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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- Statement of Comprehensive Income
- Common-Size Income Statement
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2014
- Net Profit Margin since 2014
- Return on Equity (ROE) since 2014
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Economic Profit
Paycom Software Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a generally increasing trend over the five-year period. Starting at $172,096 thousand in 2018, it peaked at $297,371 thousand in 2022, with a noticeable dip in 2020 to $176,158 thousand before recovering in subsequent years.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating narrowly between 18.52% and 18.59%, indicating consistent capital expenses over the years without significant volatility.
- Invested Capital
- Invested capital increased substantially from $522,609 thousand in 2018 to $1,478,485 thousand in 2022. The growth shows an accelerating investment trend, particularly marked by a strong increase between 2020 and 2022, reflecting expanded resource allocation or asset acquisition over time.
- Economic Profit
- Economic profit showed significant variability, starting at $75,303 thousand in 2018 and increasing slightly in 2019 to $80,324 thousand. However, a sharp decline occurred in 2020, dropping to $16,321 thousand. The metric partially recovered in 2021 and 2022, recording $23,343 thousand and $22,902 thousand, respectively, but did not return to earlier levels. This pattern suggests that despite growing NOPAT and invested capital, the returns above the cost of capital weakened considerably after 2019.
Net Operating Profit after Taxes (NOPAT)
Paycom Software Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
The financial data reveals notable fluctuations and overall growth in key profitability metrics over the five-year period ending December 31, 2022.
- Net Income
-
Net income exhibited an upward trend, increasing significantly from $137,065 thousand in 2018 to $281,389 thousand in 2022. Despite a dip in 2020, when net income fell to $143,453 thousand from $180,576 thousand in 2019, the subsequent years showed robust recovery and growth, particularly with a substantial rise in 2022 to a new high.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT followed a similar trajectory to net income but on a generally higher scale. It rose from $172,096 thousand in 2018 to $297,371 thousand in 2022. Although there was a decline in 2020, dropping to $176,158 thousand from $214,806 thousand in 2019, the profit metric rebounded strongly in the following years, reaching the peak in 2022. The increases in NOPAT were more pronounced in magnitude compared to net income, indicating increasing operational efficiency or improved core business profitability.
Overall, the data suggests a company experiencing notable profit growth, with a momentary setback in 2020 likely due to specific operational or market challenges during that year. The recovery and growth in NOPAT and net income in 2021 and 2022 demonstrate improved performance and potentially effective strategic or operational adjustments.
Cash Operating Taxes
Paycom Software Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
- Provision for income taxes
- The provision for income taxes showed a general increasing trend from 2018 to 2022. Starting at 37,646 thousand USD in 2018, it increased moderately to 45,511 thousand USD in 2019, then slightly declined to 42,483 thousand USD in 2020. Following this, there was a significant increase to 60,002 thousand USD in 2021, which was further amplified by a substantial rise to 108,189 thousand USD in 2022. This pattern indicates growing income tax obligations over the five-year period, with the most notable escalation occurring in the last two years.
- Cash operating taxes
- Cash operating taxes also exhibited an overall upward trajectory throughout the years analyzed. Initially, it stood at 16,816 thousand USD in 2018 and increased sharply to 24,932 thousand USD in 2019. There was a slight dip in 2020 to 21,299 thousand USD, followed by a recovery to 27,310 thousand USD in 2021. The year 2022 saw a dramatic increase to 112,250 thousand USD, which mirrors the substantial rise observed in the provision for income taxes. This suggests that cash outflows related to operating taxes have grown significantly, particularly in the most recent year.
Invested Capital
Paycom Software Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
- Total Reported Debt & Leases
- The total reported debt and leases exhibited a relatively stable trend from 2018 through 2021, decreasing slightly from 61,588 thousand USD in 2018 to 58,790 thousand USD in 2020, followed by a marginal increase to 60,067 thousand USD in 2021. In 2022, however, there was a noticeable increase to 70,012 thousand USD, marking a significant rise compared to previous years.
- Stockholders’ Equity
- Stockholders’ equity demonstrated a strong upward progression over the five-year period. Beginning at 334,753 thousand USD in 2018, equity more than doubled to 526,628 thousand USD in 2019 and continued to climb to 655,643 thousand USD in 2020. The growth accelerated thereafter, reaching 893,714 thousand USD in 2021 and further increasing to 1,182,607 thousand USD in 2022. This consistent increase indicates substantial equity growth and strengthening of the company’s financial position.
- Invested Capital
- Invested capital showed a continuous and significant rise throughout the entire period. Starting at 522,609 thousand USD in 2018, the invested capital increased by approximately 38.6% to 724,133 thousand USD in 2019 and then continued to expand sharply to 860,024 thousand USD in 2020. The momentum persisted with a considerable jump to 1,189,369 thousand USD in 2021, followed by another substantial increase to 1,478,485 thousand USD in 2022. This trend reflects ongoing investment and expansion activities within the company.
Cost of Capital
Paycom Software 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: 2022-12-31).
1 US$ in thousands
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 thousands
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 thousands
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 thousands
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: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Paycom Software Inc., economic spread ratio calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
- Economic Profit
- The economic profit showed an initial increase from 75,303 thousand US dollars in 2018 to 80,324 thousand US dollars in 2019. However, there was a significant decline in 2020 to 16,321 thousand US dollars, followed by a modest recovery in 2021 to 23,343 thousand US dollars. In 2022, economic profit slightly decreased again to 22,902 thousand US dollars. This trend indicates volatility and a notable drop in economic profitability starting from 2020, with only partial recovery in subsequent years.
- Invested Capital
- Invested capital consistently increased over the entire period. It rose from 522,609 thousand US dollars in 2018 to 1,478,485 thousand US dollars in 2022. This steady growth reflects continuous investment in capital assets or resources. The growth rate accelerated notably after 2019, with substantial increments particularly between 2020 and 2022.
- Economic Spread Ratio
- The economic spread ratio demonstrated a downward trend throughout the period. It started at 14.41% in 2018 and decreased significantly to 11.09% in 2019. This declining pattern continued sharply in 2020 to 1.9%, with marginal increases in 2021 to 1.96% and a slight drop again to 1.55% in 2022. This suggests a shrinking gap between the return on invested capital and its cost, indicating reduced efficiency or profitability relative to the capital invested.
- Summary of Trends
- Over the reported years, the company experienced steady growth in invested capital, which suggests ongoing expansion or asset accumulation. However, this was accompanied by a marked reduction in economic profit after 2019 and a continuous contraction in the economic spread ratio, indicating that the returns generated on the increased capital base were declining. The diminishing economic spread ratio implies lower incremental profitability per unit of invested capital, which could point to challenges in achieving cost-effective growth or competitive pressures affecting margins.
Economic Profit Margin
Paycom Software Inc., economic profit margin calculation
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
- Adjusted Revenues
- The adjusted revenues of the company have shown a consistent upward trend over the analyzed period, increasing from approximately $579 million in 2018 to about $1.39 billion in 2022. This represents a significant growth in revenues, indicating an expansion in business operations or market demand.
- Economic Profit
- Economic profit experienced variability during the period. It started at $75.3 million in 2018 and slightly increased to $80.3 million in 2019. However, there was a notable decline in 2020, with economic profit dropping to $16.3 million. Subsequently, economic profit partially recovered in 2021 and 2022, reaching approximately $23.3 million and $22.9 million, respectively, but did not approach the earlier levels seen in 2018 and 2019.
- Economic Profit Margin
- The economic profit margin also reflected this pattern of fluctuation. The margin decreased from 13% in 2018 to 10.72% in 2019, then sharply declined to 1.92% in 2020. A slight improvement occurred in 2021 to 2.18%, followed by a marginal decrease to 1.65% in 2022. This indicates that despite rising revenues, the company's profitability relative to revenue has diminished substantially since 2018.
- Overall Insights
- The company's revenue growth over the five-year period is robust, yet the significant reduction in economic profit and margin suggests increasing cost pressures or investments that have not proportionally translated into economic returns. The decline in economic profit margin highlights challenges in sustaining profitability levels amid rising revenues. While some recovery in economic profit occurred after 2020, the margins remain substantially lower than earlier years, signaling a need for improved cost management or efficiency improvements to enhance economic profitability going forward.