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 – 11.29% × 45,278 = -2,959
The period between September 30, 2016, and September 30, 2021, demonstrates a consistent pattern of negative economic profit. While net operating profit after taxes (NOPAT) and invested capital fluctuate over the observed timeframe, the cost of capital remains relatively stable, contributing to the sustained negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT initially increased significantly from US$717 million in 2016 to US$1,300 million in 2017. However, it then decreased to US$570 million in 2018 before recovering to US$1,105 million in 2019. A slight decline to US$991 million was observed in 2020, followed by a substantial increase to US$2,155 million in 2021. Despite the increase in 2021, NOPAT consistently falls short of covering the cost of capital.
- Cost of Capital
- The cost of capital experienced minor fluctuations, beginning at 11.00% in 2016, decreasing to 10.53% in 2017, and then gradually increasing to 11.29% in 2021. The cost of capital remained within a narrow range throughout the period, averaging approximately 11.04%.
- Invested Capital
- Invested capital exhibited a substantial upward trend from US$22,258 million in 2016 to US$34,655 million in 2017. It continued to rise, peaking at US$47,282 million in 2018, before decreasing slightly to US$45,181 million in 2019. Invested capital remained relatively stable between 2019 and 2021, fluctuating around US$46 billion, concluding at US$45,278 million.
- Economic Profit
- Economic profit remained negative throughout the entire period. The largest negative economic profit was recorded in 2018 at US$-4,571 million. While the negative economic profit lessened in 2021 to US$-2,959 million, it still indicates that the returns generated by the invested capital were insufficient to cover the cost of that capital. The improvement in 2021 aligns with the significant increase in NOPAT observed during that year.
In summary, despite increases in NOPAT and invested capital at various points, the cost of capital consistently exceeded the returns generated, resulting in a sustained period of negative economic profit. The substantial increase in NOPAT in 2021 partially offset the negative economic profit, but did not eliminate it.
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Net Operating Profit after Taxes (NOPAT)
Becton, Dickinson & Co., NOPAT calculation
US$ 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.
- Net Income
- The net income figures exhibit considerable fluctuation over the reported periods. Starting at 976 million US dollars in 2016, it increased moderately to 1100 million in 2017. However, 2018 saw a sharp decline to 311 million, representing a significant downturn. This was followed by a strong recovery in 2019, where net income rose to 1233 million. A decline occurred again in 2020, as net income dropped to 874 million. The latest figure in 2021 indicates a substantial increase to 2092 million, marking the highest value in the dataset and demonstrating a notable overall upward trend despite earlier volatility.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT trends are somewhat aligned with net income, but they reflect less volatility. It started at 717 million US dollars in 2016 and sharply increased to 1300 million in 2017, marking a significant improvement. In 2018, NOPAT declined to 570 million, though this drop was less severe in relative terms compared to the net income decline in the same year. Subsequently, NOPAT recovered to 1105 million in 2019 and saw a slight decrease to 991 million in 2020. The year 2021 shows a dramatic increase to 2155 million, the highest point in the period, underscoring strong operational profitability improvements.
- Summary Insights
- Both net income and NOPAT demonstrate cyclical patterns characterized by steep declines followed by significant recoveries. The year 2018 stands out as an outlier with notably lower profitability, suggesting possible operational or market challenges during that period. The firm’s overall financial performance shows strong resilience and upward momentum by 2021, indicating effective management of costs and revenue growth leading to enhanced profitability. The 2021 figures exceeding previous highs imply robust financial health and operational efficiency.
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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).
The financial data reveals significant fluctuations in the income tax provision (benefit) over the observed periods. Initially, the income tax provision shows a negative value in 2017 (-124 million USD), indicating a benefit rather than an expense. This contrasts with the positive provisions in 2016 (97 million USD) and the substantial increase to 862 million USD in 2018. The value dips again in 2019 to a negative figure (-57 million USD), signaling another tax benefit, followed by a recovery to positive values in 2020 and 2021, reaching 111 million USD and 150 million USD, respectively. This volatility suggests variability in taxable income or tax planning strategies affecting provisions for income taxes.
Cash operating taxes also exhibit variability but with somewhat less drastic changes. The cash tax payment starts at 748 million USD in 2016, sharply decreases to 109 million USD in 2017, then peaks dramatically at 1,285 million USD in 2018. After this peak, there is a decline to 711 million USD in 2019, followed by further decreases and stabilization around 508 million USD in 2020, and a slight increase to 537 million USD in 2021. This pattern may reflect changes in operational profitability, timing differences in tax payments, or varying tax obligations year over year.
- Income Tax Provision (Benefit)
- Displayed considerable volatility with alternating positive and negative values, suggesting fluctuations in reported taxable income or tax expense recognition.
- Peak observed in 2018, with a significant tax expense recorded.
- Negative values in 2017 and 2019 suggest periods where tax benefits or credits were recognized.
- The latter years (2020 and 2021) show moderate positive provisions, indicating a potential stabilization.
- Cash Operating Taxes
- Experienced sharp variations, with the highest cash tax paid in 2018 aligning with the peak in income tax provision.
- Following the 2018 peak, the cash tax outlay declined and stabilized at a lower level by 2020 and 2021.
- This may suggest shifts in operational profitability, timing issues in tax payments, or changes in tax liabilities over these years.
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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 financial data presented reveals notable trends in the company's capital structure and financing over the six-year period ending September 30, 2021.
- Total Reported Debt & Leases
- This item shows a significant increase from 2016 to 2018, rising from $11,801 million to a peak of $21,951 million in 2018. Subsequently, there is a consistent downward trend from 2018 through 2021, decreasing to $18,080 million. This decline may suggest efforts to reduce leverage or refinance obligations with lower levels of debt.
- Shareholders’ Equity
- Shareholders’ equity exhibits strong growth throughout the period. Starting at $7,633 million in 2016, it more than doubles by 2018 to $20,994 million, then continues increasing steadily to nearly $23,677 million by 2021. This upward trajectory indicates sustained profitability or capital infusions supporting the equity base.
- Invested Capital
- Invested capital reflects the combined financing through debt and equity and follows a similar pattern as debt, increasing from $22,258 million in 2016 to a peak of $47,282 million in 2018. Afterward, invested capital experiences a moderate decline, ending at $45,278 million in 2021. This suggests that while the total capital invested in the business grew substantially initially, it has somewhat plateaued or been optimized in recent years.
Overall, the data indicates an initial period of expansion or increased financing up to 2018, followed by a phase of debt reduction and stability in total invested capital. The continuous growth in shareholders’ equity through this period highlights strengthening financial resilience and potential value creation for shareholders.
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Cost of Capital
Becton, Dickinson & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 69,432) | 69,432) | ÷ | 90,561) | = | 0.77 | 0.77 | × | 14.02% | = | 10.75% | ||
| 6.125% Cumulative Preferred Stock, Series A | —) | —) | ÷ | 90,561) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 6.00% Mandatory Convertible Preferred Stock, Series B | 1,619) | 1,619) | ÷ | 90,561) | = | 0.02 | 0.02 | × | 5.56% | = | 0.10% | ||
| Debt3 | 19,040) | 19,040) | ÷ | 90,561) | = | 0.21 | 0.21 | × | 2.65% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 470) | 470) | ÷ | 90,561) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 90,561) | 1.00 | 11.29% | ||||||||||
Based on: 10-K (reporting date: 2021-09-30).
1 US$ 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 | × | 14.02% | = | 10.55% | ||
| 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 | 11.22% | ||||||||||
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 | × | 14.02% | = | 10.45% | ||
| 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 | 11.16% | ||||||||||
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 | × | 14.02% | = | 10.11% | ||
| 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 | 10.87% | ||||||||||
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 | × | 14.02% | = | 9.75% | ||
| 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 | 10.53% | ||||||||||
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 | × | 14.02% | = | 10.38% | ||
| 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 | 11.00% | ||||||||||
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 | (2,959) | (4,207) | (3,939) | (4,571) | (2,351) | (1,731) | |
| Invested capital2 | 45,278) | 46,312) | 45,181) | 47,282) | 34,655) | 22,258) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -6.54% | -9.08% | -8.72% | -9.67% | -6.78% | -7.78% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Abbott Laboratories | -1.78% | — | — | — | — | — | |
| Elevance Health Inc. | 1.68% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 12.26% | — | — | — | — | — | |
| Medtronic PLC | -7.35% | -6.35% | — | — | — | — | |
| UnitedHealth Group Inc. | 4.18% | — | — | — | — | — | |
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 × -2,959 ÷ 45,278 = -6.54%
4 Click competitor name to see calculations.
The period between September 30, 2016, and September 30, 2021, demonstrates a consistent pattern of negative economic profit. While invested capital generally increased over this timeframe, the economic spread ratio consistently remained negative, indicating that the company’s returns on invested capital were less than its cost of capital.
- Economic Profit
- Economic profit exhibited volatility, initially at -US$1,731 million in 2016, decreasing to -US$2,351 million in 2017, then significantly declining to -US$4,571 million in 2018. A slight improvement was noted in 2019 with a value of -US$3,939 million, followed by a further decline to -US$4,207 million in 2020. The most recent year, 2021, showed a positive shift, with economic profit improving to -US$2,959 million, though still remaining negative.
- Invested Capital
- Invested capital showed a generally increasing trend. Starting at US$22,258 million in 2016, it rose substantially to US$34,655 million in 2017 and continued to increase to US$47,282 million in 2018. A slight decrease was observed in 2019 to US$45,181 million, followed by a modest increase to US$46,312 million in 2020. The value decreased slightly again in 2021, settling at US$45,278 million.
- Economic Spread Ratio
- The economic spread ratio consistently registered negative values throughout the observed period. It began at -7.78% in 2016, decreased to -6.78% in 2017, and then experienced a substantial decline to -9.67% in 2018, representing the lowest value within the period. The ratio improved slightly to -8.72% in 2019 and further to -9.08% in 2020. A notable improvement occurred in 2021, with the ratio increasing to -6.54%, although it remained negative, suggesting a lessening, but continued, shortfall in generating returns exceeding the cost of capital.
The consistent negative economic spread ratio, despite increasing invested capital, suggests that the company faced challenges in deploying capital effectively to generate returns that covered its cost of capital. The improvement in the economic spread ratio in 2021, coupled with the reduced magnitude of the economic loss, may indicate emerging positive trends in capital allocation or operational efficiency.
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Economic Profit Margin
Becton, Dickinson & Co., economic profit margin calculation, comparison to benchmarks
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (2,959) | (4,207) | (3,939) | (4,571) | (2,351) | (1,731) | |
| Revenues | 20,248) | 17,117) | 17,290) | 15,983) | 12,093) | 12,483) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -14.62% | -24.58% | -22.78% | -28.60% | -19.44% | -13.87% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Abbott Laboratories | -2.57% | — | — | — | — | — | |
| Elevance Health Inc. | 0.78% | — | — | — | — | — | |
| Intuitive Surgical Inc. | 9.65% | — | — | — | — | — | |
| Medtronic PLC | -17.64% | -15.64% | — | — | — | — | |
| UnitedHealth Group Inc. | 2.05% | — | — | — | — | — | |
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 × -2,959 ÷ 20,248 = -14.62%
3 Click competitor name to see calculations.
The economic profit margin exhibited a consistently negative trend between 2016 and 2020, followed by a notable improvement in 2021. Economic profit itself remained negative throughout the observed period, though with fluctuations in magnitude. Revenues demonstrated an overall upward trajectory, particularly accelerating in the final year of the observation period.
- Economic Profit Margin
- The economic profit margin began at -13.87% in 2016 and progressively declined, reaching a low of -28.60% in 2018. A slight recovery occurred in 2019 to -22.78%, but the margin worsened again in 2020, reaching -24.58%. A significant positive shift is observed in 2021, with the margin improving to -14.62%. This indicates that while the company consistently generated economic losses relative to its cost of capital, the rate of loss diminished in the most recent year.
- Economic Profit
- Economic profit decreased from a loss of US$1,731 million in 2016 to a loss of US$2,351 million in 2017. The loss expanded considerably to US$4,571 million in 2018, before decreasing to US$3,939 million in 2019. A further increase in the loss occurred in 2020, reaching US$4,207 million. Finally, the economic loss decreased substantially to US$2,959 million in 2021. The fluctuations in economic profit, while consistently negative, suggest varying degrees of efficiency in generating returns above the cost of capital.
- Revenues
- Revenues experienced a slight decrease from US$12,483 million in 2016 to US$12,093 million in 2017. Subsequent years show consistent revenue growth, with revenues reaching US$15,983 million in 2018, US$17,290 million in 2019, and US$17,117 million in 2020. A substantial increase in revenue is evident in 2021, reaching US$20,248 million. This revenue growth did not translate into positive economic profit during the period, suggesting that increases in revenue were offset by increases in costs or a higher cost of capital.
The improvement in the economic profit margin in 2021, despite continued negative economic profit, suggests a potential shift in the relationship between revenue generation and capital efficiency. Further investigation would be required to determine the underlying drivers of this change.
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