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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Marathon Petroleum Corp. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to Earnings (P/E) since 2011
- Price to Book Value (P/BV) since 2011
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
Marathon Petroleum Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
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 significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) experienced substantial volatility, beginning with a positive value in 2019, followed by a large negative value in 2020, recovery in 2021 and 2022, and a decline in 2023. Concurrently, the cost of capital exhibited a consistent upward trend throughout the period. Invested capital decreased from 2019 to 2021, then increased in 2022, before decreasing again in 2023. These factors combined to produce a varied economic profit performance.
- Economic Profit Trend
- Economic profit was negative in 2019, 2020, and 2021, indicating that returns did not exceed the cost of capital. The largest negative economic profit occurred in 2020, coinciding with the negative NOPAT. A positive economic profit was achieved in 2022, driven by a substantial increase in NOPAT. However, economic profit turned negative again in 2023, despite positive NOPAT, suggesting the increased cost of capital significantly impacted profitability.
- NOPAT Analysis
- NOPAT experienced a dramatic decrease in 2020, resulting in a substantial loss. The subsequent recovery in 2021 and significant increase in 2022 suggest a rebound in operational performance. The decline in NOPAT in 2023, while still positive, indicates a weakening of operational profitability compared to the prior year.
- Cost of Capital Progression
- The cost of capital increased steadily from 13.36% in 2019 to 17.54% in 2023. This consistent rise in the cost of capital likely contributed to the negative economic profit in 2019, 2020, 2021 and 2023, as a larger portion of returns was required to satisfy investor expectations.
- Invested Capital Movement
- Invested capital decreased between 2019 and 2021, potentially reflecting divestitures or reduced capital expenditures. The increase in 2022 could be attributed to new investments or acquisitions. The decrease in 2023 suggests a possible reduction in capital employed.
Overall, the economic profit performance appears sensitive to changes in both NOPAT and the cost of capital. While the company demonstrated an ability to generate positive economic profit in 2022, the subsequent decline in 2023 highlights the importance of managing both operational profitability and capital costs.
Net Operating Profit after Taxes (NOPAT)
Marathon Petroleum Corp., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in restructuring reserve.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to MPC.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2023 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income (loss) attributable to MPC.
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The analyzed financial data reveals significant fluctuations in key profitability indicators over the five-year period ending December 31, 2023.
- Net Income (Loss) Attributable to MPC
- Net income exhibited pronounced volatility. The figure fell from a positive $2,637 million in 2019 to a substantial loss of $9,826 million in 2020, indicating a severe downturn, likely driven by adverse market or operational factors during that year. Recovery occurred in 2021 with net income rising sharply to $9,738 million, surpassing the 2019 level. This upward momentum continued into 2022, reaching a peak of $14,516 million, followed by a decline in 2023 to $9,681 million. Overall, the net income reflected substantial cyclical variation, with a drastic loss followed by strong recovery and subsequent moderation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored the pattern shown by net income, experiencing a significant negative shift in 2020 where it dropped to -$10,978 million from $6,182 million in 2019. The following years saw a robust recovery with NOPAT increasing to $6,187 million in 2021, nearly returning to the 2019 level, and then peaking at $17,951 million in 2022, which notably exceeded prior peaks in both net income and NOPAT. In 2023, NOPAT decreased to $10,783 million, indicating a moderation but remaining well above pre-2020 levels.
These trends suggest that the company was affected by a significant adverse event or market condition in 2020 leading to large losses and negative operating profit. However, the subsequent two years showed a robust rebound and profitability expansion beyond pre-2020 figures, implying possible operational improvements or favorable market conditions. The slight decline in both net income and NOPAT in 2023 could indicate some normalization or emerging challenges following exceptional performance in 2022.
Cash Operating Taxes
Marathon Petroleum Corp., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
- Income Tax Provision (Benefit)
- The income tax provision experienced significant volatility over the analyzed period. It started with a positive provision of 1,074 million USD at the end of 2019, followed by a substantial tax benefit of -2,430 million USD in 2020, indicating a reversal or tax credit situation. In 2021, the provision reverted to a modest positive value of 264 million USD. A notable increase occurred in 2022, reaching 4,491 million USD, before declining to 2,817 million USD at the end of 2023. This pattern suggests considerable fluctuations in taxable income or tax planning strategies leading to large swings in tax expense provisions.
- Cash Operating Taxes
- Cash operating taxes mirrored the overall trend of the income tax provision but with more pronounced changes. The 2019 figure stood at 324 million USD, then sharply decreased to a cash inflow (negative tax payment) of -1,899 million USD in 2020, reflecting adjustments or refunds. In 2021, cash taxes surged to 705 million USD, climbed dramatically to 4,421 million USD in 2022—the peak value in the period—and subsequently dropped to 3,010 million USD in 2023. These fluctuations align with variations in operational profitability and tax settlement timings, indicating an erratic but generally increasing cash tax burden post-2020.
Invested Capital
Marathon Petroleum Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2019-12-31).
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 LIFO reserve. See details »
5 Addition of restructuring reserve.
6 Addition of equity equivalents to total MPC stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of short-term investments.
The financial data reveals several key trends in the capital structure and investment base over the five-year period ending in 2023.
- Total reported debt & leases
- The total reported debt and leases experienced some fluctuations. Initially, it increased from 31,317 million USD in 2019 to a peak of 33,095 million USD in 2020. This was followed by a notable decline in 2021 to 26,904 million USD. Subsequently, a moderate rise occurred over the next two years, reaching 28,501 million USD in 2023. Overall, the debt levels show some volatility but remained below the 2019 level by the end of 2023.
- Total MPC stockholders’ equity
- Stockholders’ equity showed a declining trend over the period. Starting at 33,694 million USD in 2019, equity sharply decreased to 22,199 million USD in 2020. Although it buoyantly recovered to 26,206 million USD in 2021 and further increased to 27,715 million USD in 2022, equity declined again to 24,404 million USD in 2023. Despite recovery attempts, equity in 2023 remained significantly below the 2019 level, indicating possible challenges affecting retained earnings or other components of equity.
- Invested capital
- The invested capital consistently trended downward from 82,004 million USD in 2019 to 63,897 million USD in 2023, with intermediate fluctuations. It dropped to 70,186 million USD in 2020 and further to 63,579 million USD in 2021. A recovery occurred in 2022, reaching 69,547 million USD, followed by a decline again to 63,897 million USD in 2023. This pattern suggests variability in capital investment levels or changes in capital employed over the timeframe.
In summary, the data indicates that the company experienced a general reduction in invested capital and equity levels over the five years, paired with fluctuating debt levels that ultimately ended slightly below the initial value. The changes in equity and invested capital might reflect operational or strategic adjustments impacting the capital structure.
Cost of Capital
Marathon Petroleum Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Marathon Petroleum Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
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 significant fluctuations between 2019 and 2023. Initially negative, the ratio demonstrated a substantial decline in 2020 before recovering to positive territory in 2022, followed by a return to negative values in 2023. This volatility suggests a dynamic relationship between economic profit and invested capital.
- Economic Spread Ratio
- In 2019, the economic spread ratio was -5.82%, indicating that the company’s return on invested capital was below its cost of capital. A dramatic decrease was observed in 2020, with the ratio falling to -29.09%, signifying a considerably wider gap between returns and costs. The ratio improved significantly in 2021 to -5.60%, suggesting some recovery in profitability relative to invested capital. A positive value of 8.38% was recorded in 2022, indicating that the company generated returns exceeding its cost of capital during that period. However, this positive trend reversed in 2023, with the ratio declining to -0.66%, suggesting a narrowing of the margin between returns and costs.
The economic profit figures correlate with the economic spread ratio. Negative economic profit values in 2019, 2020, 2021, and 2023 align with the negative or near-zero economic spread ratios observed in those years. The positive economic profit in 2022 corresponds with the positive economic spread ratio for the same period. The magnitude of the economic profit fluctuations appears to drive the changes in the economic spread ratio.
- Invested Capital
- Invested capital decreased from US$82,004 million in 2019 to US$70,186 million in 2020, and continued to decline to US$63,579 million in 2021. A slight increase to US$69,547 million was noted in 2022, followed by a decrease to US$63,897 million in 2023. While the trend in invested capital is generally downward, the changes are less dramatic than those observed in economic profit and the economic spread ratio. The fluctuations in invested capital likely contribute to the overall changes in the economic spread ratio, but appear to be secondary to the impact of economic profit.
The observed patterns suggest the company’s ability to generate economic profit is highly sensitive to external factors or internal operational changes. The substantial improvement in 2022, followed by the decline in 2023, warrants further investigation to understand the underlying drivers of these shifts in performance.
Economic Profit Margin
Marathon Petroleum Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales and other operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuations between 2019 and 2023. Initially negative, it experienced a substantial decline in 2020 before recovering and then declining again in the most recent period. This analysis details the observed trends in economic profit and its relationship to sales and other operating revenues.
- Economic Profit Margin Trend
- In 2019, the economic profit margin stood at -3.85%. This indicates that the company’s economic profit was 3.85% of sales and other operating revenues. A dramatic decrease was observed in 2020, with the margin falling to -29.26%. This represents a significant erosion in value creation relative to revenue. The margin improved considerably in 2021, reaching -2.97%, suggesting a partial recovery in economic profitability. Further improvement occurred in 2022, with the margin turning positive at 3.29%, indicating the company generated economic profit equivalent to 3.29% of its revenues. However, this positive trend reversed in 2023, as the economic profit margin declined to -0.29%.
- Relationship to Sales and Revenues
- Sales and other operating revenues decreased substantially in 2020, from US$123,949 million in 2019 to US$69,779 million. This decline coincided with the largest drop in the economic profit margin. Revenues rebounded strongly in 2021 and 2022, reaching US$119,983 million and US$177,453 million respectively. While revenues decreased in 2023 to US$148,379 million, they remained above 2019 levels. The economic profit followed a similar pattern of decline in 2020, recovery in 2021 and 2022, and a decline in 2023, though the magnitude of the economic profit fluctuations was more pronounced than the revenue changes.
The volatility in the economic profit margin suggests a sensitivity to changes in both revenues and the underlying cost of capital. The return to a negative margin in 2023, despite relatively high revenue levels, warrants further investigation into the factors impacting profitability and cost of capital.