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.
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- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
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Economic Profit
Kellanova, economic profit calculation
US$ in millions
| 12 months ended: | Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating economic profit performance. Net operating profit after taxes (NOPAT) initially increased significantly before declining, while the cost of capital remained relatively stable with a slight upward trend. Invested capital also exhibited volatility, decreasing notably in the most recent year. These factors combined to produce a varied economic profit trajectory.
- Economic Profit Trend
- Economic profit began at a negative value in 2019, indicating the company’s returns were less than its cost of capital. A substantial positive shift occurred in 2020 and continued into 2021, with economic profit reaching a peak. However, economic profit returned to a negative value in 2022 before recovering to a positive, though lower, level in 2023. This suggests periods of value creation were interspersed with periods where returns did not cover the cost of capital.
- NOPAT Performance
- NOPAT increased from US$1,016 million in 2019 to US$1,566 million in 2020, and further to US$1,799 million in 2021. A significant decrease was then observed in 2022, falling to US$1,089 million, followed by a slight decline to US$1,013 million in 2023. This pattern indicates operational profitability experienced considerable swings during the period.
- Cost of Capital
- The cost of capital remained relatively consistent, fluctuating between 7.64% and 8.26% throughout the period. A slight upward trend is discernible, increasing from 7.80% in 2019 to 8.07% in 2023. This suggests a gradual increase in the required rate of return for investors.
- Invested Capital
- Invested capital showed an initial increase from US$13,101 million in 2019 to US$13,587 million in 2021. A decrease was then recorded in 2022, falling to US$13,188 million, and a more substantial decline occurred in 2023, reaching US$11,675 million. This reduction in invested capital may reflect strategic divestitures, asset sales, or reduced investment in operations.
The interplay between NOPAT, cost of capital, and invested capital significantly influenced economic profit. The decline in invested capital in 2023, despite a positive economic profit, warrants further investigation to determine its long-term implications for value creation.
Net Operating Profit after Taxes (NOPAT)
Kellanova, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in exit cost reserves.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Kellanova.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Kellanova.
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
The financial data reveals that net income attributable to the company exhibited notable fluctuations over the five-year period. Starting at 960 million US dollars in 2019, net income increased substantially to 1,251 million in 2020 and further to a peak of 1,488 million in 2021. However, this upward trend reversed in the subsequent years, with net income declining sharply to 960 million in 2022 and slightly decreasing again to 951 million in 2023, essentially returning to near the initial 2019 level by the end of the period.
Similarly, net operating profit after taxes (NOPAT) showed strong growth in the first three years, rising from 1,016 million US dollars in 2019 to a high of 1,799 million in 2021. This represents a compound growth phase with substantial improvement in operational profitability. Following this peak, NOPAT saw a marked decline in 2022 to 1,089 million and continued to decrease moderately to 1,013 million in 2023, reaching a figure close to the starting point of 2019.
- Net Income Trends
- Initial growth through 2021 followed by a reversion to earlier levels by 2023.
- NOPAT Trends
- Strong operational profit growth until 2021, then a significant decline over the last two years.
- Overall Pattern
- Both net income and NOPAT peaked in 2021 and subsequently declined, erasing much of the gains made during the growth phase. This suggests challenges in sustaining profitability post-2021.
Cash Operating Taxes
Kellanova, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
The analysis of the annual financial data over the period from the end of 2019 through the end of 2023 reveals certain fluctuations in tax-related cash outflows.
- Income Taxes
- The amount of income taxes paid has exhibited variability throughout the periods. Starting at 321 million USD at the end of 2019, amounts remained relatively stable in 2020 with 323 million USD. However, there was a significant increase in 2021 to 474 million USD. Subsequently, income taxes declined sharply in 2022 to 244 million USD, followed by a slight increase to 258 million USD in 2023. This pattern suggests a peak in income tax obligations in 2021, with a marked reduction in the following years.
- Cash Operating Taxes
- Cash operating taxes experienced a notable decline from 536 million USD in 2019 to 317 million USD at the end of 2020. Following this dip, there was a gradual increase over the next three years, rising to 399 million USD in 2021, 340 million USD in 2022, and finally 365 million USD in 2023. Despite the upward trajectory from 2020 onwards, the cash operating taxes in 2023 remained below the 2019 level.
Overall, the data indicates a divergent trend between income taxes and cash operating taxes. Income taxes peaked in 2021 but decreased significantly afterwards, whereas cash operating taxes dropped sharply in 2020 but then experienced gradual recovery. This could reflect changes in taxable income, operational performance, or tax policies affecting the timing and amount of tax payments across the years.
Invested Capital
Kellanova, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of exit cost reserves.
5 Addition of equity equivalents to total Kellanova equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- Debt and Leases
- There is a clear downward trend in the total reported debt and leases over the analyzed periods. From approximately 8.47 billion USD at the end of 2019, the debt load steadily decreased each year, reaching about 6.53 billion USD by the end of 2023. This suggests a consistent effort toward deleveraging or reducing liabilities during this timeframe.
- Equity
- Total equity exhibited growth from 2019 to 2022, increasing from roughly 2.75 billion USD to around 3.94 billion USD. However, in the final period ending 2023, there is a noticeable decline to approximately 3.18 billion USD. This drop could indicate either a return of capital to shareholders, losses, or other equity-reducing events experienced in that year.
- Invested Capital
- The invested capital values show relative stability but with a downward move in the most recent period. From about 13.1 billion USD in 2019, invested capital slightly increased to a peak near 13.59 billion USD by the end of 2021, before modestly declining to roughly 11.68 billion USD by the end of 2023. This decline may reflect asset sales, reduced capital expenditure, or other adjustments in company investments or assets employed.
- Overall Insights
- The company appears to have focused on reducing its financial leverage throughout the examined years, improving its debt profile. Despite an increase in equity until 2022, the sharp reduction in 2023 warrants attention as it contrasts with prior growth trends. The decline in invested capital in 2023 aligns with lower equity, suggesting a contraction in the company's operational or investment base. These patterns indicate strategic financial restructuring or responses to external market conditions that have impacted the company's capital structure and asset base in recent years.
Cost of Capital
Kellanova, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-30).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-28).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kellanova, economic spread ratio calculation, comparison to benchmarks
| Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited considerable fluctuation between 2019 and 2023. Initially negative in 2019, the ratio demonstrated substantial improvement through 2021, followed by a decline in 2022 and a partial recovery in 2023. This pattern mirrors the changes observed in economic profit, with invested capital showing a more moderate trend.
- Economic Spread Ratio
- In 2019, the economic spread ratio was -0.05%, indicating that the company’s return on invested capital was less than its cost of capital. A significant positive shift occurred in 2020, with the ratio reaching 4.23%, and continued to rise to 5.36% in 2021. This suggests a period of strong value creation. However, the ratio experienced a sharp reversal in 2022, falling to -0.01%, before recovering to 0.61% in 2023. The 2022 result indicates a near-breakeven situation regarding value creation, while 2023 shows a return to modest value creation.
- Economic Profit
- Economic profit moved from a loss of US$6 million in 2019 to a substantial profit of US$558 million in 2020, increasing further to US$728 million in 2021. A significant decline was then observed in 2022, resulting in a loss of US$1 million. Economic profit recovered to US$71 million in 2023, though remaining below the levels achieved in 2020 and 2021.
- Invested Capital
- Invested capital generally increased from US$13,101 million in 2019 to US$13,587 million in 2021. A decrease was noted in 2022, falling to US$13,188 million, and a more substantial decrease occurred in 2023, reaching US$11,675 million. This suggests a potential shift in capital allocation strategy or divestiture of assets in the latter period.
The correlation between economic profit and the economic spread ratio is evident. Periods of higher economic profit correspond with higher economic spread ratios, and vice versa. The decrease in invested capital in 2023, coupled with a positive, albeit lower, economic spread ratio, suggests improved efficiency in capital utilization during that year.
Economic Profit Margin
Kellanova, economic profit margin calculation, comparison to benchmarks
| Dec 30, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 28, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited considerable fluctuation between 2019 and 2023. Initial observations reveal a negative economic profit in 2019, followed by substantial improvements in subsequent years before declining again in 2022, and a partial recovery in 2023.
- Economic Profit Margin Trend
- In 2019, the economic profit margin was negative at -0.05%, indicating the company’s return on capital employed was less than its cost of capital. A significant positive shift occurred in 2020, with the margin rising to 4.05%. This upward trend continued into 2021, reaching a peak of 5.13%. However, the margin experienced a complete reversal in 2022, falling to 0.00%, suggesting the company’s economic profit was negligible. The margin showed a modest recovery in 2023, reaching 0.54%, but remained considerably below the levels observed in 2020 and 2021.
The economic profit margin’s movement closely mirrors the trend in economic profit. The substantial increase in economic profit from 2019 to 2021 directly correlates with the rising margin. The negative economic profit in 2022 is reflected in the zero margin, and the return to positive economic profit in 2023 is mirrored by a positive, albeit lower, margin.
- Relationship to Net Sales
- Net sales generally increased from 2019 to 2022, from US$13,578 million to US$15,315 million. However, net sales decreased in 2023 to US$13,122 million. Despite the increase in net sales up to 2022, the economic profit margin did not consistently increase, indicating that revenue growth alone did not guarantee improved economic profitability. The decline in net sales in 2023 coincided with a partial recovery in the economic profit margin, suggesting factors beyond revenue, such as cost management or capital efficiency, may have contributed to the improvement.
The volatility in the economic profit margin suggests the company’s ability to generate returns exceeding its cost of capital is sensitive to underlying economic conditions or internal operational factors. Further investigation into the drivers of these fluctuations would be beneficial.