Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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- Income Statement
- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Economic Profit
Freeport-McMoRan Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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
= – × =
The financial performance over the analyzed periods reveals notable trends in profitability, capital efficiency, and economic value creation.
- Net Operating Profit After Taxes (NOPAT)
-
The NOPAT exhibited a significant increase from 2020 to 2021, rising from 1,698 million US dollars to 6,188 million US dollars. However, this gain was followed by a decline in the subsequent years, decreasing to 5,116 million in 2022, then further to 4,632 million in 2023, and reaching 4,538 million in 2024. Despite the downward trend post-2021, the values for 2023 and 2024 remain considerably higher than the initial 2020 level.
- Cost of Capital
-
The cost of capital remained relatively stable throughout the period, fluctuating slightly within a narrow range of approximately 19.95% to 20.88%. This consistency indicates a stable risk profile and cost structure for the invested capital during these years.
- Invested Capital
-
Invested capital showed a gradual upward trend from 32,173 million US dollars in 2020 to a peak of 36,035 million in 2022. Following this peak, a modest decline occurred, with the figure reducing to 35,126 million in 2023 and further to 33,889 million in 2024. Overall, the capital base expanded over the five-year span before retrenching slightly in the last two years.
- Economic Profit
-
Economic profit, which measures value creation beyond the cost of capital, remained negative across all years, indicating consistent value destruction relative to invested capital costs. The magnitude of negative economic profit improved markedly from -4,720 million in 2020 to -1,100 million in 2021. Nevertheless, the metric deteriorated again afterward, deteriorating to -2,385 million in 2022, and further declining to -2,669 million and -2,540 million in 2023 and 2024 respectively. This suggests challenges in generating returns exceeding capital costs despite an initial improvement.
In summary, the entity experienced a significant improvement in operating profitability in 2021, followed by a gradual decline thereafter. Invested capital increased over the first three years before slightly decreasing. The cost of capital remained fairly constant, while economic profit consistently remained negative, indicating ongoing difficulties in generating returns above capital costs despite fluctuations in operating profit. These patterns suggest potential areas for strategic attention to enhance value creation going forward.
Net Operating Profit after Taxes (NOPAT)
Freeport-McMoRan Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common stockholders.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to common stockholders.
- Net Income Attributable to Common Stockholders
- The net income attributable to common stockholders showed a significant increase from 599 million USD in 2020 to a peak of 4306 million USD in 2021. However, after this peak, net income declined to 3468 million USD in 2022 and continued to decrease further to 1848 million USD in 2023. There was a slight recovery in 2024, with net income rising marginally to 1889 million USD. Overall, the data indicates a pronounced volatility with a substantial peak in 2021 followed by a consistent downward trend in the subsequent years through 2024.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes also demonstrated a strong upward movement from 1698 million USD in 2020 to 6188 million USD in 2021. Following this, NOPAT experienced a decline to 5116 million USD in 2022 and a further decrease to 4632 million USD in 2023. By 2024, NOPAT slightly decreased again to 4538 million USD. Despite the reductions after 2021, NOPAT levels remained substantially higher than the 2020 baseline, signifying an overall improved operating profitability compared to the start of the period.
- General Observations
- Both net income and NOPAT peaked in 2021, indicating a year of exceptional profitability. Post-2021, both metrics declined, with net income showing a sharper drop compared to NOPAT. This divergence suggests that factors affecting net income beyond operating performance, such as non-operating expenses or one-time gains/losses, could have influenced net income volatility. Despite declines, the company maintained profitability above initial 2020 levels over the five-year span. The slight uptick in net income in 2024 may hint at stabilization or recovering profitability after several years of decrease.
Cash Operating Taxes
Freeport-McMoRan Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data reveals trends in the provision for income taxes and cash operating taxes over a five-year period ending December 31, 2024.
- Provision for Income Taxes
- There is a notable increase from 944 million US dollars in 2020 to 2299 million in 2021, indicating a sharp rise in tax provisions. The figures then remain relatively stable around the 2200-2270 million range for the years 2022 and 2023. In 2024, a further increase to 2523 million is observed, suggesting continuing growth in tax obligations.
- Cash Operating Taxes
- This category exhibits a significant surge from 774 million US dollars in 2020 to 2217 million in 2021, reflecting a major increase in cash tax payments. There is a slight downward trend in 2022 and 2023, with cash operating taxes recorded at 2088 million and 2009 million respectively. However, in 2024, a sharp rise occurs, reaching 2672 million, surpassing previous years' levels.
Overall, the trends indicate a substantial increase in both provision for income taxes and cash operating taxes starting in 2021. While the provision for income taxes shows a steady upward trend after 2021, cash operating taxes display more variability with a dip in the middle years followed by a significant rebound in 2024. This pattern may reflect changes in the company's profitability, tax strategies, or external tax environment impacting its tax liabilities and payments.
Invested Capital
Freeport-McMoRan Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investment securities.
The financial data reveals several key trends regarding the company’s capital structure and equity position over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases show fluctuation but overall a slight decrease from 2020 to 2024. After peaking in 2022 at 10,952 million USD, the debt level declines to 9,738 million USD by the end of 2024. This suggests an effort to reduce debt or improve debt management after a temporary increase in 2022.
- Stockholders’ Equity
- Stockholders’ equity demonstrates consistent growth year over year. Starting at 10,174 million USD in 2020, it rises steadily to reach 17,581 million USD in 2024. This upward trend indicates strengthening equity, possibly due to retained earnings growth, issuing equity, or increased profitability enhancing the company’s net asset base.
- Invested Capital
- Invested capital increases from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022, followed by a decline to 33,889 million USD in 2024. The increase up to 2022 may reflect expanded operational assets or investment in capital projects, while the subsequent decline suggests divestitures, asset sales, or depreciation outpacing new investments.
Overall, the data reflects a company focused on strengthening equity while managing debt levels relatively stable after a notable increase in 2022. Investment in capital assets has peaked and begun to recede moderately, indicating possible strategic shifts in capital allocation or operational adjustments during the latter years.
Cost of Capital
Freeport-McMoRan Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Freeport-McMoRan Inc., economic spread ratio calculation
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
The analysis of the provided financial metrics over the five-year period reveals significant trends in the company's economic performance and capital utilization.
- Economic Profit
- There is a general improvement from 2020 to 2021, where economic profit losses reduced significantly from -4720 million US dollars to -1100 million US dollars. However, this trend reversed in the following years, with economic profit deteriorating again to -2385 million in 2022, then further declining to -2669 million in 2023, and a slight improvement to -2540 million in 2024. Despite fluctuations, the company consistently operated with negative economic profit, indicating that it did not generate returns above its cost of capital during these years.
- Invested Capital
- Invested capital increased steadily from 32173 million US dollars in 2020 to a peak of 36035 million in 2022. Subsequently, it decreased to 35126 million in 2023 and further to 33889 million in 2024. This trajectory suggests initial expansion or increased asset deployment up to 2022, followed by a contraction or asset base reduction in later years.
- Economic Spread Ratio
- The economic spread ratio, reflecting the difference between the return on invested capital and cost of capital, consistently remained negative throughout the period. It improved notably from -14.67% in 2020 to -3.14% in 2021, indicating a reduction in the gap between returns and costs. After 2021, the ratio declined to -6.62% in 2022, then further to -7.6% in 2023, and marginally improved to -7.49% in 2024. This pattern highlights persistent challenges in generating returns sufficient to cover capital costs despite some recovery efforts.
Overall, while the company showed a temporary improvement in economic profitability and spread ratio in 2021, the subsequent years demonstrated a weakening in economic performance and decreasing returns relative to the invested capital. The steady rise and then decline in invested capital may reflect strategic shifts in asset management, but the overall negative economic profit and spread ratio indicate an ongoing difficulty in creating shareholder value above cost of capital during this period.
Economic Profit Margin
Freeport-McMoRan Inc., economic profit margin calculation
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
The analysis of the financial data over the five-year period reveals several key trends in the company's performance.
- Adjusted Revenues
- The adjusted revenues exhibit a generally positive trajectory. Starting at US$14,251 million in 2020, the revenues significantly increased to US$22,971 million in 2021. After a slight decrease to US$22,665 million in 2022, the revenues stabilized with a modest increase of 1.22% to US$22,940 million in 2023, followed by a more substantial rise to US$25,385 million in 2024. This pattern indicates growth opportunities and a strong revenue base despite some fluctuations.
- Economic Profit
- Economic profit remains negative throughout the period, indicating that the company has consistently underperformed relative to its cost of capital. The loss improved significantly from -US$4,720 million in 2020 to -US$1,100 million in 2021, suggesting better cost management or improved operational efficiency. However, from 2021 onwards, economic profit deteriorated again, with losses increasing to -US$2,385 million in 2022 and further to -US$2,669 million in 2023, before slightly improving to -US$2,540 million in 2024. This trend highlights ongoing challenges in generating value beyond capital costs despite revenue growth.
- Economic Profit Margin
- The economic profit margin follows a similar trajectory to economic profit, remaining negative throughout the period. It improved dramatically from -33.12% in 2020 to -4.79% in 2021, indicating enhanced profitability relative to revenue during that year. However, from 2021 onwards, the margin declined to -10.52% in 2022 and further to -11.63% in 2023, before a marginal recovery to -10% in 2024. These figures reveal that while revenues increased, the company struggled to translate sales into economic value, likely due to high costs or capital inefficiencies.
Overall, the data suggests that while the company has achieved substantial revenue growth over the years, it continues to face difficulties in creating economic profit. The improvement seen in 2021 was not sustained, and although slight recoveries are noted in the latest period, the persistent negative economic profit margins indicate ongoing challenges with cost management and capital efficiency. This situation warrants close attention to operational expenses and strategic initiatives aimed at enhancing value creation.