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 – 13.70% × 44,287 = -4,635
The financial performance from 2018 to 2022 is characterized by consistent economic value erosion, as economic profit remained negative throughout the entire period. Despite a period of operational growth in net operating profit after taxes (NOPAT) through 2021, the returns generated were insufficient to exceed the cost of the invested capital, resulting in a sustained failure to create shareholder value.
- Net Operating Profit After Taxes (NOPAT)
- A positive growth trajectory was observed from 2018 to 2021, with NOPAT increasing from 2,342 million to a peak of 5,241 million. However, this trend reversed sharply in 2022, where NOPAT fell to 1,431 million, indicating a significant contraction in operational profitability.
- Invested Capital and Cost of Capital
- Invested capital underwent a substantial expansion between 2018 and 2019, rising from 15,419 million to 37,244 million, and continued to grow to a peak of 45,938 million by 2021. The cost of capital fluctuated between 12.36% and 16.21%, stabilizing at approximately 13.7% in 2021 and 2022. The rapid increase in the capital base significantly raised the absolute dollar threshold required to achieve a positive economic profit.
- Economic Profit Performance
- Economic profit remained negative for five consecutive years, signifying that the company operated below its cost of capital. The deficit widened from -157 million in 2018 to -2,807 million in 2020. Although a relative improvement occurred in 2021 (-1,056 million) due to peak NOPAT, the most severe value destruction occurred in 2022. In that year, economic profit dropped to -4,635 million, driven by the collapse in NOPAT coinciding with a still-elevated level of invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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.
An analysis of the financial performance from 2018 to 2022 reveals a period of general growth in operational profitability followed by a significant contraction in the final year.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT demonstrated a consistent upward trajectory from 2018 through 2021, increasing from 2,342 million to a peak of 5,241 million. This growth indicates a substantial expansion in operational efficiency and profit generation during this period. However, a sharp reversal occurred in 2022, with NOPAT falling to 1,431 million, a level lower than that recorded at the start of the analyzed period in 2018.
- Comparative Relationship Between Net Earnings and NOPAT
- Net earnings remained consistently below NOPAT throughout the entire five-year duration. A notable divergence is observed between 2019 and 2020, where NOPAT continued to rise from 3,590 million to 3,726 million, while net earnings declined from 3,308 million to 2,422 million. This suggests that while core operations remained profitable and growing, non-operating factors—such as interest expenses or other non-operational losses—negatively impacted the final net income.
- Profitability Volatility and Peak Performance
- The highest level of financial performance occurred in 2021, with both net earnings and NOPAT reaching their respective peaks of 4,543 million and 5,241 million. The subsequent decline in 2022 is severe, with NOPAT decreasing by approximately 72.7% and net earnings dropping by approximately 75.6% relative to the 2021 highs, indicating a period of significant volatility and a sharp reduction in the ability to generate economic value.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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).
An analysis of tax expenditures from 2018 to 2022 reveals a notable divergence between accrual-based tax provisions and actual cash outflows associated with operating taxes.
- Cash Operating Tax Trends
- Cash operating taxes exhibited significant volatility throughout the period, reaching a peak of 967 million US dollars in 2019. Following this spike, expenditures decreased to 633 million US dollars in 2020, increased to 766 million US dollars in 2021, and declined to 519 million US dollars by the end of 2022. This suggests an inconsistent cash requirement for tax obligations over the five-year horizon.
- Income Tax Provision Patterns
- The provision for income taxes displayed extreme fluctuations, including a recorded tax benefit of 9 million US dollars in 2019. Provisions subsequently rose sharply, peaking at 646 million US dollars in 2021, before dropping to 227 million US dollars in 2022. This pattern indicates a lack of stability in the reported tax expense relative to operating results.
- Comparative Analysis of Tax Metrics
- A significant discrepancy is observed particularly in 2019, where the company reported a tax benefit while simultaneously recording its highest cash tax payment of the period. For the majority of the analyzed timeframe, cash operating taxes consistently exceeded the provision for income taxes. This indicates that actual cash outflows for tax purposes were higher than the expenses recognized on the income statement, likely reflecting the impact of deferred tax assets, non-deductible expenses, or timing differences in tax jurisdictions.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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 total invested capital exhibited a significant expansion between 2018 and 2021, followed by a slight contraction in 2022. The most substantial increase occurred between 2018 and 2019, where invested capital rose from 15,419 million US$ to 37,244 million US$, representing a growth of approximately 141%. This capital base peaked in 2021 at 45,938 million US$ before declining to 44,287 million US$ by the end of 2022.
- Debt and Lease Obligations
- A sharp increase in reported debt and leases is observed between 2018 and 2019, jumping from 11,083 million US$ to 20,920 million US$. Debt levels peaked in 2020 at 21,622 million US$ and subsequently entered a period of steady decline, falling to 17,566 million US$ by December 31, 2022. This suggests a strategic deleveraging process in the latter part of the analyzed period.
- Stockholders' Equity
- Stockholders' equity demonstrated consistent and aggressive growth throughout the five-year period. From a base of 2,804 million US$ in 2018, equity surged to 13,207 million US$ in 2019 and continued an upward trajectory to reach 23,036 million US$ by 2022. The growth in equity was the primary driver of the total invested capital increase from 2020 onward.
- Capital Structure Dynamics
- The composition of invested capital shifted markedly over the period. In 2018, debt constituted the vast majority of the invested capital. By 2022, the reliance on debt decreased while the proportion of equity increased significantly. This transition indicates a strengthening of the balance sheet and a reduction in financial leverage, as the growth in equity more than offset the reductions in total debt and leases between 2020 and 2022.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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 | × | 23.84% | = | 11.67% | ||
| 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 | 13.70% | ||||||||||
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 | × | 23.84% | = | 11.76% | ||
| 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 | 13.71% | ||||||||||
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 | × | 23.84% | = | 14.43% | ||
| 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 | 15.91% | ||||||||||
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 | × | 23.84% | = | 10.32% | ||
| 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 | 12.36% | ||||||||||
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 | × | 23.84% | = | 15.00% | ||
| 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 | 16.21% | ||||||||||
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 | (4,635) | (1,056) | (2,807) | (1,015) | (157) | |
| Invested capital2 | 44,287) | 45,938) | 41,069) | 37,244) | 15,419) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.47% | -2.30% | -6.84% | -2.73% | -1.02% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | 7.39% | 26.68% | — | — | — | |
| Comcast Corp. | -7.74% | -2.74% | — | — | — | |
| Meta Platforms Inc. | 0.52% | 22.81% | — | — | — | |
| Netflix Inc. | -10.48% | -5.88% | — | — | — | |
| Walt Disney Co. | -15.13% | -18.12% | -20.38% | — | — | |
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 × -4,635 ÷ 44,287 = -10.47%
4 Click competitor name to see calculations.
An analysis of the financial performance from December 31, 2018, to December 31, 2022, reveals a consistent trend of value destruction. Economic profit remained negative throughout the entire five-year period, indicating that the returns generated were insufficient to cover the cost of the capital employed. While there was a temporary mitigation of losses in 2021, the overall trajectory indicates a deepening failure to achieve economic value added.
- Economic Profit Trends
- Economic profit exhibited significant volatility and a general downward trajectory. Starting at a loss of 157 million USD in 2018, the deficit expanded rapidly to 2,807 million USD by 2020. Although a partial recovery occurred in 2021, with losses narrowing to 1,056 million USD, this was followed by a severe decline in 2022, where economic profit reached its lowest point at 4,635 million USD.
- Invested Capital Growth
- There was a substantial increase in invested capital between 2018 and 2021, rising from 15,419 million USD to a peak of 45,938 million USD. This indicates a period of aggressive capital deployment or acquisition. A slight contraction occurred in 2022, with invested capital decreasing to 44,287 million USD, yet the scale of investment remained significantly higher than the 2018 baseline.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative for the entire duration, confirming that the company operated below its cost of capital. The ratio deteriorated from -1.02% in 2018 to -6.84% in 2020. Despite an improvement to -2.30% in 2021, the ratio collapsed to -10.47% by the end of 2022. This sharp decline in the final year suggests a critical disconnect between the amount of capital invested and the resulting operational returns.
The correlation between the expansion of invested capital and the widening of the negative economic spread suggests that the capital injections did not yield proportional increases in profitability. The peak value erosion observed in 2022, characterized by the widest negative spread and the largest economic loss, indicates a significant decline in capital efficiency.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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 | (4,635) | (1,056) | (2,807) | (1,015) | (157) | |
| 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 | -15.44% | -3.68% | -11.01% | -3.63% | -1.08% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | 5.28% | 17.70% | — | — | — | |
| Comcast Corp. | -13.66% | -5.40% | — | — | — | |
| Meta Platforms Inc. | 0.46% | 17.92% | — | — | — | |
| Netflix Inc. | -12.50% | -6.87% | — | — | — | |
| Walt Disney Co. | -31.15% | -46.18% | -54.80% | — | — | |
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 × -4,635 ÷ 30,014 = -15.44%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2018 to 2022 reveals a persistent inability to generate positive economic value, as economic profit remained negative throughout the entire period. While adjusted revenues exhibited an overall growth trajectory, this expansion did not translate into economic value creation, indicating that returns on invested capital consistently failed to exceed the cost of capital.
- Economic Profit Trends
- Economic profit demonstrated significant volatility and a deepening deficit. From a loss of 157 million USD in 2018, the figure deteriorated to a peak loss of 4.635 billion USD by 2022. Although a partial recovery occurred in 2021, the subsequent decline in 2022 represents the most severe erosion of economic value within the five-year window.
- Revenue Performance
- Adjusted revenues increased from 14.504 billion USD in 2018 to 30.014 billion USD in 2022. A substantial increase was observed between 2018 and 2019, followed by a moderate contraction in 2020 and a steady recovery thereafter. The divergence between rising revenues and declining economic profit suggests that the capital requirements or operating costs associated with this revenue growth outweighed the returns generated.
- Economic Profit Margin Analysis
- The economic profit margin remained negative for the duration of the period, reflecting a lack of economic viability. The margin fluctuated from -1.08% in 2018 to a low of -15.44% in 2022. Notable volatility is evident, specifically the sharp decline in 2020 to -11.01% and the inability to sustain the margin improvement observed in 2021, resulting in a significant contraction by the end of 2022.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?