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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Texas Instruments Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Texas Instruments Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals several notable trends in the company's performance from 2020 to 2024. Key performance indicators, including net operating profit after taxes (NOPAT), invested capital, cost of capital, and economic profit, provide insight into the company’s operational efficiency and capital utilization over this period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a notable increase from 2020 through 2022, rising from $5,637 million to a peak of $8,736 million in 2022. However, this upward trend reversed sharply over the subsequent two years, with NOPAT declining to $6,512 million in 2023 and further to $5,023 million in 2024. This decline suggests a reduction in operating efficiency or profitability in the more recent periods.
- Invested Capital
- Invested capital demonstrated a consistent upward trajectory, increasing substantially from $12,963 million in 2020 to $26,167 million in 2024. This growth in capital investment—more than doubling over five years—indicates ongoing expansion or investment in assets, although the corresponding returns as measured by NOPAT do not show proportionate growth in the most recent years.
- Cost of Capital
- The cost of capital remained relatively stable throughout the five-year period, fluctuating narrowly between 13.8% and 14.07%. This stability suggests that the company’s risk profile and financing environment did not experience significant changes during these years.
- Economic Profit
- Economic profit, calculated as the residual income after accounting for the cost of capital, mirrored the trend seen in NOPAT but exhibited a sharper decline in the latter years. After rising from $3,816 million in 2020 to $6,265 million in 2022, economic profit decreased significantly to $3,393 million in 2023 and further to $1,411 million in 2024. This downturn indicates that while the company continued to invest more capital, the returns generated increasingly failed to compensate adequately for the cost of that capital, suggesting deteriorating capital efficiency.
In summary, the initial years reflect a period of growth and increasing profitability and value creation, as evidenced by ascending NOPAT and economic profit figures. The latter years, however, reveal a reversal in profitability despite higher invested capital, with declining economic profit pointing to reduced effectiveness in generating returns above the company’s cost of capital. The stable cost of capital underscores that the observed declines are likely related to operational or market challenges rather than changes in financing costs or risk.
Net Operating Profit after Taxes (NOPAT)
Texas Instruments Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in accounts receivable allowances.
3 Addition of increase (decrease) in accrued restructuring.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
The financial data reveals several notable trends related to the company's profitability over the five-year period.
- Net Income
-
Net income displayed a positive trajectory from 2020 through 2022, increasing substantially from 5,595 million US dollars in 2020 to a peak of 8,749 million US dollars in 2022. However, subsequent years show a decline, with net income falling to 6,510 million US dollars in 2023 and further decreasing to 4,799 million US dollars in 2024. This suggests a period of growth followed by a contraction in profitability.
- Net Operating Profit After Taxes (NOPAT)
-
Similar to net income, NOPAT increased steadily from 5,637 million US dollars in 2020 to a high of 8,736 million US dollars in 2022. Following this peak, a decline is observed, with NOPAT dropping to 6,512 million US dollars in 2023 and further to 5,023 million US dollars in 2024. The close alignment between NOPAT and net income values over the period indicates consistent tax impact and operational profitability trends.
Overall, the data indicates that the company experienced strong profitability growth leading up to 2022, with both net income and NOPAT reaching their highest levels. The two years following 2022 show a marked decrease in profitability, reflecting potential operational challenges, market conditions, or other factors impacting earnings. The similarity in the pattern and values of net income and NOPAT further confirms that operational efficiency and tax effects have moved in tandem during this timeframe.
Cash Operating Taxes
Texas Instruments Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Provision for Income Taxes
- The provision for income taxes increased significantly from 2020 to 2022, rising from 422 million US dollars to 1,283 million US dollars. This represents a substantial increase over the two-year period. However, after peaking in 2022, the provision declined notably in the subsequent years, decreasing to 908 million in 2023 and further down to 654 million in 2024. The trend indicates a strong growth phase followed by a marked reduction in tax provision amounts.
- Cash Operating Taxes
- Cash operating taxes followed a broadly similar pattern to the provision for income taxes but with consistently higher absolute values. From 601 million US dollars in 2020, cash operating taxes increased steadily to reach a peak of 1,521 million in 2022. Following this peak, there was a decrease to 1,286 million in 2023 and a further decline to 978 million in 2024. While the pattern indicates growth in cash operating tax payments until 2022, it also shows a decline in the subsequent two years, although the reduction is less pronounced compared to the provision for income taxes.
- Overall Observations
- Both provision for income taxes and cash operating taxes exhibit a strong upward trend during the first three years, suggesting increasing taxable income or changes in tax rates or regulations leading to higher tax liabilities. The subsequent decrease in both metrics after 2022 might point to improved tax planning, changes in financial results, or other strategic decisions impacting tax expenses. The consistently higher cash operating taxes compared to provisions reflect the timing differences typically observed between tax payments and tax expense accounting.
Invested Capital
Texas Instruments Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 accrued restructuring.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of investments measured at fair value.
The financial data reveals several key trends in the company's capital structure over the five-year period from 2020 to 2024.
- Total Reported Debt & Leases
- The total reported debt and leases increased steadily each year, rising from $7,119 million in 2020 to $14,377 million in 2024. This represents a doubling in the debt level over the observed timeframe, with a particularly notable jump between 2022 and 2023. The increasing leverage indicates a growing reliance on borrowed capital.
- Stockholders’ Equity
- Stockholders’ equity also increased annually, moving from $9,187 million in 2020 to $16,903 million in 2024. The growth was most significant from 2020 to 2021 and remained relatively steady thereafter. The rise in equity suggests the company retained earnings or issued new equity, strengthening the net asset base.
- Invested Capital
- Invested capital grew from $12,963 million in 2020 to $26,167 million in 2024, essentially doubling in size. The increase accelerated notably in 2023 and 2024, aligning with the rise in both debt and equity. This combined growth reflects an expansion in the company’s overall capital employed in the business, indicating potential asset growth or investments in operations.
Overall, the trends illustrate a strategy of expanding investment supported by both increasing equity and notably growing debt levels. The balance between debt and equity growth suggests active capital management aimed at scaling the business, though the rise in leverage may warrant monitoring for financial risk considerations.
Cost of Capital
Texas Instruments Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (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 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (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 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Texas Instruments Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of the company's economic profit, invested capital, and economic spread ratio over the five-year period reveals significant trends and changes.
- Economic Profit
- The economic profit showed an increasing trend from 2020 through 2022, rising from $3,816 million to a peak of $6,265 million. However, from 2023 onwards, there is a noticeable decline, dropping to $3,393 million in 2023 and further decreasing to $1,411 million by 2024.
- Invested Capital
- The invested capital demonstrates a consistent upward trajectory without declines during the entire period. It increased steadily from $12,963 million in 2020 to $26,167 million in 2024, indicating substantial growth in the base of resources employed by the company.
- Economic Spread Ratio
- The economic spread ratio, which measures the profit relative to the cost of capital, showed an increasing trend from 29.44% in 2020 to a peak of 35.67% in 2022. Then, a sharp reduction occurred, dropping to 15.02% in 2023 and further declining to 5.39% in 2024. This reflects a diminished ability to generate returns exceeding the cost of invested capital in the recent years.
Overall, the data points to an initial phase of strong growth in economic profit and efficiency in capital use, followed by a marked deterioration starting in 2023 despite continuous growth in invested capital. This suggests potential pressures on profitability and return on investment in the latest periods analyzed.
Economic Profit Margin
Texas Instruments Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenue Trends
- The revenue increased significantly from 14,461 million US dollars in 2020 to a peak of 20,028 million US dollars in 2022. Subsequently, there was a noticeable decline, with revenue dropping to 17,519 million in 2023 and further down to 15,641 million in 2024. This pattern indicates a growth phase followed by a period of contraction.
- Economic Profit Dynamics
- The economic profit rose from 3,816 million US dollars in 2020 to its highest point at 6,265 million in 2022, mirroring the revenue increase. However, after 2022, economic profit experienced a sharp decline, falling to 3,393 million in 2023 and dwindling further to 1,411 million in 2024. This suggests that the company's profitability beyond the cost of capital weakened considerably in the most recent years.
- Economic Profit Margin Analysis
- The economic profit margin displayed a similar pattern to both revenue and economic profit. It improved steadily from 26.39% in 2020 to 31.28% in 2022, indicating increasing efficiency and value creation per unit of revenue. Following the peak, the margin decreased substantially to 19.37% in 2023 and further down to 9.02% in 2024, pointing to diminished economic returns relative to revenue in the latter years.
- Overall Insights
- The data reveals a period of growth and enhanced profitability up until 2022, after which the company faced a notable downturn in both revenue and economic profit metrics. The declining economic profit margin in the latest years signals potential challenges in maintaining cost efficiency and generating value beyond capital costs. This trend may warrant further investigation into operational, market, or strategic factors impacting financial performance during the recent period.