.48% | -46.60% | -55.24% | — | — | |
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 × -4,685 ÷ 30,014 = -15.61%
3 Click competitor name to see calculations.
The analysis of economic value added from 2018 to 2022 reveals a persistent inability to generate positive economic profit, indicating that the cost of capital consistently exceeded the operating returns. Despite a substantial increase in adjusted revenues over the five-year period, this growth did not translate into economic value creation, and the deficit expanded significantly by the end of the period.
- Economic Profit Trajectory
- Absolute economic profit remained negative throughout the entire period, exhibiting high volatility and an overall downward trend. The deficit grew from -179 million USD in 2018 to -4,685 million USD in 2022. Although a partial recovery was observed in 2021, with losses narrowing to -1,108 million USD, the subsequent collapse in 2022 represents the most severe erosion of economic value in the observed timeframe.
- Revenue Growth and Capital Efficiency
- Adjusted revenues experienced significant growth, rising from 14,504 million USD in 2018 to 30,014 million USD in 2022. The most pronounced increase occurred between 2018 and 2019, where revenues nearly doubled. However, the divergence between rising revenues and deepening economic losses suggests that the costs associated with expanding the revenue base, or the cost of the capital employed to achieve that growth, significantly outweighed the operational gains.
- Economic Profit Margin Analysis
- The economic profit margin reflects a deteriorating relationship between revenue generation and value creation. Starting at -1.24% in 2018, the margin worsened to -11.23% in 2020 before a temporary improvement to -3.87% in 2021. The period ended with a sharp decline to -15.61% in 2022, indicating that for every dollar of revenue generated, the economic loss expanded more rapidly than the revenue growth itself.
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