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:
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Aggregate Accruals
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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 analysis of the financial data reveals distinct trends in the company's profitability and capital investment over the observed period from 2020 to 2024.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a general upward trend from 5637 million US dollars in 2020 to a peak of 8736 million in 2022. However, it declined significantly thereafter, reaching 6512 million in 2023 and further dropping to 5023 million in 2024. This indicates a reversal in operational profitability after 2022.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating marginally between 13.79% and 14.06%. This consistency suggests a stable risk assessment and financing environment for the company during these years.
- Invested Capital
- Invested capital exhibited a continuous increase each year, starting from 12963 million US dollars in 2020 and rising to 26167 million by 2024. The growth accelerated notably after 2022, reflecting significant investment or expansion activities during the latter half of the period.
- Economic Profit
- Economic profit, which considers NOPAT adjusted for the cost of capital, increased from 3817 million in 2020 to a high of 6267 million in 2022, mirroring the rise in NOPAT. However, it experienced a sharp decline thereafter, falling to 3395 million in 2023 and further down to 1414 million in 2024. This pattern highlights a decreasing return on the invested capital despite its growth, indicating deteriorating capital efficiency and value creation in the most recent years.
In summary, while the company expanded its invested capital significantly, particularly after 2022, profitability measured by NOPAT and economic profit deteriorated in the latest two years. The stable cost of capital suggests that external financing conditions remained favorable, pointing to internal operational challenges or possibly increased capital base not yet yielding proportional returns.
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 financial data reveals several notable trends over the five-year period ending December 31, 2024. The economic profit demonstrates a fluctuating pattern, initially increasing from 3,817 million US dollars in 2020 to a peak of 6,267 million US dollars in 2022, indicating a phase of strong value generation. However, this trend reverses sharply thereafter, with economic profit declining to 3,395 million US dollars in 2023 and further to 1,414 million US dollars in 2024, signaling a deceleration in profitability.
Invested capital shows a consistent and significant upward trend throughout the period. Starting at 12,963 million US dollars in 2020, it rises steadily each year, reaching 26,167 million US dollars in 2024. This increase reflects ongoing capital commitments, which may be associated with growth initiatives, acquisitions, or asset base expansions.
The economic spread ratio, which measures the return generated on invested capital relative to costs, aligns with the economic profit trend. The ratio improves from 29.45% in 2020 to a high of 35.68% in 2022, denoting efficient use of capital and strong return generation. Subsequently, it declines dramatically to 15.03% in 2023 and further to 5.4% in 2024, indicating a significant erosion of economic value created per unit of invested capital.
- Summary
-
Overall, the data suggests a phase of high economic profitability and efficient capital use until 2022, followed by a marked downturn in economic profit and economic spread ratio despite continued growth in invested capital. This divergence implies challenges in generating sufficient returns on the increased capital base in the latest years, which may warrant attention to operational efficiency, capital allocation strategies, or market conditions impacting the business.
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 of the company showed a steady increase from 14,461 million US dollars at the end of 2020 to a peak of 20,028 million US dollars in 2022. However, there was a notable decline in revenue in the subsequent years, falling to 17,519 million US dollars by the end of 2023 and further to 15,641 million US dollars by the end of 2024.
- Economic Profit Analysis
- Economic profit followed a somewhat similar trajectory to revenue but with more pronounced fluctuations. Starting at 3,817 million US dollars in 2020, economic profit increased significantly to 6,267 million US dollars in 2022. Afterward, there was a sharp decline, dropping to 3,395 million US dollars by the end of 2023 and continuing to reduce to 1,414 million US dollars by the end of 2024.
- Economic Profit Margin Patterns
- The economic profit margin increased from 26.4% in 2020 to a high of 31.29% in 2022, indicating improved efficiency or profitability relative to revenue during this period. Following 2022, the margin declined sharply, falling to 19.38% in 2023 and further to 9.04% in 2024, which corresponds with the decline in both revenue and economic profit.
- Overall Insights
- The data reveals a period of growth and improved profitability through 2022, followed by a downturn in the subsequent two years. The decline in revenue is accompanied by a disproportionate decrease in economic profit and margin, suggesting possible cost pressures or challenges affecting profitability. The steep drop in economic profit margin by 2024 points to reduced economic efficiency and profitability potential in recent periods.