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.
Economic Profit
Amphenol Corp., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,010,042 – 19.75% × 13,752,400 = -705,977
The analysis of economic value added reveals a persistent inability to generate economic profit over the five-year period from 2019 to 2023. While operating profitability has increased, the concurrent growth in invested capital and the rising cost of capital have consistently offset these gains, resulting in negative economic profit throughout the observed timeframe.
- Net Operating Profit After Taxes (NOPAT)
- A strong growth trajectory is observed from 2019 through 2022, with NOPAT increasing from US$ 1,277,245 thousand to a peak of US$ 2,040,201 thousand. However, a slight contraction occurred in 2023, with the figure declining to US$ 2,010,042 thousand, indicating a stabilization or minor downturn in operating efficiency toward the end of the period.
- Capital Requirements and Cost Trends
- Invested capital grew steadily and significantly, rising from US$ 9,029,400 thousand in 2019 to US$ 13,752,400 thousand by 2023. Simultaneously, the cost of capital exhibited a gradual but consistent upward trend, moving from 18.84% to 19.75%. The combination of a larger capital base and a higher cost of funding increased the total capital charge required to achieve economic break-even.
- Economic Profit Performance
- Economic profit remained negative for all five years, indicating that the entity did not create economic value above its cost of capital. The deficit widened from -US$ 423,997 thousand in 2019 to -US$ 653,700 thousand in 2021. Although a partial recovery was noted in 2022, where the loss narrowed to -US$ 437,571 thousand, the economic profit deteriorated to its lowest point in 2023 at -US$ 705,977 thousand.
The divergent trends between NOPAT growth and the capital charge suggest that capital expansion has not yielded proportional increases in operating returns. The increasing cost of capital has further amplified the economic loss, particularly in 2023, where the combination of a slight dip in NOPAT and continued capital expansion led to a significant increase in the economic profit deficit.
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Net Operating Profit after Taxes (NOPAT)
Amphenol Corp., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Amphenol Corporation.
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 303,700 × 3.60% = 10,933
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 150,433 × 21.00% = 31,591
6 Addition of after taxes interest expense to net income attributable to Amphenol Corporation.
7 Elimination of discontinued operations.
Financial performance between 2019 and 2023 is characterized by a consistent upward trajectory in both bottom-line earnings and operational profitability, with a slight divergence observed in the final year of the period.
- Net Income Growth Trends
- Net income attributable to the corporation exhibited steady growth, rising from 1,155,000 thousand USD in 2019 to 1,928,000 thousand USD in 2023. The most significant acceleration occurred between 2020 and 2022, where earnings grew from 1,203,400 thousand USD to 1,902,300 thousand USD, representing a substantial increase in overall profitability.
- NOPAT Performance and Volatility
- Net operating profit after taxes (NOPAT) mirrored the growth of net income for the majority of the period, increasing from 1,277,245 thousand USD in 2019 to a peak of 2,040,201 thousand USD in 2022. However, a slight contraction is observed in 2023, with NOPAT declining to 2,010,042 thousand USD, marking a departure from the consistent growth trend seen in previous years.
- Analysis of Operational vs. Net Profitability
- NOPAT remained consistently higher than net income across all reported years. This persistent gap indicates that the company's operating performance, adjusted for taxes but excluding the influence of capital structure and financing costs, is stronger than its final net profit. The narrowing of this gap in 2023, coupled with the slight decline in NOPAT while net income continued to rise, suggests a shift in the impact of non-operating items or financing costs on the final bottom line.
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Cash Operating Taxes
Amphenol Corp., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
The analysis of tax-related expenditures from 2019 to 2023 reveals a general upward trajectory in both accounting provisions and actual cash outflows, although the two metrics exhibit divergent behaviors in the most recent fiscal year.
- Provision for Income Taxes Trend
- The provision for income taxes experienced a slight decline in 2020 to 313,300 thousand US$ from 331,900 thousand US$ in 2019. This was followed by a period of significant growth, peaking in 2022 at 550,600 thousand US$. However, 2023 saw a reversal of this trend, with the provision decreasing to 509,300 thousand US$, representing a 7.5% reduction from the previous year's peak.
- Cash Operating Taxes Trend
- Cash operating taxes followed a similar initial pattern, dipping to 307,985 thousand US$ in 2020 before entering a phase of consistent and aggressive growth. Unlike the tax provision, cash operating taxes did not decline in 2023; instead, they reached their highest point in the analyzed period at 599,691 thousand US$. The increase from 2020 to 2023 represents a total growth of approximately 94.7%.
- Divergence and EVA Implications
- A notable divergence between the accounting provision and actual cash tax payments is observed starting in 2021. While the provision for income taxes and cash operating taxes were closely aligned in 2019 and 2020, the gap widened significantly by 2023. In the final year of the period, cash operating taxes exceeded the tax provision by 90,391 thousand US$. From an Economic Value Added (EVA) perspective, this indicates that the actual cash tax burden is higher than the reported accounting expense, which reduces the net operating profit after tax (NOPAT) and subsequently lowers the total economic value generated.
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Invested Capital
Amphenol Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
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 stockholders’ equity attributable to Amphenol Corporation.
5 Removal of accumulated other comprehensive income.
6 Subtraction of investments.
Invested capital exhibited a consistent upward trajectory over the five-year period ending December 31, 2023. The total capital base expanded from approximately $9.03 billion in 2019 to $13.75 billion in 2023, indicating a sustained increase in the resources deployed to generate economic value.
- Invested Capital Growth
- The total amount of invested capital grew monotonically each year. The most significant absolute increase occurred between 2020 and 2021, when invested capital rose by approximately $2.01 billion, marking the sharpest acceleration in capital deployment during the analyzed period.
- Equity Expansion
- Stockholders' equity attributable to the corporation served as the primary catalyst for the growth in invested capital. Equity increased every year, rising from $4.53 billion in 2019 to $8.35 billion in 2023. This continuous growth suggests a strong accumulation of retained earnings or additional capital contributions, strengthening the company's solvency profile.
- Debt and Lease Obligations
- Total reported debt and leases followed a non-linear trend. Obligations increased from $3.81 billion in 2019 to a peak of $5.05 billion in 2021. However, a reversal occurred after 2021, with debt and leases declining for two consecutive years to reach $4.64 billion by December 31, 2023.
- Capital Structure Shift
- An analysis of the components of invested capital reveals a strategic shift in funding. While both debt and equity increased through 2021, the growth in invested capital from 2022 to 2023 was driven exclusively by the expansion of stockholders' equity, coinciding with a deliberate reduction in total debt and lease liabilities.
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Cost of Capital
Amphenol Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 62,540,867) | 62,540,867) | ÷ | 66,939,367) | = | 0.93 | 0.93 | × | 20.99% | = | 19.61% | ||
| Debt3 | 4,094,800) | 4,094,800) | ÷ | 66,939,367) | = | 0.06 | 0.06 | × | 2.66% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 303,700) | 303,700) | ÷ | 66,939,367) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 66,939,367) | 1.00 | 19.75% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,329,455) | 48,329,455) | ÷ | 52,808,155) | = | 0.92 | 0.92 | × | 20.99% | = | 19.21% | ||
| Debt3 | 4,185,000) | 4,185,000) | ÷ | 52,808,155) | = | 0.08 | 0.08 | × | 2.81% × (1 – 21.00%) | = | 0.18% | ||
| Operating lease liability4 | 293,700) | 293,700) | ÷ | 52,808,155) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 52,808,155) | 1.00 | 19.39% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 47,909,192) | 47,909,192) | ÷ | 53,169,992) | = | 0.90 | 0.90 | × | 20.99% | = | 18.91% | ||
| Debt3 | 5,009,800) | 5,009,800) | ÷ | 53,169,992) | = | 0.09 | 0.09 | × | 2.12% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 251,000) | 251,000) | ÷ | 53,169,992) | = | 0.00 | 0.00 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 53,169,992) | 1.00 | 19.08% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,340,414) | 39,340,414) | ÷ | 43,834,914) | = | 0.90 | 0.90 | × | 20.99% | = | 18.84% | ||
| Debt3 | 4,265,400) | 4,265,400) | ÷ | 43,834,914) | = | 0.10 | 0.10 | × | 2.65% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 229,100) | 229,100) | ÷ | 43,834,914) | = | 0.01 | 0.01 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,834,914) | 1.00 | 19.05% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,871,356) | 30,871,356) | ÷ | 34,853,456) | = | 0.89 | 0.89 | × | 20.99% | = | 18.59% | ||
| Debt3 | 3,782,700) | 3,782,700) | ÷ | 34,853,456) | = | 0.11 | 0.11 | × | 2.77% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 199,400) | 199,400) | ÷ | 34,853,456) | = | 0.01 | 0.01 | × | 3.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 34,853,456) | 1.00 | 18.84% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Amphenol Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (705,977) | (437,571) | (653,700) | (560,513) | (423,997) | |
| Invested capital2 | 13,752,400) | 12,775,400) | 12,048,900) | 10,035,300) | 9,029,400) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.13% | -3.43% | -5.43% | -5.59% | -4.70% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 137.63% | 199.15% | 195.51% | 143.48% | — | |
| Arista Networks Inc. | 20.78% | 16.31% | 31.36% | — | — | |
| Cisco Systems Inc. | 3.42% | 3.39% | 2.64% | — | — | |
| Dell Technologies Inc. | -0.71% | 3.15% | -1.37% | — | — | |
| Lumentum Holdings Inc. | -18.96% | -6.28% | 6.04% | — | — | |
| Super Micro Computer Inc. | -1.14% | -9.37% | -17.80% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -705,977 ÷ 13,752,400 = -5.13%
4 Click competitor name to see calculations.
Between 2019 and 2023, the company exhibited a consistent inability to generate positive economic profit, with negative values persisting across the entire five-year observation period. Although the invested capital base expanded steadily, the economic spread ratio remained negative, indicating that the return on invested capital consistently failed to exceed the company's cost of capital.
- Invested Capital Expansion
- A sustained upward trajectory in invested capital is observed, increasing from 9,029,400 thousand US dollars in 2019 to 13,752,400 thousand US dollars by the end of 2023. This represents a continuous and significant growth in the total capital deployed in the business over the five-year period.
- Economic Profit Performance
- Economic profit remained in negative territory throughout the period, reflecting a failure to create value above the cost of capital. While there was a notable reduction in the deficit during 2022, where losses narrowed to -437,571 thousand US dollars, this improvement was temporary. The deficit widened significantly in 2023, reaching the period low of -705,977 thousand US dollars.
- Economic Spread Ratio Dynamics
- The economic spread ratio remained negative for all reported years, fluctuating between -3.43% and -5.59%. A peak in performance occurred in 2022, when the ratio reached its least negative value of -3.43%. However, the ratio deteriorated to -5.13% in 2023. The persistence of a negative spread confirms that the company operated below its required rate of return for the duration of the analyzed timeframe.
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Economic Profit Margin
Amphenol Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (705,977) | (437,571) | (653,700) | (560,513) | (423,997) | |
| Net sales | 12,554,700) | 12,623,000) | 10,876,300) | 8,598,900) | 8,225,400) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -5.62% | -3.47% | -6.01% | -6.52% | -5.15% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.65% | 23.54% | 22.72% | 18.80% | — | |
| Arista Networks Inc. | 15.69% | 11.24% | 18.37% | — | — | |
| Cisco Systems Inc. | 3.40% | 3.80% | 2.94% | — | — | |
| Dell Technologies Inc. | -0.39% | 1.65% | -1.17% | — | — | |
| Lumentum Holdings Inc. | -31.11% | -9.17% | 6.82% | — | — | |
| Super Micro Computer Inc. | -0.39% | -3.98% | -6.42% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -705,977 ÷ 12,554,700 = -5.62%
3 Click competitor name to see calculations.
Between 2019 and 2023, the organization consistently reported negative economic profit, signaling that the returns generated were insufficient to cover the cost of capital employed. While net sales experienced substantial growth over most of the period, this expansion did not translate into positive economic value added.
- Net Sales Trajectory
- A strong upward trend in revenue is observed from 2019 to 2022, with net sales increasing from approximately 8.2 billion to a peak of 12.6 billion. A slight contraction occurred in 2023, where sales leveled off at approximately 12.6 billion.
- Economic Profit Volatility
- Economic profit remained in deficit throughout the analyzed timeframe. The deficit widened from 423.9 million in 2019 to a peak loss of 653.7 million in 2021. Although there was a notable recovery in 2022, with the deficit narrowing to 437.6 million, the figure deteriorated sharply in 2023 to its lowest absolute point of 706 million.
- Economic Profit Margin Performance
- The economic profit margin fluctuated between -3.47% and -6.52%. The most favorable performance occurred in 2022, where the margin improved to -3.47%, coinciding with the peak in net sales. However, 2023 saw a reversal of this improvement, with the margin declining to -5.62%, indicating a decrease in the efficiency of capital utilization relative to revenue generation.
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