Elevance Health Inc. (NYSE:ELV)

The financial trends indicate several noteworthy patterns over the five-year period. Net operating profit after taxes (NOPAT) experienced a substantial increase from 2020 to 2021, reaching a peak of 7,193 million US dollars. However, after 2021, NOPAT declined over the next two years, hitting its lowest point in 2023 at 6,415 million US dollars, before rising again in 2024 to 7,015 million US dollars, though not surpassing the 2021 peak.

The cost of capital showed a gradual increase from 10.52% in 2020 to a high of 11.43% during 2022 and 2023. In 2024, the cost of capital decreased to 10.72%, reflecting a reduction but still remaining above the initial 2020 level.

Invested capital grew steadily across the entire period, rising from 56,634 million US dollars in 2020 to 78,241 million US dollars in 2024. This indicates a consistent increase in the resources deployed in the business over time.

Economic profit displayed considerable volatility and a generally negative trend. The company started with a negative economic profit of -1,219 million US dollars in 2020, shifted slightly positive to 113 million US dollars in 2021, but then reverted to negative figures in subsequent years, reaching -1,375 million US dollars in 2024. This suggests that, despite fluctuations in operating profit, the returns have not consistently exceeded the cost of capital, resulting in an ongoing erosion of value relative to invested capital.

Net Operating Profit After Taxes (NOPAT)

Rose sharply in 2021, peaked, then declined for two years before recovering in 2024.

Cost of Capital

Increased moderately until 2023, then decreased somewhat in 2024, remaining above 2020 levels.

Invested Capital

Exhibited steady growth throughout the period, indicating continued investment in operational assets.

Economic Profit

Remained largely negative aside from a brief positive result in 2021, indicating challenges in generating returns above the cost of capital.

Shareholders’ Net Income

The shareholders’ net income exhibited an upward trend from 2020 to 2021, increasing significantly from 4,572 million USD to 6,104 million USD. However, this upward momentum did not sustain in the following years. From 2021 to 2022, net income slightly decreased to 6,025 million USD, followed by a marginal decline in 2023 to 5,987 million USD. By the end of 2024, the figure remained relatively stable at 5,980 million USD, indicating a plateau after the initial growth.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a robust increase from 4,739 million USD in 2020 to 7,193 million USD in 2021, signaling improved operational effectiveness and profitability. Subsequent years showed a decline in NOPAT to 6,841 million USD in 2022 and further down to 6,415 million USD in 2023, suggesting a reduction in operating efficiency or increased costs during this period. Notably, there was a recovery in 2024, with NOPAT rising again to 7,015 million USD, reaching levels approaching the 2021 peak.

Overall Observations

Both shareholders’ net income and NOPAT experienced substantial growth from 2020 to 2021. Following this peak, net income maintained relatively steady levels with minor declines, while NOPAT exhibited more volatility, decreasing over two years before partially rebounding in 2024. This pattern could indicate external or operational factors affecting profitability after initial gains. The relative steadiness in net income compared to NOPAT fluctuations may also suggest effective management of non-operating factors such as taxes, financing costs, or extraordinary items during the period analyzed.

The financial data over the five-year period reveals several notable trends related to tax expenses and cash operating taxes.

Income Tax Expense

The income tax expense showed a general upward trend from 2020 to 2024, starting at 1,666 million US dollars in 2020 and increasing to 1,933 million US dollars in 2024. There was a slight dip in 2022 compared to 2021, where the expense decreased from 1,830 million to 1,750 million, followed by a minor further decline in 2023 to 1,724 million. However, the expense rose significantly in 2024, reaching the highest recorded value over the period.

Cash Operating Taxes

Cash operating taxes demonstrated greater volatility during the period. The value initially decreased from 2,363 million US dollars in 2020 to 1,823 million in 2021, indicating a substantial reduction of approximately 22.9%. This trend reversed in the following years, with cash operating taxes increasing to 1,931 million in 2022, then surging to 2,637 million in 2023. Although there was a slight decline in 2024 to 2,550 million, cash operating taxes remained well above the 2021 and 2022 levels.

Overall, the patterns suggest that while income tax expense has been relatively stable with minor fluctuations, cash operating taxes have experienced more pronounced changes with a sharp decline early in the period and a significant rebound later. The year 2024 marked a notable peak for income tax expense, and cash operating taxes remain elevated compared to the middle years of the timeframe.

Total Reported Debt & Leases

The total reported debt and leases show a consistent upward trend over the five-year period. Starting from US$20,992 million at the end of 2020, the figure rose to US$24,028 million in 2021, reflecting a substantial increase of approximately 14.5%. This growth continued at a slower but steady pace in 2022 and 2023, reaching US$25,046 million and US$25,969 million, respectively. The most significant increase occurred in 2024, where debt and leases climbed markedly to US$32,043 million. This sharp rise in the final year signals a potential strategic increase in leverage or financing activities.

Shareholders’ Equity

Shareholders' equity experienced a positive growth trajectory throughout the period. Beginning at US$33,199 million in 2020, equity expanded steadily to US$36,060 million in 2021 and US$36,307 million in 2022, showing moderate annual increases. The upward movement became more pronounced in the subsequent years, culminating in an equity balance of US$41,315 million by the end of 2024. This steady accumulation of equity suggests ongoing profitability or capital retention strategies enhancing the company’s net assets.

Invested Capital

Invested capital also displayed a consistent increasing pattern, starting from US$56,634 million in 2020 and growing annually through to 2024. Elevations to US$63,876 million in 2021, US$66,804 million in 2022, and US$69,669 million in 2023 illustrate gradual capital expansion. By 2024, invested capital reached US$78,241 million, indicating an accelerated growth rate. This trend points to ongoing investments in operational or business assets, which may correspond to expansion efforts or increased asset base supporting growth initiatives.

Overall Financial Position Insights

The data reveals a pattern of expanding financial resources alongside increasing obligations. The rise in total debt and leases is proportionally higher than the growth in shareholders' equity, especially in the latest period, reflecting potentially greater reliance on external financing. Simultaneously, the increase in invested capital suggests that the company has been actively deploying capital into its business operations. The balance between rising debt and equity levels indicates a leveraged growth strategy, which may affect risk profiles and financial flexibility going forward. Monitoring the impact of this leverage on profitability and cash flows would be essential for a comprehensive financial assessment.

Economic Profit

The economic profit experienced significant fluctuations throughout the analyzed period. It was negative in 2020, improved to a positive value in 2021, but then declined sharply again in the subsequent years, reaching substantial negative levels in 2023 and 2024. Overall, the trend indicates persistent challenges in generating economic profit, with a brief improvement followed by a return to negative performance.

Invested Capital

The invested capital showed a consistent upward trend across all periods. Starting at approximately $56.6 billion in 2020, it steadily increased each year, reaching over $78 billion by the end of 2024. This indicates ongoing investment and expansion of the company's capital base over the timeframe.

Economic Spread Ratio

The economic spread ratio mirrored the trend in economic profit, fluctuating between negative and slightly positive values. Beginning with a negative spread in 2020, it briefly turned positive in 2021, but reverted to negative values in the subsequent years. The ratio remained below zero for most of the period except in 2021, suggesting that the returns on invested capital generally did not exceed the cost of capital, except in that one year.

Operating Revenue

The operating revenue demonstrated a consistent upward trend over the five-year period. Starting at approximately 120.8 billion US dollars in 2020, it increased year-over-year to reach around 175.2 billion US dollars by the end of 2024. This steady increase indicates growth in the company's core business activities.

Economic Profit

The economic profit showed significant volatility during the same period. Initially, there was a negative economic profit of about -1.2 billion US dollars in 2020, which turned positive to approximately 113 million US dollars in 2021. However, from 2022 onwards, economic profit reverted to negative figures, worsening substantially to -796 million in 2022, further declining to -1.55 billion in 2023, and slightly improving but remaining negative at -1.375 billion in 2024. This pattern reflects challenges in generating profits beyond the cost of capital, despite revenue growth.

Economic Profit Margin

The economic profit margin mirrored the trend observed in economic profit, fluctuating around the zero mark. It was negative at -1.01% in 2020, turned marginally positive at 0.08% in 2021, but then declined to -0.51% in 2022. Subsequent years showed further decreases to -0.91% in 2023 and a slight improvement to -0.78% in 2024. The margin remained negative for most of the period, indicating that the company’s operations were generally not generating value above the cost of capital in several years.

Overall Insights

Despite the continuous growth in operating revenue, the company struggled to maintain positive economic profit and economic profit margin after 2021. The negative trends in economic profit and margin suggest increasing costs, inefficiencies, or capital expenses that outweighed revenue growth. This disparity points to potential areas for management to investigate, such as cost control, operational efficiency, or capital allocation strategies, to improve value creation in the future.