Elevance Health Inc. (NYSE:ELV)

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures indicate fluctuations over the five-year period. There was a significant increase from 4,739 million US dollars in 2020 to 7,193 million in 2021, followed by a slight decline to 6,841 million in 2022. The downward trend continued into 2023 with 6,415 million but rebounded to 7,015 million in 2024. Overall, the NOPAT exhibits volatility, with a notable peak in 2021 and partial recovery by 2024.

Cost of Capital

The cost of capital percentage shows a gradual rise from 10.58% in 2020 to a peak of 11.51% in 2022 and 2023, before declining to 10.79% in 2024. This trend suggests increasing capital costs initially, which may have exerted pressure on profitability, followed by a reduction in 2024 that could positively impact financial performance.

Invested Capital

Invested capital shows a consistent upward trajectory throughout the five-year span, growing from 56,634 million US dollars in 2020 to 78,241 million in 2024. This steady increase highlights ongoing investment or asset accumulation, potentially indicating growth initiatives or expansion efforts.

Economic Profit

The economic profit figures reveal persistent challenges in creating value above the cost of capital. The company moved from a negative economic profit of -1,256 million US dollars in 2020 to a marginal positive of 68 million in 2021. However, this improvement was not sustained as the economic profit dropped sharply to -845 million in 2022, further worsening to -1,601 million in 2023, and slightly improving to -1,426 million in 2024. These results imply that despite some increases in NOPAT, the return on invested capital has frequently failed to exceed its cost, leading to value destruction in most years.

Overall Insights

The data reflect a scenario where the company has increased its invested capital steadily while experiencing fluctuating profitability and economic profit. The rising cost of capital up to 2023, coupled with mostly negative economic profits, suggests difficulties in efficiently generating returns that surpass capital costs. Although there was a notable surge in NOPAT and a brief period of positive economic profit in 2021, subsequent years demonstrate challenges in sustaining value creation. The partial recovery in NOPAT and reduction in the cost of capital in 2024 could indicate early signs of improved financial performance, but economic profit remains negative, underscoring ongoing value generation issues.

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 exhibits significant volatility over the five-year period. It starts with a substantial negative value of -1,256 million USD in 2020, followed by a positive shift to 68 million USD in 2021. Subsequently, it declines sharply to -845 million USD in 2022 and further decreases to -1,601 million USD in 2023. The year 2024 shows a slight improvement, although the figure remains negative at -1,426 million USD. This pattern indicates a struggle to generate consistent economic profit, with mostly negative returns after 2021.

Invested Capital

Invested capital demonstrates a steady upward trend throughout the entire period. It increases from 56,634 million USD in 2020 to 78,241 million USD in 2024. This continuous growth suggests ongoing investments or expansion in the company’s capital base, reflecting possibly increased asset holdings or capital expenditures.

Economic Spread Ratio

The economic spread ratio, representing the difference between returns on invested capital and cost of capital, fluctuates but remains predominantly negative. It begins at -2.22% in 2020, improves marginally to 0.11% in 2021, indicating a brief period where returns might have exceeded costs. Following 2021, it dips again to -1.26% in 2022 and worsens to -2.3% in 2023, before slightly recovering to -1.82% in 2024. The negative values for most years reveal a persistent inability to generate returns above the cost of capital.

Summary

The financial data reflect challenges in generating sustainable economic profit despite increasing invested capital. The negative economic spread ratio across most of the period underscores that returns on invested capital consistently fall short of associated costs. While there is a brief positive economic profit and spread ratio in 2021, subsequent years show a decline, suggesting deteriorating profitability or efficiency in capital utilization. The continued rise in invested capital combined with negative economic profit raises questions about capital deployment effectiveness and potential strategic adjustments.

Operating Revenue

The operating revenue demonstrates a consistent upward trend over the five-year period from 2020 to 2024. Starting at 120,808 million USD in 2020, it increased steadily each year, reaching 175,204 million USD by 2024. This indicates sustained revenue growth with an overall increasing business scale during this timeframe.

Economic Profit

The economic profit exhibits significant volatility and remains negative in most years, indicating challenges in generating value beyond the cost of capital. In 2020, economic profit was negative at -1,256 million USD, improved sharply to a small positive value of 68 million USD in 2021, but then deteriorated markedly in subsequent years to -845 million USD in 2022, further declining to -1,601 million USD in 2023 before slightly improving to -1,426 million USD in 2024. This pattern suggests intermittent profitability improvements but an overall difficulty in sustaining positive economic profit.

Economic Profit Margin

The economic profit margin aligns with the trends in economic profit, remaining negative for most years with a brief positive margin in 2021 at 0.05%. The margin was -1.04% in 2020, moved to a marginally positive figure in 2021, then reverted to negative margins of -0.54%, -0.94%, and -0.81% in 2022, 2023, and 2024 respectively. This confirms an ongoing challenge in translating operating revenue growth into corresponding economic profitability, with margins consistently below zero except for 2021.