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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Raytheon Co. pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Common Stock Valuation Ratios
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- 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
= – × =
The financial data reveals a notable evolution in several key financial metrics over the five-year span under review. Net Operating Profit After Taxes (NOPAT) demonstrates a generally upward trend, increasing from $2,171 million in 2015 to $3,427 million in 2019. This reflects an overall improvement in operational profitability, despite a slight dip observed in 2017.
The company's cost of capital shows a modest but consistent rise from 11.68% in 2015 to 12.37% in 2019, indicating a gradual increase in the expense associated with funding its operations and investments.
Invested capital grows steadily from $22,413 million in 2015 to $26,688 million in 2019, suggesting continuous investment in assets and business operations. This growth appears to support the rise in NOPAT, implying efficient allocation of capital.
Regarding economic profit, the company records negative values from 2015 through 2018, with the largest loss of $491 million in 2017. However, there is a significant turnaround in 2019, resulting in a positive economic profit of $125 million. This shift indicates that by 2019, the company’s net operating profit exceeded the cost of capital applied to the invested capital, signaling value creation for shareholders.
- Net Operating Profit After Taxes (NOPAT)
- Displayed sustained growth overall, with a peak in 2019, reflecting improving operational efficiency.
- Cost of Capital
- Experienced a gradual increase, suggesting slightly higher risks or financing costs over the period.
- Invested Capital
- Showed steady expansion, indicating ongoing investment in assets and business growth.
- Economic Profit
- Was negative for most of the period but turned positive in 2019, highlighting enhanced value generation.
Net Operating Profit after Taxes (NOPAT)
Raytheon Co., NOPAT calculation
US$ 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.
The financial data over the five-year period displays distinct trends in economic profit, invested capital, and the economic spread ratio, revealing insights into the company’s financial performance and capital efficiency.
- Economic Profit
- The economic profit shows significant fluctuations, starting with a substantial negative value of -448 million USD in 2015 and improving consistently until 2019. Notably, the losses reduce from -448 million USD in 2015 to -166 million USD in 2018, culminating in a positive economic profit of 125 million USD by 2019. This trend indicates an improvement in profitability and value creation over time, transitioning from a loss-generating position to a profitable one.
- Invested Capital
- Invested capital has exhibited a steady increase throughout the period, rising from approximately 22,413 million USD in 2015 to 26,688 million USD in 2019. The consistent growth in invested capital suggests ongoing investment in the company's operations, reflecting expansion or further capital deployment to support business activities.
- Economic Spread Ratio
- The economic spread ratio, which measures the difference between return on invested capital and cost of capital as a percentage, mirrors the economic profit trend. It started negative at -2% in 2015, indicating returns below the cost of capital, progressively improved through the years, reaching a positive 0.47% by 2019. This movement toward a positive spread ratio demonstrates enhanced capital efficiency and the ability to generate returns exceeding costs by the end of the period.
In summary, the data indicates an overall improvement in economic profitability and capital efficiency despite an increasing capital base. The company transitioned from operating at economic losses to achieving positive economic profit and a positive economic spread ratio by 2019, which reflects a strengthening financial position and improved value creation capacity over the period analyzed.
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
- There was a consistent upward trend in net sales over the five-year period. The sales increased from 23,247 million USD in 2015 to 29,176 million USD in 2019, reflecting steady growth each year. This demonstrates successful revenue expansion throughout the timeframe.
- Economic Profit
- Economic profit showed significant volatility with an overall improving trend. It was negative in the first four years, starting at -448 million USD in 2015 and reaching -166 million USD in 2018, before turning positive at 125 million USD in 2019. This shift from consistent losses to economic profit indicates improving operational efficiency or cost management leading to value creation by the end of the period.
- Economic Profit Margin
- The economic profit margin correspondingly improved from a negative margin in 2015 (-1.93%) to a slightly positive margin in 2019 (0.43%). Although the margin remained negative from 2015 to 2018, the steady rise towards zero and eventual positive value suggests enhanced profitability relative to sales, reflecting better cost control, asset utilization, or pricing power over time.