Economic Value Added (EVA)
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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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Raytheon Co. pages available for free this week:
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Sales (P/S) since 2005
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Economic Profit
Raytheon Co., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net operating profit after taxes (NOPAT)
- The net operating profit after taxes exhibited a general upward trend over the five-year period. Starting at 2,171 million in 2015, the figure peaked at 3,427 million in 2019, reflecting consistent profitability improvement except for a slight dip observed in 2017 compared to 2016.
- Cost of Capital
- The cost of capital showed a gradual increase from 11.69% in 2015 to 12.37% in 2019. Although fluctuations were minor, the overall trend indicates a slightly rising cost of financing or required return during the observed period.
- Invested Capital
- Invested capital rose steadily from 22,413 million in 2015 to 26,688 million in 2019. This increase suggests ongoing investment in assets, albeit with a somewhat slower growth rate between 2018 and 2019 compared to previous years.
- Economic Profit
- Economic profit figures were negative for the initial four years, indicating that the company did not fully cover its cost of capital during this span. The negative economic profit ranged from -448 million in 2015 to a trough of -492 million in 2017, improving gradually thereafter. A notable shift occurred in 2019 when economic profit turned positive to 124 million, signifying value creation beyond the cost of capital.
Net Operating Profit after Taxes (NOPAT)
Raytheon Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Raytheon Company.
4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2019 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 attributable to Raytheon Company.
7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
- Net income attributable to Raytheon Company
- The net income shows a generally positive trend over the five-year period. Starting at 2,074 million US dollars in 2015, there was a modest increase in 2016 to 2,211 million. However, the net income slightly declined in 2017 to 2,024 million. From 2017 onwards, the net income rose significantly, reaching 2,909 million in 2018 and further increasing to 3,343 million by the end of 2019. This pattern indicates recovery and robust growth in profitability in the latter years.
- Net operating profit after taxes (NOPAT)
- NOPAT also demonstrates an upward trajectory across the reported years. The value grew steadily from 2,171 million US dollars in 2015 to 2,456 million in 2016. A slight decline occurred in 2017, with NOPAT at 2,393 million, mirroring the dip seen in net income for that year. In 2018, NOPAT increased sharply to 3,010 million and continued its upward movement to 3,427 million in 2019. This trend underscores improving operational efficiency and effective tax management contributing to profit growth over the period.
- Overall Trend Analysis
- The data reveals a consistent improvement in both net income and NOPAT from 2015 to 2019, notwithstanding the minor setbacks in 2017. The stronger gains after 2017 suggest enhanced operational performance and possibly favorable market or internal conditions. The parallel movement between net income and NOPAT implies that the operating profits, after accounting for taxes, significantly drive the net profitability of the company.
Cash Operating Taxes
Raytheon Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial data indicates a fluctuating pattern in the provisions for federal and foreign income taxes over the five-year period. Starting at 733 million US dollars in 2015, the provision increased steadily to reach a peak of 1,114 million in 2017. However, in 2018, the provision experienced a significant decline to 264 million, followed by a recovery to 658 million in 2019. This trend suggests variability in the company's taxable income or changes in tax rates or policies during these years.
Regarding cash operating taxes, the figures show a less consistent trend. The amount decreased slightly from 881 million in 2015 to 840 million in 2016, then rose to 939 million in 2017. Similar to the provision for income taxes, cash operating taxes dropped considerably in 2018 to 327 million before increasing again to 721 million in 2019. The parallel movements in both provision and cash taxes in 2018 and 2019 indicate an underlying correlation in tax strategies or tax liabilities paid.
- Provision for Federal and Foreign Income Taxes
- General upward trend from 2015 to 2017, followed by a sharp decline in 2018 and partial rebound in 2019
- Reflects volatility possibly due to changes in earnings before tax, tax regulations, or deferred tax assets/liabilities adjustments
- Cash Operating Taxes
- Slight fluctuations with a significant drop in 2018 and a recovery in 2019
- Movements suggest impact from operational cash flows and timing differences in tax payments
- Comparison and Insights
- Both tax-related figures exhibit synchronized declines in 2018, indicating potential operational or fiscal events affecting tax computations or payments during that year
- The rebound in 2019 points to normalization or adjustments after an anomalous fiscal period
Invested Capital
Raytheon Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 equity equivalents to total Raytheon Company stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of short-term investments.
- Total reported debt & leases
-
The total reported debt and leases demonstrate a gradual declining trend over the analyzed period. Starting from 6,306 million US dollars in 2015, the figure increased slightly in 2016 to 6,421 million but began to decrease thereafter. By 2019, the total reported debt and leases had reduced to 5,679 million, reflecting a consistent effort to manage and reduce debt levels over time.
- Total Raytheon Company stockholders’ equity
-
The stockholders’ equity shows a generally positive upward trend from 2015 to 2019. It started at 10,128 million US dollars in 2015 and experienced a minor decline through 2017, reaching 9,963 million. However, a significant recovery occurred in 2018 and 2019, with equity increasing to 11,472 million and then to 12,223 million respectively. This growth suggests an improvement in the company’s net asset base and potential retention of earnings or capital injection during these latter years.
- Invested capital
-
Invested capital shows a steady increase over the period examined. Beginning at 22,413 million US dollars in 2015, it rose each year, attaining 23,509 million in 2016 and edging slightly upward to 23,548 million in 2017. Subsequently, there was a more pronounced increase in 2018 to 26,081 million, continuing to grow in 2019 to 26,688 million. This upward trend indicates ongoing capital investment or asset expansion, potentially supporting future growth initiatives.
Cost of Capital
Raytheon Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and 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 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and 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 millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Commercial paper and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Commercial paper and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Raytheon Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced fluctuations over the five-year period. Initially, there was a significant negative profit of -448 million USD in 2015, which softened to -335 million USD in 2016. However, it declined again to -492 million USD in 2017 before improving substantially to -167 million USD in 2018, and ultimately turning positive with a profit of 124 million USD in 2019. This trend suggests an overall recovery and improvement in profitability towards the end of the period.
- Invested Capital
- The invested capital showed a consistent upward trend throughout the period. It increased from 22,413 million USD in 2015 to 26,688 million USD in 2019. This steady growth indicates ongoing investment or asset accumulation in the company’s operations, which may have supported the improved economic profit seen in the later years.
- Economic Spread Ratio
- The economic spread ratio, which reflects the return over the cost of capital, mirrored the changes in economic profit. It started at a negative ratio of -2% in 2015, improved slightly to -1.42% in 2016, then deteriorated again to -2.09% in 2017. The ratio subsequently improved significantly, reaching -0.64% in 2018 and turning positive to 0.47% in 2019. This positive shift suggests that the company moved from eroding shareholder value to generating returns above its cost of capital by the end of the period.
Economic Profit Margin
Raytheon Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Net Sales
- The net sales demonstrated a consistent upward trend over the five-year period. Beginning at approximately 23.2 billion US dollars in 2015, the figure increased each year, reaching nearly 29.2 billion US dollars by the end of 2019. This indicates steady revenue growth throughout the timeframe.
- Economic Profit
- The economic profit showed a pattern of gradual improvement. Initially, the company reported a significant loss of 448 million US dollars in 2015. Although the loss deepened slightly in 2017 to 492 million US dollars, economic profit improved markedly thereafter, turning positive in 2019 with a recorded profit of 124 million US dollars. This suggests a successful transition toward profitability.
- Economic Profit Margin
- The economic profit margin mirrored the economic profit trend, starting with a negative margin of -1.93% in 2015. The margin deteriorated further in 2017 to -1.94%, then improved in subsequent years, narrowing to -0.62% in 2018 and eventually reaching a positive margin of 0.43% in 2019. This progression reflects enhanced operational efficiency and value creation.