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:
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) 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 substantially to US$146 million in 2020, and continued to rise to US$283 million in 2021. A significant decline occurred in 2022, resulting in an economic loss of US$5 million. The final year, 2023, showed a strong recovery, with economic profit reaching US$546 million.
- NOPAT Performance
- NOPAT increased from US$984 million in 2019 to US$1,129 million in 2020, representing a growth of approximately 14.7%. Further growth was observed in 2021, reaching US$1,409 million. A slight decrease to US$1,222 million occurred in 2022, followed by a substantial increase to US$1,871 million in 2023, indicating a strong operational performance in the latest year.
- Cost of Capital Stability
- The cost of capital remained relatively consistent throughout the period, fluctuating between 14.08% and 14.85%. This suggests that the company’s risk profile and market conditions remained stable during the observed timeframe. The gradual increase in the cost of capital towards the end of the period may reflect broader macroeconomic trends.
- Invested Capital Growth
- Invested capital increased steadily from US$6,887 million in 2019 to US$8,921 million in 2023. This indicates ongoing investment in the business, potentially supporting the growth in NOPAT. The rate of increase in invested capital appears to have accelerated in the later years of the period.
The negative economic profit in 2022 suggests that, despite a reasonable NOPAT level, the cost of capital and invested capital combined resulted in a return below the company’s required rate of return. The substantial recovery in 2023 indicates improved efficiency in capital allocation or a significant increase in profitability relative to the invested capital base.
Net Operating Profit after Taxes (NOPAT)
Motorola Solutions Inc., NOPAT calculation
US$ 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 was low, increasing substantially before experiencing a negative value and then rising to a peak. This pattern correlates with the changes observed in economic profit, while also being influenced by the growth in invested capital.
- Economic Spread Ratio Trend
- In 2019, the economic spread ratio was 0.07%, indicating a minimal spread between the return on invested capital and the cost of capital. A substantial increase to 2.10% was observed in 2020, followed by a further rise to 3.61% in 2021. This suggests improving profitability relative to the capital employed. However, the ratio decreased to -0.06% in 2022, signifying that the cost of capital exceeded the return on invested capital. The ratio rebounded strongly in 2023, reaching 6.12%, representing a significant improvement in value creation.
- Relationship with Economic Profit
- The economic spread ratio’s trajectory closely mirrors the economic profit. The positive economic profit values in 2019, 2020, and 2021 align with positive and increasing economic spread ratios. The negative economic profit in 2022 corresponds with the negative economic spread ratio. The substantial increase in economic profit in 2023 is reflected in the high economic spread ratio for that year.
- Impact of Invested Capital
- Invested capital consistently increased throughout the period, from US$6,887 million in 2019 to US$8,921 million in 2023. While the economic spread ratio increased in 2020 and 2021 alongside invested capital, the negative spread in 2022 indicates that the increase in invested capital did not generate a commensurate return. The substantial increase in the economic spread ratio in 2023 suggests that the increased invested capital was utilized more effectively to generate returns.
Overall, the economic spread ratio indicates a volatile period of value creation. The company experienced periods of strong value creation, a period of value destruction, and a return to strong value creation. The relationship between economic profit and invested capital is a key driver of the observed fluctuations.
Economic Profit Margin
Motorola Solutions Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 0.06%. This value increased considerably to 1.97% in 2020, indicating improved profitability relative to sales. The margin continued its upward trajectory, reaching 3.47% in 2021. However, 2022 saw a reversal of this trend, with the margin declining to -0.06%, representing an economic loss. The most recent year, 2023, demonstrated a strong rebound, with the economic profit margin rising to 5.47%, the highest value observed during the analyzed period.
The economic profit itself mirrors the pattern observed in the economic profit margin. A modest profit of US$5 million was recorded in 2019, which grew substantially to US$146 million in 2020 and further to US$283 million in 2021. The negative economic profit of US$-5 million in 2022 corresponds with the negative margin, and the significant increase to US$546 million in 2023 aligns with the margin’s recovery.
- 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 does not fully explain the fluctuations in the economic profit margin, suggesting that changes in costs or capital employed also played a significant role.
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, despite higher sales volume. The substantial improvement in both economic profit and margin in 2023 suggests successful cost management or increased efficiency in capital utilization.