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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Motorola Solutions Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
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Economic Profit
Motorola Solutions Inc., 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
= – × =
Motorola Solutions Inc. demonstrated fluctuating economic profit over the five-year period ending December 31, 2023. Net operating profit after taxes (NOPAT) generally increased, while the cost of capital remained relatively stable. Invested capital also exhibited an upward trend. However, these factors did not consistently translate into positive economic profit each year.
- Economic Profit Trend
- Economic profit began at US$5 million in 2019, increased significantly to US$147 million in 2020, and continued to rise to US$284 million in 2021. A substantial decline was then observed in 2022, resulting in an economic loss of US$5 million. The final year, 2023, showed a strong recovery, with economic profit reaching US$547 million.
- NOPAT Performance
- NOPAT increased from US$984 million in 2019 to US$1,129 million in 2020, and further to US$1,409 million in 2021. A decrease to US$1,222 million occurred in 2022, followed by a considerable increase to US$1,871 million in 2023. This suggests improving operational profitability, particularly in the most recent year.
- Cost of Capital Stability
- The cost of capital remained relatively consistent throughout the period, fluctuating between 14.07% and 14.84%. This indicates a stable risk profile and financing structure for the company. The slight upward trend in the cost of capital in later years may reflect broader macroeconomic conditions.
- Invested Capital Growth
- Invested capital increased steadily from US$6,887 million in 2019 to US$8,921 million in 2023. This growth suggests ongoing investment in the business, potentially supporting future expansion and profitability. The increase in invested capital did not always correlate directly with increases in economic profit, as evidenced by the negative economic profit in 2022.
The negative economic profit in 2022 is a notable observation. Despite increased NOPAT and invested capital compared to 2019 and 2020, the higher cost of capital relative to the return generated on invested capital resulted in a loss. The substantial recovery in 2023, driven by a significant increase in NOPAT, demonstrates the company’s ability to generate returns exceeding its cost of capital under favorable conditions.
Net Operating Profit after Taxes (NOPAT)
Motorola Solutions Inc., NOPAT calculation
US$ 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 credit losses.
3 Addition of increase (decrease) in reorganization of businesses accruals.
4 Addition of increase (decrease) in equity equivalents to net earnings attributable to Motorola Solutions, Inc..
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 earnings attributable to Motorola Solutions, Inc..
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.
- Net earnings attributable to Motorola Solutions, Inc.
- The net earnings demonstrate a consistent upward trend throughout the five-year period. Starting at 868 million US dollars in 2019, the figure increased each year, reaching 1709 million US dollars by 2023. This growth suggests a steady enhancement of profitability and successful operational execution over the years.
- Net operating profit after taxes (NOPAT)
- The NOPAT values generally follow an increasing pattern from 2019 to 2023. Beginning at 984 million US dollars in 2019, NOPAT peaked at 1409 million US dollars in 2021 before experiencing a decline to 1222 million US dollars in 2022. It then rose sharply to 1871 million US dollars in 2023, indicating a strong recovery and improved operational efficiency in the latest period. The fluctuation observed in 2022 may warrant further analysis to understand the causes behind the temporary dip.
Cash Operating Taxes
Motorola Solutions Inc., 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 financial data reflects the annual trends in income tax expense and cash operating taxes over the five-year period ending in 2023.
- Income Tax Expense
- Between 2019 and 2021, there was a consistent upward trend, with the income tax expense increasing from 130 million USD in 2019 to 302 million USD in 2021. However, in 2022, this figure experienced a significant decline to 148 million USD. Subsequently, it surged markedly to 432 million USD in 2023, representing the highest value in the reported period.
- Cash Operating Taxes
- Cash operating taxes also exhibited an upward trajectory from 265 million USD in 2019 to 315 million USD in 2021. In 2022, this amount rose sharply to 534 million USD, followed by a slight decrease to 514 million USD in 2023. Despite this minor reduction in the final year, cash operating taxes remained substantially elevated compared to the earlier years.
Overall, the data indicates that both income tax expense and cash operating taxes generally increased over the period, with notable fluctuations in the last two years. Income tax expense demonstrated volatility with a sharp decrease followed by a substantial increase, whereas cash operating taxes showed a strong upward spike in 2022 and then a moderate decline in 2023. These patterns suggest changing tax liabilities or operational circumstances impacting taxable income and actual cash tax payments.
Invested Capital
Motorola Solutions Inc., 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 reorganization of businesses accruals.
5 Addition of equity equivalents to total Motorola Solutions, Inc. stockholders’ equity (deficit).
6 Removal of accumulated other comprehensive income.
- Total reported debt & leases
- The total reported debt and leases exhibited a generally increasing trend over the analyzed period. Starting at $5,748 million in 2019, debt slightly decreased to $5,703 million in 2020, then rose to $6,130 million in 2021. This upward momentum continued in 2022 reaching $6,551 million and remained nearly stable at $6,550 million in 2023. Overall, the data suggests a gradual increase in debt levels, particularly from 2020 onward, indicating a potential expansion or capital investment strategy funded through increased leverage.
- Total Motorola Solutions, Inc. stockholders’ equity (deficit)
- Stockholders’ equity showed significant improvement throughout the period. Initially in a deficit of $700 million in 2019, the negative equity reduced consistently each year, moving to a deficit of $558 million in 2020 and further narrowing to a near break-even position with a $40 million deficit in 2021. By 2022, the company achieved positive equity of $116 million, which substantially increased to $724 million by 2023. This positive trend indicates strengthening financial stability and improved capital structure, reflecting enhanced retained earnings, reduced losses, or equity injections.
- Invested capital
- Invested capital demonstrated steady growth over the five-year period. Starting at $6,887 million in 2019, the total capital invested increased incrementally each year, reaching $6,976 million in 2020, $7,857 million in 2021, $8,350 million in 2022, and culminating at $8,921 million in 2023. The continuous rise in invested capital aligns with the increased debt levels and improving equity, suggesting ongoing investment in operational assets or expansion initiatives funded through a combination of debt and equity resources.
Cost of Capital
Motorola Solutions Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term 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 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Motorola Solutions Inc., 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 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 demonstrates significant fluctuation over the five-year period. Initially, the ratio exhibited a substantial increase followed by a decline, and then a marked recovery. This pattern mirrors the changes observed in economic profit, with invested capital generally trending upward.
- Economic Spread Ratio Trend
- In 2019, the economic spread ratio was 0.08%, indicating a minimal spread between return on invested capital and the cost of capital. A considerable increase to 2.10% was observed in 2020, suggesting improved profitability relative to invested capital. This positive trend continued into 2021, with the ratio reaching 3.61%, representing a strong economic spread. However, 2022 saw a reversal, with the ratio declining to -0.06%, indicating that the cost of capital exceeded the return on invested capital. The ratio experienced a substantial recovery in 2023, rising to 6.13%, signifying a return to strong economic value creation.
The economic spread ratio’s volatility suggests sensitivity to changes in economic profit. The negative value in 2022 is particularly noteworthy, as it indicates a period where the company’s investments did not generate sufficient returns to cover the cost of capital. The substantial increase in 2023 suggests successful initiatives to improve profitability or more efficient capital allocation.
- Relationship to Economic Profit
- The economic spread ratio closely follows the trend of economic profit. Years with higher economic profit, such as 2020, 2021, and 2023, correspond with higher economic spread ratios. Conversely, the negative economic profit in 2022 aligns with the negative economic spread ratio observed in the same year. This correlation highlights the direct link between profitability and the economic spread.
Invested capital consistently increased throughout the period, but the economic spread ratio’s fluctuations demonstrate that simply increasing investment does not guarantee value creation. The ability to generate a positive and expanding economic spread, as seen in 2020, 2021, and particularly 2023, is crucial for maximizing shareholder value.
Economic Profit Margin
Motorola Solutions Inc., 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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Arista Networks Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation between 2019 and 2023. Initial values were relatively low, followed by substantial growth, a subsequent decline, and then a strong recovery. A detailed examination of the trends is presented below.
- Economic Profit Margin
- In 2019, the economic profit margin stood at 0.07%. This value increased considerably to 1.98% in 2020, indicating improved profitability relative to sales. The upward trend continued into 2021, with the margin reaching 3.47%. However, 2022 saw a reversal, resulting in a negative margin of -0.05%, suggesting economic losses relative to sales. The most recent year, 2023, demonstrated a strong positive shift, with the economic profit margin rising to 5.48%, representing the highest value within the observed period.
The economic profit itself mirrors the trend observed in the economic profit margin. A modest profit of US$5 million was recorded in 2019, which grew substantially to US$147 million in 2020 and further to US$284 million in 2021. The negative economic profit of US$-5 million in 2022 corresponds with the negative margin, and the significant increase to US$547 million in 2023 aligns with the substantial margin improvement.
- Net Sales
- Net sales generally increased over the period. From US$7,887 million in 2019, sales decreased slightly to US$7,414 million in 2020. Subsequent years showed consistent growth, reaching US$8,171 million in 2021, US$9,112 million in 2022, and US$9,978 million in 2023. The increasing sales trend, coupled with the fluctuating economic profit margin, suggests that factors beyond revenue volume significantly influenced profitability.
The divergence between net sales and economic profit margin in 2022 is noteworthy. While net sales continued to increase, the economic profit margin turned negative, indicating that the cost of capital exceeded the economic profit generated from sales. The substantial recovery in both economic profit and margin in 2023 suggests successful implementation of strategies to improve profitability, potentially through cost management or increased operational efficiency.