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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Warner Bros. Discovery Inc. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Total Asset Turnover since 2008
- Price to Earnings (P/E) since 2008
- Price to Book Value (P/BV) since 2008
- Aggregate Accruals
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Economic Profit
Warner Bros. Discovery Inc., economic profit calculation
US$ in millions
| 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
= – × =
The financial data reveals several key trends regarding the company's profitability, capital efficiency, and economic value over the five-year period ending in 2021.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT showed a notable recovery starting in 2018 after a significantly negative value in 2017. It increased sharply from a loss of 121 million USD in 2017 to a profit of 1,195 million USD in 2018. This upward trend continued in 2019, reaching a peak of 2,393 million USD. However, in the subsequent years, NOPAT exhibited a declining trend, dropping to 1,788 million USD in 2020 and further down to 1,066 million USD in 2021. Despite this decrease, the NOPAT remained positive after 2017, indicating sustained profitability but weakening operational performance from 2019 onwards.
- Cost of Capital
-
The cost of capital fluctuated over the period, starting at 8.4% in 2017 and experiencing a rise to 10.08% in 2018. It then slightly declined to 9.39% in 2019 before increasing significantly to 11.8% in 2020, suggesting higher perceived risk or capital costs during that year. By 2021, the cost of capital decreased to 9.7%, indicating some recovery but still at a higher level than at the beginning of the period. These variations imply changing market conditions and corporate risk perceptions impacting capital expenditure decisions.
- Invested Capital
-
Invested capital grew markedly from 21,151 million USD in 2017 to 31,259 million USD in 2018, reflecting substantial investment or acquisition activity. After 2018, invested capital remained relatively stable, with minor fluctuations: slightly decreasing to 30,994 million USD in 2019, then to 30,674 million USD in 2020, and a small increase to 30,724 million USD in 2021. This stability suggests a plateau in capital investment following the sharp increase.
- Economic Profit
-
Despite positive NOPAT values from 2018 onwards, economic profit remained negative throughout the period examined. The economic profit was most negative in 2018 and 2017, with values of -1,957 million USD and -1,897 million USD, respectively. It improved in 2019 to -518 million USD but deteriorated again in 2020 and 2021, reaching -1,833 million USD and -1,914 million USD. This persistent negative economic profit indicates that the returns generated did not cover the cost of capital, pointing to value destruction over the period.
Net Operating Profit after Taxes (NOPAT)
Warner Bros. Discovery Inc., NOPAT calculation
US$ in millions
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 allowance for credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in restructuring and other liabilities.
5 Addition of increase (decrease) in equity equivalents to net income (loss) available to Discovery, Inc..
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2021 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income (loss) available to Discovery, Inc..
9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Income (Loss) Available to Discovery, Inc.
- The net income experienced significant fluctuations over the five-year period. In 2017, the company reported a net loss of 337 million USD. A substantial turnaround occurred in 2018, with net income improving sharply to 594 million USD. This positive trend continued through 2019, peaking at 2069 million USD, indicating a phase of strong profitability. However, subsequent years showed a decline, with net income falling to 1219 million USD in 2020 and further down to 1006 million USD in 2021. Despite this decline, net income remained positive and considerably higher than the 2017 loss, reflecting sustained profitability after the initial recovery.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored a similar trajectory to net income but on a different scale. The value was negative in 2017 at -121 million USD, indicating operational challenges. A sharp recovery took place in 2018 as NOPAT increased substantially to 1195 million USD. This improvement continued in 2019, reaching a high point of 2393 million USD, which suggests enhanced operational efficiency and profitability. However, the subsequent years showed a downward trend with NOPAT decreasing to 1788 million USD in 2020 and 1066 million USD in 2021. This decline suggests that while operations remained profitable, perhaps operational cost pressures or other factors impacted the efficiency or scale of profit generation.
- Overall Trends and Insights
- Both net income and NOPAT demonstrate a recovery from losses in 2017 to strong profitability in 2019. This trend indicates successful strategic or operational changes during these years. However, the decline in the last two years suggests emerging challenges or market conditions affecting profitability. Despite this decline, the company maintained positive earnings, indicating resilience. The gap between NOPAT and net income also suggests consistent tax impacts and possibly financing costs that moderated net income compared to operating profits.
Cash Operating Taxes
Warner Bros. Discovery Inc., cash operating taxes calculation
US$ in millions
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).
- Provision for Income Taxes
- The provision for income taxes fluctuated significantly over the analyzed period. Starting at 176 million US dollars in 2017, it increased sharply to 341 million in 2018. This was followed by a notable decline to 81 million in 2019. Subsequently, the provision rose again to 373 million in 2020 before decreasing to 236 million in 2021. These fluctuations indicate variability in the company’s taxable income or tax planning strategies over the years.
- Cash Operating Taxes
- Cash operating taxes demonstrated a generally increasing trend throughout the period. From 537 million US dollars in 2017, the amount increased steadily to 627 million in 2018 and further to 728 million in 2019. Although there was a slight decline to 698 million in 2020, the figure rebounded to reach a peak of 880 million in 2021. This overall upward trajectory may suggest growing taxable operations or changes in tax payment timing and cash flow management.
Invested Capital
Warner Bros. Discovery Inc., invested capital calculation (financing approach)
US$ in millions
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 deferred revenues.
5 Addition of restructuring and other liabilities.
6 Addition of equity equivalents to total Discovery, Inc. stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of assets under construction.
9 Subtraction of equity investments with readily determinable fair values.
The financial data reveals several notable trends over the five-year period ending December 31, 2021. The total reported debt and leases exhibited fluctuation rather than a consistent trajectory. Starting at approximately $14.99 billion in 2017, the debt increased notably to about $17.78 billion in 2018. Subsequently, it declined over the next three years, reaching approximately $15.64 billion in 2021. This suggests a period of increased borrowing followed by a gradual reduction or restructuring of debt obligations.
Stockholders’ equity showed a consistent and robust upward trend throughout the period. Beginning at $4.61 billion in 2017, equity rose sharply to approximately $8.39 billion in 2018 and continued to increase steadily year-over-year, reaching about $11.60 billion by 2021. This steady growth in equity indicates an improvement in the company’s net asset position and indicates potentially positive retained earnings or capital injections over time.
Invested capital peaked in 2018 at approximately $31.26 billion, having increased significantly from $21.15 billion in 2017. Following 2018, invested capital remained relatively stable through 2021, hovering around $30.7 billion without substantial increase or decrease. This stabilization after an initial sharp rise could imply a plateau in new investments or acquisitions during the latter part of the period under review.
- Total Reported Debt & Leases
- Increased from 2017 to 2018, then gradually decreased each subsequent year, ending lower in 2021 than its peak.
- Total Stockholders’ Equity
- Displayed continuous and steady growth across the entire period, indicating strengthening financial foundations.
- Invested Capital
- Experienced a significant rise from 2017 to 2018, followed by a plateau, remaining relatively unchanged from 2018 through 2021.
Cost of Capital
Warner Bros. Discovery Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Total debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Total debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Total debt and finance lease liabilities3 | ÷ | = | × | × (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 Total debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Total debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Total debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Total debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Total debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Total debt and finance lease liabilities3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Total debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Warner Bros. Discovery 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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.
The financial analysis reveals several notable trends in the company's economic profit, invested capital, and economic spread ratio over the five-year period ending December 31, 2021.
- Economic Profit
- The economic profit figures demonstrate a consistent pattern of negative outcomes throughout the analyzed years. While the losses near two billion US dollars in 2017, 2018, 2020, and 2021, there was a significant reduction in the loss magnitude in 2019, where economic profit improved substantially to a less negative value of approximately -518 million US dollars. However, this improvement was not sustained, as losses increased again in the subsequent years, returning to levels similar to those at the start of the period.
- Invested Capital
- The invested capital shows an increasing trend from 2017 through 2018, growing from approximately 21.2 billion to 31.3 billion US dollars. Following 2018, the invested capital stabilizes around the 30.6 to 30.7 billion US dollars range, indicating a plateau in capital deployment over the last three years of the period. This leveling off suggests a potential limit or strategic pause in investment expansion.
- Economic Spread Ratio
- The economic spread ratio is consistently negative, indicating that the returns on invested capital did not exceed the cost of capital during these years. The ratio improves from -8.97% in 2017 to -1.67% in 2019, signaling a temporary narrowing of the gap between return and cost of capital. Nevertheless, this positive trend reverses in 2020 and 2021, with the spread ratio declining again to approximately -6%, reflecting a diminished efficiency in capital utilization during those years.
In summary, the company faced recurring challenges in generating positive economic profit, despite a phase of improvement in 2019. The capital base expanded significantly early in the period but then stabilized, while the economic spread ratio movement suggests fluctuating but overall insufficient returns relative to capital costs. These patterns highlight areas that may require strategic attention to enhance profitability and capital efficiency.
Economic Profit Margin
Warner Bros. Discovery 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- There was a significant increase in adjusted revenues from 2017 to 2018, rising from approximately 6.95 billion US dollars to over 10.5 billion. This upward trend continued modestly in 2019, reaching approximately 11.37 billion, followed by a slight decline in 2020 to approximately 10.72 billion. By 2021, revenues recovered and grew further to approximately 12.1 billion US dollars, indicating overall growth over the five-year period despite a temporary dip in 2020.
- Economic Profit
- The economic profit figures indicate persistent negative values throughout the analyzed years, showing that the company has been consistently generating economic losses rather than profits. The loss was largest in 2018 at about -1.96 billion US dollars. Improvement was seen in 2019, with a reduction in the loss to around -518 million. However, economic profit deteriorated again in 2020 and 2021, with losses of approximately -1.83 billion and -1.91 billion US dollars respectively, suggesting challenges in achieving value creation despite revenue growth.
- Economic Profit Margin
- The economic profit margin followed a similar trend to economic profit, remaining negative across all years. It improved markedly in 2019 to -4.56%, indicating better efficiency or profitability compared to prior years when margins were worse (-27.28% in 2017 and -18.53% in 2018). Nevertheless, margins declined again in 2020 and 2021, finishing at -17.09% and -15.8%. This decline suggests that despite overall revenue growth, the company struggled to translate this into proportional economic value creation after accounting for costs and capital charges.
- Summary Insights
- Overall, the financial data reveals a pattern of growing revenues over the five-year span but persistent economic losses and negative profit margins. The company experienced a notable improvement in economic profit and margin in 2019, indicating some operational or strategic efficiencies during that period. However, this was not sustained, as economic profitability declined again in subsequent years, coinciding with fluctuations and a short-term dip in revenues. The trend underscores an ongoing challenge in balancing growth with profitability and economic value generation.