Elevance Health Inc. (NYSE:ELV)

Net Operating Profit After Taxes (NOPAT)

The NOPAT values exhibit a general upward trend over the five-year period. Starting at 4,739 million US dollars in 2020, the figure increased significantly to 7,193 million in 2021. However, there was a slight decline in the following years with values of 6,841 million in 2022 and 6,415 million in 2023, before rising again to 7,015 million in 2024. This indicates some volatility but overall growth in operating profitability after taxes.

Cost of Capital

The cost of capital percentage shows an increasing trend from 10.63% in 2020 to a peak of 11.56% in 2022 and 2023, before decreasing to 10.83% in 2024. The rise in cost of capital in 2021 through 2023 may reflect changing market conditions or risk perceptions, while the reduction in 2024 suggests some easing or improvement in capital costs.

Invested Capital

Invested capital steadily increased each year during the period under review, from 56,634 million US dollars in 2020 to 78,241 million in 2024. This consistent growth indicates ongoing investments or asset accumulation, expanding the capital base over time.

Economic Profit

Economic profit fluctuated notably throughout these years, beginning with a negative value of -1,282 million US dollars in 2020. It briefly turned positive at 37 million in 2021 but then reverted to negative values, with -879 million in 2022, worsening to -1,636 million in 2023, and slightly improving to -1,462 million in 2024. Despite the positive NOPAT growth, the persistent negative economic profit suggests that the returns generated did not consistently exceed the cost of the invested capital, indicating potential value erosion over most of the period.

Summary

Overall, there is evidence of increasing operating profit and invested capital, signifying growth in business scale and profitability capacity. However, the cost of capital remained elevated for several years, and economic profit was predominantly negative, except for a brief positive occurrence. This suggests that despite higher profits, the returns may not have fully compensated for the capital costs, highlighting challenges in value creation throughout the period.

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 exhibited significant volatility over the five-year period. It started with a substantial loss of $1,282 million in 2020, improved sharply to a positive $37 million in 2021, then declined again into negative territory, with losses of $879 million in 2022, $1,636 million in 2023, and $1,462 million in 2024. This pattern indicates inconsistent profitability and challenges in generating value above the required return on invested capital.

Invested Capital

There is a clear upward trend in invested capital, increasing steadily from $56,634 million in 2020 to $78,241 million in 2024. This growth suggests ongoing investments or asset accumulation over the period. The steady rise in invested capital contrasts with the fluctuating economic profit, highlighting potential inefficiencies or struggles in converting these investments into economic value.

Economic Spread Ratio

The economic spread ratio, which measures the return on invested capital above its cost, mirrored the inconsistent economic profit. It was negative at -2.26% in 2020, barely positive at 0.06% in 2021, then fell again to negative values of -1.32% in 2022, -2.35% in 2023, and -1.87% in 2024. This indicates that, except for a brief recovery in 2021, the company has consistently earned returns below its capital costs, which aligns with the persistent negative economic profit observed in most years.

Operating Revenue

The operating revenue shows a consistent upward trend over the five-year period. Beginning at $120,808 million in 2020, it increased each year, reaching $175,204 million by 2024. This represents a significant growth, indicating an expanding business or higher sales volume throughout the timeframe.

Economic Profit

The economic profit displays a volatile and overall negative pattern. It started with a significant loss of $1,282 million in 2020, improved to a positive $37 million in 2021, then declined again to substantial losses of $879 million in 2022, $1,636 million in 2023, and slightly improved losses of $1,462 million in 2024. Despite the increase in operating revenue, the company struggled to generate consistent positive economic profit, reflecting challenges in covering the cost of capital or inefficiencies within the operations.

Economic Profit Margin

The economic profit margin similarly exhibits volatility and predominantly negative values. It was -1.06% in 2020, improved marginally to a positive 0.03% in 2021, but reverted to negative margins of -0.56% in 2022, -0.96% in 2023, and -0.83% in 2024. The slight positive margin in 2021 was short-lived. Overall, the margins indicate that the company was generally unable to maintain profitability relative to its revenue, potentially implying high capital costs or operational inefficiencies.

Overall Insights

Despite steady revenue growth over the five years, the persistent negative economic profit and margin suggest difficulties in converting sales growth into sustainable economic value. The temporary improvement in 2021 was not sustained, and losses worsened in subsequent years. This pattern may signal the need for cost management improvements, capital structure optimization, or strategic initiatives to enhance profitability beyond revenue increases.