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.
Economic Profit
Marathon Petroleum Corp., economic profit 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 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
= 10,783 – 17.35% × 63,897 = -304
The financial performance of Marathon Petroleum Corp. between 2019 and 2023 is characterized by significant volatility in operating profitability and a consistent increase in the cost of capital, which has heavily influenced the generation of economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme fluctuations throughout the period. A substantial decline occurred in 2020, with profit dropping to negative 10,978 million US dollars. A strong recovery followed, peaking in 2022 at 17,951 million US dollars, before moderating to 10,783 million US dollars in 2023. This volatility indicates a high sensitivity to external market conditions affecting operating margins.
- Cost of Capital
- A steady upward trend is observed in the cost of capital, which rose from 13.23% in 2019 to 17.35% by 2023. This consistent increase raised the minimum return threshold required to create value, effectively increasing the capital charge against the company's invested capital each year.
- Invested Capital
- The total invested capital generally trended downward from 82,004 million US dollars in 2019 to 63,897 million US dollars in 2023. While there was a temporary increase to 69,547 million US dollars in 2022, the overall trajectory suggests a reduction in the capital base used to generate operating profits.
- Economic Profit
- Economic profit remained negative for four of the five years analyzed, reflecting a failure to generate returns in excess of the cost of capital. The most severe value destruction occurred in 2020, with an economic profit of negative 20,325 million US dollars. The only instance of positive value creation occurred in 2022, where economic profit reached 5,960 million US dollars, driven by the peak in NOPAT. By 2023, despite positive NOPAT, the economic profit reverted to a negative 304 million US dollars, as operating gains were insufficient to cover the heightened cost of capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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
= 1,218 × 4.10% = 50
7 2023 Calculation
Tax benefit of interest expense, net of interest capitalized = Adjusted interest expense, net of interest capitalized × Statutory income tax rate
= 1,315 × 21.00% = 276
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
= 530 × 21.00% = 111
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The financial performance between 2019 and 2023 is characterized by significant volatility, featuring a severe contraction in 2020 followed by a period of strong recovery and a peak in 2022. Both Net Income and Net Operating Profit After Taxes (NOPAT) exhibit highly correlated trajectories, reflecting a synchronized response to operational and market conditions.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced a drastic decline from 6,182 million US$ in 2019 to a deficit of 10,978 million US$ in 2020. A recovery phase followed, with NOPAT returning to 6,187 million US$ in 2021 before reaching a five-year peak of 17,951 million US$ in 2022. By 2023, the figure moderated to 10,783 million US$, representing a decrease from the 2022 high but remaining significantly above the 2019 and 2021 levels.
- Net Income Performance
- Net income attributable to MPC followed a similar pattern of volatility, dropping from 2,637 million US$ in 2019 to a loss of 9,826 million US$ in 2020. Performance rebounded sharply to 9,738 million US$ in 2021 and achieved a maximum of 14,516 million US$ in 2022. In 2023, net income declined to 9,681 million US$, aligning with the contraction observed in NOPAT.
- Comparative Analysis of Profitability Metrics
- A consistent gap is observed between NOPAT and Net Income during profitable years, with NOPAT generally exceeding Net Income. This indicates that operational profitability remained stronger than final bottom-line earnings after the consideration of non-operating items and financial costs. The synchronization of the 2020 trough and the 2022 peak suggests that the primary drivers of financial variance were rooted in core operating performance rather than isolated accounting adjustments or financing changes.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cash Operating Taxes
Marathon Petroleum Corp., cash operating taxes calculation
US$ 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).
The analysis of tax expenditures between 2019 and 2023 reveals significant volatility in both income tax provisions and cash operating taxes, characterized by a substantial reversal in 2020 followed by a period of sharp increase and subsequent moderation.
- Tax Expenditure Trends
- A notable inversion occurred in 2020, where the income tax provision shifted to a benefit of US$ 2,430 million and cash operating taxes resulted in a net benefit of US$ 1,899 million. Following this period, a strong upward trajectory was observed, culminating in a peak during 2022, with cash operating taxes reaching US$ 4,421 million before declining to US$ 3,010 million in 2023.
- Convergence of Provision and Cash Outflows
- Between 2019 and 2021, a distinct variance existed between the income tax provision and actual cash operating taxes. In 2019, the provision of US$ 1,074 million far exceeded the cash payment of US$ 324 million. However, from 2022 onward, these two metrics converged closely. In 2022, the variance was minimal, with cash operating taxes nearly equal to the provision. This alignment continued into 2023, indicating that accrued tax expenses were closely mirrored by actual cash disbursements.
- Implications for Economic Value Added (EVA)
- The volatility in cash operating taxes indicates substantial fluctuations in the actual cash outflows required to settle tax liabilities. The transition from a tax benefit in 2020 to significant expenditures in 2022 and 2023 reflects a shift in the company's tax position that directly impacts the calculation of net operating profit after tax (NOPAT). The high cash tax payments in the latter years suggest a period of increased taxable profitability, which increases the cash tax burden and adjusts the capital charge calculations essential for determining EVA.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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.
Invested capital exhibits a general contraction over the analyzed five-year period, decreasing from 82,004 million USD in 2019 to 63,897 million USD in 2023. This downward trajectory indicates a reduction in the total capital base employed by the organization to generate economic value.
- Invested Capital Trends
- A consistent decline was observed between 2019 and 2021, with invested capital reaching a period low of 63,579 million USD. While a moderate recovery occurred in 2022, increasing to 69,547 million USD, the figure reverted toward the 2021 lows by the end of 2023.
- Debt and Lease Obligations
- Total reported debt and leases remained relatively stable compared to other capital components. After a peak of 33,095 million USD in 2020, obligations decreased to 26,904 million USD in 2021 and have since seen a marginal upward trend, reaching 28,501 million USD by December 31, 2023.
- Stockholders' Equity Volatility
- Stockholders' equity demonstrated significant volatility throughout the period. A sharp decrease occurred in 2020, with equity dropping from 33,694 million USD to 22,199 million USD. Despite a recovery phase reaching 27,715 million USD in 2022, a subsequent decline to 24,404 million USD in 2023 contributed to the overall reduction in invested capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
Marathon Petroleum Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 60,405) | 60,405) | ÷ | 87,593) | = | 0.69 | 0.69 | × | 23.55% | = | 16.24% | ||
| Debt3 | 25,970) | 25,970) | ÷ | 87,593) | = | 0.30 | 0.30 | × | 4.54% × (1 – 21.00%) | = | 1.06% | ||
| Operating lease liability4 | 1,218) | 1,218) | ÷ | 87,593) | = | 0.01 | 0.01 | × | 4.10% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 87,593) | 1.00 | 17.35% | ||||||||||
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 | 55,925) | 55,925) | ÷ | 81,664) | = | 0.68 | 0.68 | × | 23.55% | = | 16.13% | ||
| Debt3 | 24,530) | 24,530) | ÷ | 81,664) | = | 0.30 | 0.30 | × | 4.51% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 1,209) | 1,209) | ÷ | 81,664) | = | 0.01 | 0.01 | × | 3.55% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 81,664) | 1.00 | 17.24% | ||||||||||
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 | 42,086) | 42,086) | ÷ | 72,149) | = | 0.58 | 0.58 | × | 23.55% | = | 13.74% | ||
| Debt3 | 28,698) | 28,698) | ÷ | 72,149) | = | 0.40 | 0.40 | × | 4.42% × (1 – 21.00%) | = | 1.39% | ||
| Operating lease liability4 | 1,365) | 1,365) | ÷ | 72,149) | = | 0.02 | 0.02 | × | 3.11% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 72,149) | 1.00 | 15.17% | ||||||||||
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 | 35,573) | 35,573) | ÷ | 72,629) | = | 0.49 | 0.49 | × | 23.55% | = | 11.54% | ||
| Debt3 | 35,545) | 35,545) | ÷ | 72,629) | = | 0.49 | 0.49 | × | 4.45% × (1 – 21.00%) | = | 1.72% | ||
| Operating lease liability4 | 1,511) | 1,511) | ÷ | 72,629) | = | 0.02 | 0.02 | × | 3.68% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 72,629) | 1.00 | 13.32% | ||||||||||
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 | 30,799) | 30,799) | ÷ | 64,076) | = | 0.48 | 0.48 | × | 23.55% | = | 11.32% | ||
| Debt3 | 30,798) | 30,798) | ÷ | 64,076) | = | 0.48 | 0.48 | × | 4.70% × (1 – 21.00%) | = | 1.78% | ||
| Operating lease liability4 | 2,479) | 2,479) | ÷ | 64,076) | = | 0.04 | 0.04 | × | 4.02% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 64,076) | 1.00 | 13.23% | ||||||||||
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 | (304) | 5,960) | (3,461) | (20,325) | (4,666) | |
| Invested capital2 | 63,897) | 69,547) | 63,579) | 70,186) | 82,004) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -0.48% | 8.57% | -5.44% | -28.96% | -5.69% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.87% | 6.63% | -2.48% | — | — | |
| ConocoPhillips | 6.35% | 19.09% | 4.79% | — | — | |
| Exxon Mobil Corp. | 2.88% | 11.64% | 3.03% | — | — | |
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 × -304 ÷ 63,897 = -0.48%
4 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant volatility in value creation and capital utilization between 2019 and 2023. The financial trajectory is characterized by a severe contraction in 2020, a subsequent recovery peaking in 2022, and a return to a marginal economic loss by the end of 2023.
- Economic Profit Trends
- Economic profit exhibited extreme fluctuations over the five-year period. After an initial loss of 4,666 million USD in 2019, a substantial decline occurred in 2020, with losses expanding to 20,325 million USD. A recovery phase followed, with losses narrowing to 3,461 million USD in 2021 before the company achieved a positive economic profit of 5,960 million USD in 2022. However, this positive momentum was not sustained into 2023, as the figure reverted to a loss of 304 million USD.
- Invested Capital Dynamics
- The capital base showed a general downward trend with some intermittent volatility. Invested capital decreased from 82,004 million USD in 2019 to a low of 63,579 million USD in 2021. A moderate increase to 69,547 million USD was observed in 2022, followed by another reduction to 63,897 million USD in 2023. This indicates a general contraction of the invested capital base over the long term, despite the brief increase in 2022.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of economic profit, reflecting the efficiency of capital employment relative to the cost of capital. The ratio dropped sharply to -28.96% in 2020, representing a significant failure to cover the cost of capital. This was followed by a recovery to -5.44% in 2021 and a peak of 8.57% in 2022, marking the only period in the dataset where positive economic value was generated. By 2023, the ratio converged toward the break-even point, settling at -0.48%.
Overall, the data indicates that while a significant recovery in value creation was achieved in 2022, the company has struggled to maintain a consistent positive economic spread, ending the period just below the threshold of economic profitability.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
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 | (304) | 5,960) | (3,461) | (20,325) | (4,666) | |
| Sales and other operating revenues | 148,379) | 177,453) | 119,983) | 69,779) | 123,949) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -0.20% | 3.36% | -2.88% | -29.13% | -3.76% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -4.18% | 5.97% | -3.09% | — | — | |
| ConocoPhillips | 9.20% | 18.36% | 7.98% | — | — | |
| Exxon Mobil Corp. | 2.64% | 8.67% | 2.98% | — | — | |
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 × -304 ÷ 148,379 = -0.20%
3 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by significant volatility in both top-line revenue and the generation of economic value. The period is marked by a severe contraction in 2020, a robust recovery peaking in 2022, and a subsequent moderate decline in 2023.
- Economic Profit Trends
- Economic profit remained negative for the majority of the analyzed period. A substantial decline occurred in 2020, where losses reached 20.3 billion US$. This was followed by a consistent recovery phase, culminating in a positive economic profit of 5.96 billion US$ in 2022. However, this positive trajectory reversed in 2023, with economic profit returning to a negative value of 304 million US$, though the deficit is considerably smaller than the losses seen in the early part of the period.
- Revenue Fluctuations
- Sales and other operating revenues exhibited a mirroring pattern to economic profit. Revenue dropped sharply from 123.9 billion US$ in 2019 to 69.8 billion US$ in 2020. A strong upward trend followed, reaching a five-year peak of 177.5 billion US$ in 2022 before receding to 148.4 billion US$ in 2023.
- Economic Profit Margin Analysis
- The economic profit margin serves as a primary indicator of value creation relative to scale. The margin collapsed to -29.13% in 2020, reflecting a period of severe value erosion. The margin improved steadily thereafter, achieving a positive peak of 3.36% in 2022, indicating that the company generated returns in excess of its cost of capital during that year. By 2023, the margin compressed to -0.20%, suggesting a near-break-even state regarding economic value addition, though technically remaining in a value-destructive position.
The correlation between revenue volume and the economic profit margin indicates that the entity's ability to create economic value is highly sensitive to revenue fluctuations. The shift from a deep negative margin in 2020 to a positive margin in 2022 demonstrates a significant recovery in operational efficiency or market conditions, while the 2023 results suggest a return to marginal value destruction.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?