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
Dollar General Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,431,523 – 7.60% × 26,309,034 = 431,420
The financial performance over the analyzed six-year period is characterized by a phase of significant expansion in value creation followed by a sharp contraction in operating efficiency and economic profit. While invested capital grew consistently throughout the period, the ability to generate returns above the cost of capital peaked in 2023 before experiencing a substantial decline in 2024.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trajectory was observed from February 2019 through February 2023, with NOPAT increasing from 1,981,150 thousand to a peak of 3,664,406 thousand. This growth was particularly pronounced between 2020 and 2021. However, this trend reversed sharply in 2024, with NOPAT falling to 2,431,523 thousand, representing a significant reduction in operating profitability.
- Invested Capital and Cost of Capital
- Invested capital exhibited a consistent and uninterrupted increase, growing from 18,107,408 thousand in 2019 to 26,309,034 thousand in 2024. This indicates a sustained commitment to capital expenditure and asset growth. Concurrently, the cost of capital remained relatively stable, fluctuating within a narrow range between 7.60% and 8.35%. A slight downward trend in the cost of capital is noted in the final two years of the period.
- Economic Profit Trends
- Economic profit followed a pattern similar to NOPAT, showing substantial growth between 2019 and 2023, where it reached a maximum of 1,687,781 thousand. This indicates that the company was creating significant value over and above its required return on capital during this phase. In 2024, economic profit plummeted to 431,420 thousand, the lowest level recorded in the six-year series. This decline is particularly notable as it occurred while invested capital continued to rise, suggesting a decrease in the efficiency of capital deployment.
The divergence observed in 2024 suggests a critical inflection point. The simultaneous increase in invested capital and the sharp decrease in both NOPAT and economic profit indicate that the latest capital investments have not yet translated into proportional operating returns, leading to a diminished capacity for economic value creation.
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Net Operating Profit after Taxes (NOPAT)
Dollar General Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 11,090,582 × 4.30% = 476,895
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 803,676 × 21.00% = 168,772
6 Addition of after taxes interest expense to net income.
The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.
- Net Income
-
Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.
Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.
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Cash Operating Taxes
Dollar General Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.
- Provision for Income Taxes
- The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.
- Cash Operating Taxes
- Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.
- Comparative Insights
- Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.
Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.
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Invested Capital
Dollar General Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of LIFO reserve. See details »
4 Addition of equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
- Total Reported Debt & Leases
- The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.
- Shareholders’ Equity
- Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.
- Invested Capital
- Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.
- Overall Analysis
- The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.
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Cost of Capital
Dollar General Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,122,041) | 33,122,041) | ÷ | 51,068,786) | = | 0.65 | 0.65 | × | 9.85% | = | 6.39% | ||
| Long-term obligations, including current portion3 | 6,856,163) | 6,856,163) | ÷ | 51,068,786) | = | 0.13 | 0.13 | × | 4.49% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 11,090,582) | 11,090,582) | ÷ | 51,068,786) | = | 0.22 | 0.22 | × | 4.30% × (1 – 21.00%) | = | 0.74% | ||
| Total: | 51,068,786) | 1.00 | 7.60% | ||||||||||
Based on: 10-K (reporting date: 2024-02-02).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,094,716) | 45,094,716) | ÷ | 62,672,927) | = | 0.72 | 0.72 | × | 9.85% | = | 7.09% | ||
| Long-term obligations, including current portion3 | 6,926,511) | 6,926,511) | ÷ | 62,672,927) | = | 0.11 | 0.11 | × | 4.25% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 10,651,700) | 10,651,700) | ÷ | 62,672,927) | = | 0.17 | 0.17 | × | 3.90% × (1 – 21.00%) | = | 0.52% | ||
| Total: | 62,672,927) | 1.00 | 7.98% | ||||||||||
Based on: 10-K (reporting date: 2023-02-03).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 52,555,043) | 52,555,043) | ÷ | 67,072,297) | = | 0.78 | 0.78 | × | 9.85% | = | 7.72% | ||
| Long-term obligations, including current portion3 | 4,442,986) | 4,442,986) | ÷ | 67,072,297) | = | 0.07 | 0.07 | × | 3.74% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 10,074,268) | 10,074,268) | ÷ | 67,072,297) | = | 0.15 | 0.15 | × | 3.70% × (1 – 21.00%) | = | 0.44% | ||
| Total: | 67,072,297) | 1.00 | 8.35% | ||||||||||
Based on: 10-K (reporting date: 2022-01-28).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,929,041) | 44,929,041) | ÷ | 59,094,767) | = | 0.76 | 0.76 | × | 9.85% | = | 7.49% | ||
| Long-term obligations, including current portion3 | 4,706,259) | 4,706,259) | ÷ | 59,094,767) | = | 0.08 | 0.08 | × | 3.74% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 9,459,467) | 9,459,467) | ÷ | 59,094,767) | = | 0.16 | 0.16 | × | 3.90% × (1 – 21.00%) | = | 0.49% | ||
| Total: | 59,094,767) | 1.00 | 8.22% | ||||||||||
Based on: 10-K (reporting date: 2021-01-29).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 36,027,608) | 36,027,608) | ÷ | 47,954,115) | = | 0.75 | 0.75 | × | 9.85% | = | 7.40% | ||
| Long-term obligations, including current portion3 | 3,142,019) | 3,142,019) | ÷ | 47,954,115) | = | 0.07 | 0.07 | × | 3.46% × (1 – 21.00%) | = | 0.18% | ||
| Operating lease liability4 | 8,784,488) | 8,784,488) | ÷ | 47,954,115) | = | 0.18 | 0.18 | × | 4.20% × (1 – 21.00%) | = | 0.61% | ||
| Total: | 47,954,115) | 1.00 | 8.19% | ||||||||||
Based on: 10-K (reporting date: 2020-01-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,485,674) | 30,485,674) | ÷ | 41,575,960) | = | 0.73 | 0.73 | × | 9.85% | = | 7.22% | ||
| Long-term obligations, including current portion3 | 2,864,280) | 2,864,280) | ÷ | 41,575,960) | = | 0.07 | 0.07 | × | 3.62% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 8,226,006) | 8,226,006) | ÷ | 41,575,960) | = | 0.20 | 0.20 | × | 3.62% × (1 – 21.00%) | = | 0.57% | ||
| Total: | 41,575,960) | 1.00 | 7.99% | ||||||||||
Based on: 10-K (reporting date: 2019-02-01).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dollar General Corp., economic spread ratio calculation, comparison to benchmarks
| Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | Feb 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 431,420) | 1,687,781) | 1,317,076) | 1,388,364) | 580,040) | 535,220) | |
| Invested capital2 | 26,309,034) | 24,763,719) | 21,499,995) | 20,896,699) | 19,125,860) | 18,107,408) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 1.64% | 6.82% | 6.13% | 6.64% | 3.03% | 2.96% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | 6.62% | 1.81% | 5.90% | 4.30% | 0.53% | — | |
| Target Corp. | -2.04% | -3.81% | 8.87% | -0.61% | — | — | |
| Walmart Inc. | 1.21% | -1.21% | -0.67% | 0.79% | — | — | |
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 431,420 ÷ 26,309,034 = 1.64%
4 Click competitor name to see calculations.
An analysis of economic value added reveals a period of significant growth in value creation from 2019 through 2023, followed by a substantial contraction in the 2024 fiscal year.
- Economic Profit Trends
- Economic profit exhibited a strong upward trajectory between February 2019 and February 2023, rising from $535.22 million to a peak of $1.69 billion. This growth was most pronounced in 2021, where profit more than doubled relative to the previous year. However, the period ending February 2, 2024, saw a sharp reversal, with economic profit falling to $431.42 million, representing the lowest level recorded in the observed six-year timeframe.
- Invested Capital Growth
- Invested capital demonstrated consistent and uninterrupted growth throughout the analysis period. Starting at $18.11 billion in 2019, the capital base expanded annually to reach $26.31 billion by February 2024. This indicates a steady and continuous increase in the total resources deployed by the organization.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrored the fluctuations of economic profit while contrasting with the steady rise in invested capital. The ratio remained stable near 3% in 2019 and 2020 before surging to 6.64% in 2021. A peak efficiency level of 6.82% was reached in February 2023. This trend shifted abruptly in 2024, as the ratio plummeted to 1.64%. This decline indicates that the return on invested capital fell significantly relative to the cost of capital, occurring simultaneously with the highest level of invested capital in the series.
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Economic Profit Margin
Dollar General Corp., economic profit margin calculation, comparison to benchmarks
| Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | Feb 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 431,420) | 1,687,781) | 1,317,076) | 1,388,364) | 580,040) | 535,220) | |
| Net sales | 38,691,609) | 37,844,863) | 34,220,449) | 33,746,839) | 27,753,973) | 25,625,043) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 1.12% | 4.46% | 3.85% | 4.11% | 2.09% | 2.09% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | 0.88% | 0.27% | 0.84% | 0.64% | 0.09% | — | |
| Target Corp. | -0.65% | -1.06% | 2.52% | -0.20% | — | — | |
| Walmart Inc. | 0.29% | -0.30% | -0.18% | 0.23% | — | — | |
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 431,420 ÷ 38,691,609 = 1.12%
3 Click competitor name to see calculations.
An analysis of the financial performance from February 2019 to February 2024 reveals a consistent increase in net sales contrasted by significant volatility in economic profit and its corresponding margin. While top-line growth remained steady, the ability to generate value in excess of the cost of capital fluctuated substantially, culminating in a sharp decline in the final year.
- Net Sales Performance
- A continuous upward trend in net sales is observed over the six-year period. Revenue increased from $25.6 billion in 2019 to $38.7 billion in 2024, representing steady expansion in the company's scale of operations.
- Economic Profit Volatility
- Economic profit experienced a period of rapid growth between 2020 and 2023, rising from $580 million to a peak of $1.69 billion. However, this growth trend reversed sharply in 2024, with economic profit plummeting to $431 million, the lowest absolute value recorded during the analyzed timeframe.
- Economic Profit Margin Trends
- The economic profit margin remained stable at 2.09% between 2019 and 2020 before expanding to a peak of 4.46% in 2023. A severe contraction occurred in 2024, with the margin dropping to 1.12%. This decline is particularly significant as it occurred concurrently with record-high net sales, indicating a disconnect between revenue growth and economic value creation.
- Value Creation Insight
- The data suggests that while the company successfully expanded its sales base, the efficiency of capital utilization declined sharply in the most recent period. The collapse of the economic profit margin in 2024 indicates that the returns on invested capital have diminished relative to the cost of that capital, despite the continued growth in net sales.
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