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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Kellanova pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Aggregate Accruals
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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 financial data demonstrates varied performance trends over the analyzed five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited growth from 2019 to 2021, rising from 1,016 million US dollars to a peak of 1,799 million US dollars in 2021. However, after this peak, a noticeable decline occurred in 2022 and 2023, with values falling to 1,089 million and then further to 1,013 million US dollars, respectively. This suggests a downward pressure on operating profitability in the most recent two years.
- Cost of Capital
- The cost of capital showed moderate variation across the period, beginning at 6.96% in 2019, slightly decreasing to 6.82% in 2020, then gradually increasing to 7.34% by 2022 before a slight decrease to 7.18% in 2023. The general upward trend toward the middle and later years indicates a marginally increasing hurdle rate for investment returns.
- Invested Capital
- Invested capital remained fairly stable between 2019 and 2022, fluctuating within a narrow range from 13,101 million US dollars to 13,587 million US dollars. In 2023, however, there was a significant decrease to 11,675 million US dollars, indicating a reduction in the capital base which may reflect divestitures, asset sales, or other capital restructuring activities.
- Economic Profit
- Economic profit showed strong positive momentum from 2019 to 2021, increasing from 104 million US dollars to 846 million US dollars. This peak in 2021 aligns with the peak in NOPAT. Following this, economic profit declined sharply to 121 million in 2022 but partially recovered to 176 million US dollars in 2023. This pattern highlights variability in value creation beyond the cost of capital, with notable contraction after 2021 yet some improvement in the final year.
Overall, the data indicates a period of growth and improved profitability up to 2021, followed by a phase of decline in operating performance and economic profit. The decline in invested capital in 2023 may have helped partially mitigate the profitability challenges, but the cost of capital has generally increased, potentially exerting pressure on economic returns. These trends could suggest a need to focus on operational efficiencies, capital allocation, and cost management to restore prior levels of economic profitability.
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 financial data indicates several key trends over the five-year period under consideration. Overall, there is a notable fluctuation in the company's economic profit, invested capital, and economic spread ratio, which provides insight into profitability and capital efficiency.
- Economic Profit
- The economic profit exhibits a volatile pattern, starting at 104 million USD in 2019, reaching a significant peak of 846 million USD in 2021, then sharply declining to 121 million USD in 2022 before slightly increasing to 176 million USD in 2023. This suggests periods of strong profitability followed by a considerable reduction, with a modest recovery in the most recent year.
- Invested Capital
- The invested capital remains relatively stable from 2019 through 2022, fluctuating narrowly between approximately 13,100 million USD and 13,600 million USD. However, there is a notable decrease to 11,675 million USD in 2023, indicating a reduction in the total capital invested in the company's operations in the latest year.
- Economic Spread Ratio
- The economic spread ratio shows a somewhat inconsistent trend. It begins at 0.8% in 2019, improves significantly to over 6% by 2021, but then declines sharply in 2022 to less than 1%, followed by a slight improvement to 1.5% in 2023. This ratio reflects the difference between the return on invested capital and the cost of capital, implying increased efficiency and profitability in 2020 and 2021, with a marked deterioration thereafter, although the most recent data indicates partial recovery.
In summary, the period demonstrates a peak in economic profit and capital efficiency around 2021, accompanied by relative capital stability until a reduction in 2023. The sharp declines in economic profit and spread ratio after 2021 suggest challenges in maintaining profitability and returns on invested capital, while the modest recovery in 2023 provides a cautiously positive outlook.
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.
- Economic Profit
- The economic profit exhibited a general increasing trend from 2019 to 2021, rising from 104 million USD in 2019 to a peak of 846 million USD in 2021. This indicates a significant improvement in profitability during this period. However, there was a notable decline in 2022 to 121 million USD, followed by a moderate recovery to 176 million USD in 2023.
- Net Sales
- Net sales showed a consistent upward trend from 2019 to 2022, increasing from approximately 13.6 billion USD in 2019 to a maximum of around 15.3 billion USD in 2022. In 2023, net sales decreased substantially to approximately 13.1 billion USD, signaling a potential reduction in market demand or sales volume in that most recent year.
- Economic Profit Margin
- The economic profit margin mirrored the overall pattern of economic profit. It increased notably from 0.77% in 2019 to a high of 5.97% in 2021, suggesting enhanced efficiency and profitability relative to sales. However, this margin fell sharply to 0.79% in 2022 and recovered slightly to 1.34% in 2023, reflecting reduced profitability relative to net sales during those years.
- Summary of Trends
- Overall, the financial data indicate strong performance improvements from 2019 through 2021 across economic profit, net sales, and profit margin, implying effective operational and financial management during this period. The subsequent declines in 2022 across all key indicators suggest challenges impacting profitability and sales, with a partial rebound in 2023 in terms of profitability though sales remained lower. The mismatch between declining net sales and modest recovery in economic profit margin in 2023 may point to cost control measures or pricing strategies helping to mitigate the impact of lower revenues.