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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Warner Bros. Discovery Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Assets
- Cash Flow Statement
- Common-Size Income Statement
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Operating Profit Margin since 2008
- Return on Assets (ROA) since 2008
- Price to Sales (P/S) since 2008
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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 performance from 2017 to 2021 is characterized by a consistent failure to generate positive economic profit, indicating that the company did not create value above its cost of capital during this period.
- Operating Profitability Trends
- Net operating profit after taxes (NOPAT) showed significant volatility. After a loss in 2017, NOPAT grew rapidly to reach a peak of US$ 2,393 million in 2019. However, a downward trajectory followed, with NOPAT falling to US$ 1,066 million by 2021.
- Capital Structure and Cost of Capital
- A substantial increase in invested capital occurred between 2017 and 2018, rising from US$ 21,151 million to US$ 31,259 million. For the remainder of the period, invested capital remained relatively stable around the US$ 30-31 billion range. Simultaneously, the cost of capital fluctuated, reaching its highest point of 13.64% in 2020.
- Economic Profit and Value Creation
- Economic profit remained negative throughout the analyzed timeframe, signifying a persistent state of value destruction. The deficit was most pronounced in 2018 and 2020, exceeding -US$ 2,300 million. While 2019 showed the least negative result at -US$ 928 million, the company failed to reach a break-even point where NOPAT equaled the charge for the cost of capital.
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 performance from 2017 to 2021 is characterized by a consistent inability to generate positive economic value. Throughout the observed period, economic profit remained negative, indicating that the returns on invested capital failed to exceed the company's cost of capital, resulting in continuous value destruction for shareholders.
- Economic Spread Ratio
- The economic spread ratio remained negative across all five years, though it exhibited significant volatility. A notable trend of improvement was observed between 2017 and 2019, with the ratio narrowing from -10.15% to a peak of -2.99%. However, this positive momentum was lost in 2020, as the ratio widened again to -7.82%, ending the period at -7.62% in 2021.
- Invested Capital
- A substantial expansion of the capital base occurred between 2017 and 2018, with invested capital increasing from 21,151 million USD to 31,259 million USD. Following this sharp increase, the level of invested capital remained relatively stagnant, oscillating within a narrow range between 30,674 million USD and 30,994 million USD from 2019 through 2021.
- Economic Profit
- Economic profit remained negative throughout the duration of the analysis. The most significant reduction in economic loss occurred in 2019, where the deficit narrowed to 928 million USD. This improvement was temporary, as losses widened significantly in 2020 to 2,398 million USD and remained at a similar level of 2,341 million USD in 2021.
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.
The financial performance from 2017 to 2021 is characterized by a persistent inability to generate positive economic value, as economic profit remained negative throughout the entire period. Despite significant fluctuations in revenue and periodic improvements in margins, the returns on invested capital consistently failed to exceed the cost of capital.
- Economic Profit Trends
- Economic profit exhibited high volatility, starting at -2,147 million US dollars in 2017 and reaching a low of -2,419 million US dollars in 2018. A notable recovery occurred in 2019, where losses narrowed to -928 million US dollars, before deteriorating sharply again in 2020 to -2,398 million US dollars. The period ended with a marginal recovery in 2021, with economic profit standing at -2,341 million US dollars.
- Revenue Growth and Scale
- Adjusted revenues showed a general upward trajectory, increasing from 6,952 million US dollars in 2017 to a peak of 12,115 million US dollars in 2021. While revenue grew substantially, this expansion of the top line did not translate into positive economic profit, suggesting that the growth in scale was not accompanied by sufficient operational efficiency or return on capital.
- Economic Profit Margin Analysis
- The economic profit margin followed a non-linear path, beginning at -30.88% in 2017. The most significant improvement was observed in 2019, when the margin peaked at -8.16%, reflecting the highest level of capital efficiency in the analyzed timeframe. However, this gain was largely erased in 2020, as the margin dropped to -22.36%. By 2021, the margin showed a slight recovery to -19.32%, though it remained deeply negative, indicating a continued destruction of economic value.