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
Becton, Dickinson & Co., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
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
= 2,155 – 11.51% × 45,278 = -3,057
The analysis of economic profit from 2016 to 2021 reveals a consistent failure to generate value above the cost of capital. Throughout the observed period, economic profit remained negative, indicating that the returns generated from operations were insufficient to cover the implicit and explicit costs of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility over the six-year period. After an initial increase in 2017, profit levels declined sharply in 2018 to 570 million US dollars before recovering. A substantial increase is observed in 2021, where NOPAT reached a peak of 2,155 million US dollars, representing the highest operational performance in the analyzed timeframe.
- Invested Capital and Cost of Capital
- Invested capital experienced rapid expansion between 2016 and 2018, increasing from 22,258 million US dollars to 47,282 million US dollars. Following this growth phase, the capital base stabilized, ending at 45,278 million US dollars in 2021. Concurrently, the cost of capital remained relatively stable, fluctuating within a narrow range between 10.73% and 11.51%, with a slight upward trend toward the end of the period.
- Economic Profit Trends
- Economic profit remained negative for all reported years, with the deficit widening as invested capital grew. The most significant value destruction occurred in 2018, with an economic profit of -4,667 million US dollars, coinciding with the peak in invested capital. While the deficit persisted through 2020, a partial recovery was observed in 2021, where economic profit improved to -3,057 million US dollars, driven primarily by the surge in NOPAT despite a slightly higher cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Becton, Dickinson & Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in restructuring liability.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 470 × 2.20% = 10
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 479 × 21.00% = 101
7 Addition of after taxes interest expense to net income.
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9 × 21.00% = 2
9 Elimination of after taxes investment income.
The financial performance between September 30, 2016, and September 30, 2021, is characterized by significant volatility followed by a substantial growth phase. Both Net Income and Net Operating Profit After Taxes (NOPAT) exhibit synchronized fluctuations, with a notable contraction in 2018 and a peak in 2021.
- Net Income Trends
- Net income demonstrated an unstable trajectory, experiencing a sharp decline in 2018 to 311 million USD from 1,100 million USD in the previous year. A recovery was observed in 2019, reaching 1,233 million USD, followed by a slight decrease in 2020 to 874 million USD, before surging to a period high of 2,092 million USD in 2021.
- NOPAT Performance
- Net Operating Profit After Taxes mirrored the volatility of net income, falling to 570 million USD in 2018. However, NOPAT showed a strong upward trend in the latter part of the period, climbing from 991 million USD in 2020 to 2,155 million USD in 2021, indicating a significant expansion in operational profitability.
- Comparative Analysis of Operating Profit and Net Earnings
- A recurring pattern is observed where NOPAT exceeds Net Income in four of the six reported years (2017, 2018, 2020, and 2021). This indicates that the core operating performance, when adjusted for capital structure and financing costs, was generally stronger than the bottom-line net profit. The most pronounced gap occurred in 2018, where NOPAT remained substantially higher than net income despite the overall downturn in both metrics.
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Cash Operating Taxes
Becton, Dickinson & Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
An analysis of tax-related outflows reveals significant volatility and a persistent divergence between accrual-based tax provisions and actual cash operating tax payments between 2016 and 2021.
- Cash Operating Tax Trends
- Cash operating taxes exhibited substantial fluctuations, peaking in September 2018 at 1,285 million US dollars. A sharp decline was observed in September 2017, where payments dropped to 109 million US dollars, before returning to a higher range. From 2019 through 2021, cash tax payments reached a state of relative stabilization, fluctuating between 508 million and 711 million US dollars.
- Income Tax Provision Volatility
- The income tax provision showed extreme variability, alternating between positive expenses and negative benefits. Tax benefits were recorded in September 2017 and September 2019, while the highest provision was noted in September 2018 at 862 million US dollars. Toward the end of the period, in 2020 and 2021, the provision normalized to a lower range of 111 million to 150 million US dollars.
- Accrual vs. Cash Tax Divergence
- A notable disparity exists between the reported tax provision and actual cash operating taxes. In periods where tax benefits were recorded, such as 2017 and 2019, the company continued to make positive cash tax payments. This indicates that accounting-based tax expenses did not align with actual liquidity outflows, suggesting the influence of significant deferred tax adjustments or timing differences that would impact the determination of economic value added.
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Invested Capital
Becton, Dickinson & Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
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 restructuring liability.
5 Addition of equity equivalents to shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of short-term investments.
The trajectory of invested capital exhibits a period of rapid expansion between 2016 and 2018, followed by a phase of relative stability through 2021. Total invested capital increased from US$ 22,258 million in 2016 to a peak of US$ 47,282 million in 2018, representing a growth of approximately 112% over two years. From 2019 onward, invested capital remained consolidated within a narrow range, fluctuating between US$ 45,181 million and US$ 46,312 million.
- Debt and Lease Obligations
- Total reported debt and leases showed a sharp upward trend initially, rising from US$ 11,801 million in 2016 to a maximum of US$ 21,951 million in 2018. Following this peak, a consistent downward trend is observed, with debt levels receding to US$ 18,080 million by September 30, 2021, indicating a systematic deleveraging process in the latter half of the period.
- Shareholders' Equity Growth
- Shareholders' equity experienced sustained growth throughout the analyzed timeframe. The value climbed from US$ 7,633 million in 2016 to US$ 23,677 million in 2021. The most significant acceleration occurred between 2016 and 2018, during which equity nearly tripled, contributing substantially to the overall increase in invested capital.
- Capital Composition Dynamics
- A shift in the composition of invested capital is evident. In 2016, debt constituted the larger portion of the invested capital base. By 2021, however, shareholders' equity became the dominant component. This transition indicates a strategic shift toward a more equity-heavy capital structure, reducing reliance on borrowed funds and leases relative to equity financing.
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Cost of Capital
Becton, Dickinson & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 69,432) | 69,432) | ÷ | 90,561) | = | 0.77 | 0.77 | × | 14.30% | = | 10.96% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 90,561) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | 1,619) | 1,619) | ÷ | 90,561) | = | 0.02 | 0.02 | × | 5.56% | = | 0.10% | ||
| Debt3 | 19,040) | 19,040) | ÷ | 90,561) | = | 0.21 | 0.21 | × | 2.65% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 470) | 470) | ÷ | 90,561) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 90,561) | 1.00 | 11.51% | ||||||||||
Based on: 10-K (reporting date: 2021-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 65,973) | 65,973) | ÷ | 87,672) | = | 0.75 | 0.75 | × | 14.30% | = | 10.76% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 87,672) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | 1,580) | 1,580) | ÷ | 87,672) | = | 0.02 | 0.02 | × | 5.70% | = | 0.10% | ||
| Debt3 | 19,677) | 19,677) | ÷ | 87,672) | = | 0.22 | 0.22 | × | 3.19% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 442) | 442) | ÷ | 87,672) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 87,672) | 1.00 | 11.44% | ||||||||||
Based on: 10-K (reporting date: 2020-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 70,428) | 70,428) | ÷ | 94,492) | = | 0.75 | 0.75 | × | 14.30% | = | 10.66% | ||
| 6.125% Cumulative Preferred Stock, Series A | 3,065) | 3,065) | ÷ | 94,492) | = | 0.03 | 0.03 | × | 4.96% | = | 0.16% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 94,492) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 20,509) | 20,509) | ÷ | 94,492) | = | 0.22 | 0.22 | × | 3.17% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 490) | 490) | ÷ | 94,492) | = | 0.01 | 0.01 | × | 3.17% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 94,492) | 1.00 | 11.37% | ||||||||||
Based on: 10-K (reporting date: 2019-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 64,929) | 64,929) | ÷ | 90,033) | = | 0.72 | 0.72 | × | 14.30% | = | 10.31% | ||
| 6.125% Cumulative Preferred Stock, Series A | 3,235) | 3,235) | ÷ | 90,033) | = | 0.04 | 0.04 | × | 4.69% | = | 0.17% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 90,033) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 21,413) | 21,413) | ÷ | 90,033) | = | 0.24 | 0.24 | × | 3.25% × (1 – 24.50%) | = | 0.58% | ||
| Operating lease liability4 | 456) | 456) | ÷ | 90,033) | = | 0.01 | 0.01 | × | 3.25% × (1 – 24.50%) | = | 0.01% | ||
| Total: | 90,033) | 1.00 | 11.08% | ||||||||||
Based on: 10-K (reporting date: 2018-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 51,120) | 51,120) | ÷ | 73,514) | = | 0.70 | 0.70 | × | 14.30% | = | 9.94% | ||
| 6.125% Cumulative Preferred Stock, Series A | 2,735) | 2,735) | ÷ | 73,514) | = | 0.04 | 0.04 | × | 5.54% | = | 0.21% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 73,514) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 19,409) | 19,409) | ÷ | 73,514) | = | 0.26 | 0.26 | × | 3.34% × (1 – 35.00%) | = | 0.57% | ||
| Operating lease liability4 | 250) | 250) | ÷ | 73,514) | = | 0.00 | 0.00 | × | 3.34% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 73,514) | 1.00 | 10.73% | ||||||||||
Based on: 10-K (reporting date: 2017-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 35,772) | 35,772) | ÷ | 48,321) | = | 0.74 | 0.74 | × | 14.30% | = | 10.58% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 48,321) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 48,321) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Debt3 | 12,299) | 12,299) | ÷ | 48,321) | = | 0.25 | 0.25 | × | 3.68% × (1 – 35.00%) | = | 0.61% | ||
| Operating lease liability4 | 250) | 250) | ÷ | 48,321) | = | 0.01 | 0.01 | × | 3.68% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 48,321) | 1.00 | 11.21% | ||||||||||
Based on: 10-K (reporting date: 2016-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Becton, Dickinson & Co., economic spread ratio calculation, comparison to benchmarks
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,057) | (4,305) | (4,034) | (4,667) | (2,418) | (1,778) | |
| Invested capital2 | 45,278) | 46,312) | 45,181) | 47,282) | 34,655) | 22,258) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -6.75% | -9.30% | -8.93% | -9.87% | -6.98% | -7.99% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Abbott Laboratories | -2.02% | — | — | — | — | — | |
| Elevance Health Inc. | 1.33% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 12.62% | — | — | — | — | — | |
| Medtronic PLC | -6.78% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 3.74% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,057 ÷ 45,278 = -6.75%
4 Click competitor name to see calculations.
An analysis of the economic value added metrics from 2016 to 2021 reveals a consistent deficit in economic profit, indicating that the returns generated were insufficient to cover the cost of capital throughout the period. While the performance remained negative, a trend toward recovery is observable in the final year of the sequence.
- Economic Profit
- Economic profit remained negative for all six years. A significant widening of the deficit occurred between 2016 and 2018, where losses increased from -1,778 million to a peak of -4,667 million. Following 2018, the deficit began to narrow, reaching -3,057 million by September 30, 2021.
- Invested Capital
- A substantial expansion in invested capital is noted from 2016 to 2018, growing from 22,258 million to 47,282 million. After this period of rapid growth, the capital base stabilized, maintaining a range between 45,181 million and 46,312 million from 2019 through 2021.
- Economic Spread Ratio
- The economic spread ratio was consistently negative, reflecting a return on invested capital that trailed the cost of capital. The ratio experienced a decline to its lowest point of -9.87% in 2018, coinciding with the peak in invested capital. Subsequently, the ratio showed a gradual improvement, ending the period at -6.75% in 2021, the most favorable level observed since 2017.
The correlation between the sharp increase in invested capital and the deepening of the economic profit deficit suggests that the capital expenditures or acquisitions made between 2016 and 2018 did not yield immediate economic value. The stabilization of invested capital and the subsequent improvement in the economic spread ratio by 2021 indicate an increase in capital efficiency.
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Economic Profit Margin
Becton, Dickinson & Co., economic profit margin calculation, comparison to benchmarks
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,057) | (4,305) | (4,034) | (4,667) | (2,418) | (1,778) | |
| Revenues | 20,248) | 17,117) | 17,290) | 15,983) | 12,093) | 12,483) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -15.10% | -25.15% | -23.33% | -29.20% | -20.00% | -14.24% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Abbott Laboratories | -2.92% | — | — | — | — | — | |
| Elevance Health Inc. | 0.62% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 9.93% | — | — | — | — | — | |
| Medtronic PLC | -16.28% | — | — | — | — | — | |
| UnitedHealth Group Inc. | 1.83% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -3,057 ÷ 20,248 = -15.10%
3 Click competitor name to see calculations.
The financial performance from 2016 to 2021 is characterized by a sustained period of negative economic profit despite significant growth in total revenues. Although revenues expanded from 12,483 million USD in 2016 to 20,248 million USD in 2021, the organization consistently failed to generate returns exceeding its cost of capital.
- Revenue Trajectory
- Revenues demonstrated a general upward trend, with a significant increase observed between 2017 and 2018, rising from 12,093 million USD to 15,983 million USD. This growth continued through 2021, reaching a peak of 20,248 million USD.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed period. The deficit widened from -1,778 million USD in 2016 to a peak loss of -4,667 million USD in 2018. While the economic profit improved to -3,057 million USD by 2021, the figures indicate a persistent inability to achieve positive economic value added.
- Economic Profit Margin Dynamics
- The economic profit margin showed significant volatility, deteriorating from -14.24% in 2016 to -29.20% in 2018. Following this trough, a gradual recovery trend is evident, with the margin improving to -15.10% by 2021. This suggests that while the organization continues to operate below its cost of capital, the efficiency of value creation relative to revenue has begun to stabilize toward 2021 levels.
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