Economic Value Added (EVA)
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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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Steel Dynamics Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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Economic Profit
Steel Dynamics Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | |
|---|---|---|---|---|---|---|
| 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), 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
= – × =
- Net operating profit after taxes (NOPAT)
- The NOPAT shows significant fluctuations over the five-year period. It increased notably from 755,373 thousand US dollars in 2017 to 1,420,457 thousand US dollars in 2018. However, it decreased sharply in the following years, dropping to 827,375 thousand in 2019 and further to 696,079 thousand in 2020. The year 2021 saw a remarkable recovery and surge, with NOPAT reaching 3,611,424 thousand US dollars, the highest value in the period considered.
- Cost of capital
- The cost of capital fluctuated moderately during the period. It started at 16.83% in 2017 and slightly decreased to 16.32% in 2018 and then to 14.4% in 2019. There was a slight increase in 2020 to 15.15%, followed by another rise to 16.4% in 2021. Overall, the cost of capital remained within a relatively narrow range, staying around the mid-teen percentage points.
- Invested capital
- Invested capital demonstrated a steady upward trend throughout the five years. Beginning at 5,964,900 thousand US dollars in 2017, it increased each year, reaching 6,403,131 thousand in 2018, 6,721,821 thousand in 2019, and 6,781,124 thousand in 2020. In 2021, there was a more significant rise to 8,550,168 thousand US dollars, indicating substantial investment growth.
- Economic profit
- The economic profit, which reflects the value generated beyond the cost of capital, varied considerably. The company experienced negative economic profit in most years, with a loss of 248,529 thousand US dollars in 2017, a loss increasing to 140,527 thousand in 2019, and a further loss of 331,352 thousand in 2020. However, in 2018, a positive economic profit of 375,214 thousand was recorded, despite setbacks in other years. The most notable improvement occurred in 2021, with a substantial economic profit of 2,209,065 thousand US dollars, indicating significant value creation in that year.
- Summary of trends and insights
- The data reveal volatility in profitability and economic profit, with NOPAT and economic profit showing sharp declines in 2019 and 2020, followed by a strong recovery in 2021. Invested capital consistently increased, suggesting ongoing investments or asset accumulation. The relatively stable cost of capital indicates that financing costs remained fairly constant, not significantly affecting the variability in economic profit. The substantial economic profit in 2021 points to a period of enhanced operational efficiency or market conditions that boosted value creation beyond the cost of capital.
Net Operating Profit after Taxes (NOPAT)
Steel Dynamics Inc., NOPAT calculation
US$ in thousands
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 allowances for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Steel Dynamics, Inc..
4 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2021 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Steel Dynamics, Inc..
- Net income attributable to Steel Dynamics, Inc.
- The net income shows a volatile trend over the period analyzed. It increased significantly from 812,741 thousand USD in 2017 to a peak of 1,258,379 thousand USD in 2018. However, this was followed by a sharp decline to 671,103 thousand USD in 2019 and a further decrease to 550,822 thousand USD in 2020. In 2021, net income experienced a remarkable surge, reaching 3,214,066 thousand USD, the highest level in the five-year span.
- Net operating profit after taxes (NOPAT)
- The NOPAT values exhibit a similar pattern to net income, indicating operational profitability dynamics. Starting at 755,373 thousand USD in 2017, NOPAT rose substantially to 1,420,457 thousand USD in 2018. Subsequently, it experienced a decline, reaching 827,375 thousand USD in 2019 and decreasing slightly to 696,079 thousand USD in 2020. In 2021, NOPAT showed a significant increase to 3,611,424 thousand USD, surpassing prior years and indicating improved operational efficiency or favorable business conditions.
- Insights
- Both net income and NOPAT demonstrate a pattern of considerable increase in 2018, followed by a decline over the next two years, and then a substantial recovery in 2021. The pronounced increases in 2021 suggest that the company may have benefited from external or internal factors that significantly enhanced profitability. However, the volatility in prior years highlights potential operational challenges or market fluctuations impacting earnings. The alignment between net income and NOPAT trends suggests that both operational performance and overall profitability were similarly affected throughout the period.
Cash Operating Taxes
Steel Dynamics Inc., cash operating taxes calculation
US$ in thousands
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).
- Income tax expense
- The income tax expense exhibited significant fluctuation over the five-year period. Starting at approximately $129 million in 2017, it sharply increased to nearly $364 million in 2018. This was followed by a marked reduction to about $197 million in 2019 and further declined to approximately $135 million in 2020. However, in 2021, there was a dramatic spike to over $962 million, representing the highest value in the observed timeframe.
- Cash operating taxes
- Cash operating taxes showed a different pattern compared to the income tax expense. Initially, there was a moderate rise from roughly $317 million in 2017 to $332 million in 2018. This was succeeded by a substantial decrease to about $176 million in 2019, continuing downward to $110 million in 2020. In 2021, cash operating taxes reversed the downward trend, surging significantly to around $656 million, though still below the 2017 and 2018 levels.
- Comparison and analysis
- Both income tax expense and cash operating taxes experienced fluctuations with a notable peak in 2021. Income tax expense showed more volatility with its lowest value in 2017 and highest in 2021, while cash operating taxes maintained a relatively higher baseline in the earlier years before a marked decline and subsequent increase in 2021. The considerable rise in both metrics in 2021 might indicate higher taxable income or changes in tax policy or company financial structure. The differing trajectories from 2017 to 2020 between the two measures suggest variations in timing or recognition of tax-related cash flows versus accrued tax expenses.
Invested Capital
Steel Dynamics Inc., invested capital calculation (financing approach)
US$ in thousands
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 equity equivalents to total Steel Dynamics, Inc. equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of trading securities.
- Total reported debt & leases
- The total reported debt and leases show a generally increasing trend over the analyzed period. Starting at approximately 2.43 billion USD in 2017, the figure rose steadily each year up to around 3.21 billion USD by the end of 2021. This indicates a growing leverage or financing through debt and lease obligations over time.
- Total Steel Dynamics, Inc. equity
- Equity values exhibit consistent growth throughout the five-year span. Beginning at approximately 3.35 billion USD in 2017, equity increased to about 6.30 billion USD by 2021, with a notable acceleration between 2020 and 2021. This substantial rise in equity suggests significant retained earnings, capital infusions, or revaluation impacts that strengthened the company’s equity base.
- Invested capital
- Invested capital experienced steady growth from 5.96 billion USD in 2017 to 8.55 billion USD in 2021. The increase is somewhat consistent year over year, with a marked jump in the final year analyzed. This growth reflects an expansion in the total capital allocated in the business, combining both debt and equity financing sources, which supports the company’s operational capacity and potential for value creation.
- Overall trend and insights
- The data reveals a balanced expansion financed through both higher liabilities and substantially increased equity, leading to larger invested capital over the five years. The proportionally higher increase in equity compared to debt may indicate a strategic emphasis on strengthening the financial position and reducing financial risk. The rising invested capital underscores ongoing investments in operational assets or business growth initiatives. Such trends typically reflect robust financial health and an upward trajectory in the company’s scale and capital structure sophistication.
Cost of Capital
Steel Dynamics Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Steel Dynamics 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan 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), 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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed significant volatility over the five-year period. Initially, there was a substantial loss of approximately $248.5 million in 2017, followed by a positive turnaround in 2018 with a profit of about $375.2 million. However, this gain was not sustained as the company experienced negative economic profit again in 2019 and 2020, recording losses of roughly $140.5 million and $331.4 million, respectively. In 2021, there was a dramatic improvement, with economic profit reaching over $2.2 billion, indicating a strong recovery and enhanced value creation during that year.
- Invested Capital
- The invested capital exhibited a consistent upward trend across the entire period. Starting at approximately $5.96 billion in 2017, the capital base gradually increased each year, reaching about $8.55 billion in 2021. This steady rise suggests ongoing investments or capital expansions by the company, reflecting growth or increased asset holdings over time.
- Economic Spread Ratio
- The economic spread ratio, which measures the company's return relative to its cost of capital, mirrored the fluctuations seen in economic profit. It was negative in 2017 (-4.17%), positive in 2018 (5.86%), then again negative in both 2019 (-2.09%) and 2020 (-4.89%). The ratio experienced a substantial increase in 2021, reaching 25.84%, signaling a strong enhancement in returns relative to the cost of capital during that year. This improvement corresponds with the notable rise in economic profit, indicating that the company's investments became significantly more profitable in 2021.
Economic Profit Margin
Steel Dynamics Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan 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), 10-K (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the reported years. It started with a substantial loss of approximately -248.5 million US dollars in 2017, followed by a strong recovery to a positive 375.2 million in 2018. This was succeeded by a return to negative values in 2019 and 2020, with losses deepening from -140.5 million to -331.4 million respectively. A dramatic turnaround occurred in 2021, with economic profit surging to a notably high positive value of over 2.2 billion US dollars. This indicates volatility in profitability with an exceptional improvement in the most recent year.
- Net Sales
- Net sales demonstrated an overall growth trend throughout the period. After starting at approximately 9.54 billion US dollars in 2017, sales increased to 11.82 billion in 2018. This was followed by a decline in 2019 and 2020 to about 10.46 billion and 9.6 billion respectively, suggesting some cyclical or market challenges during those years. However, a notable expansion occurred in 2021, with net sales reaching a peak of roughly 18.41 billion US dollars, signaling strong market demand or successful business initiatives in that year.
- Economic Profit Margin
- The economic profit margin mirrored the economic profit trend, exhibiting considerable volatility. It began with a negative margin of -2.61% in 2017, improved to a positive 3.17% in 2018, then declined back to negative percentages (-1.34% in 2019 and -3.45% in 2020). In 2021, the margin showed a dramatic increase to 12%, indicating not only profit recovery but enhanced operational efficiency or pricing power leading to a substantially higher margin despite earlier fluctuations.