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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Stryker Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	2,015)	1,867)	2,347)	2,098)	1,187)
Cost of capital²	12.30%	12.06%	12.29%	12.33%	12.37%
Invested capital³	26,516)	27,132)	23,274)	20,767)	17,502)

Economic profit⁴	(1,247)	(1,406)	(512)	(462)	(978)

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,015 – 12.30% × 26,516 = -1,247

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Stryker Corp. economic profit decreased from 2019 to 2020 but then slightly increased from 2020 to 2021.

Stryker Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net earnings	1,994)	1,599)	2,083)	3,553)	1,020)
Deferred income tax expense (benefit)¹	(237)	48)	126)	(1,582)	36)
Increase (decrease) in allowance for doubtful accounts²	36)	43)	24)	5)	3)
Increase (decrease) in equity equivalents³	(201)	91)	150)	(1,577)	39)
Interest expense	337)	315)	287)	264)	247)
Interest expense, operating lease liability⁴	12)	11)	13)	10)	10)
Adjusted interest expense	349)	326)	300)	274)	257)
Tax benefit of interest expense⁵	(73)	(68)	(63)	(57)	(90)
Adjusted interest expense, after taxes⁶	276)	258)	237)	216)	167)
(Gain) loss on marketable securities	(68)	(102)	(155)	(119)	(60)
Investment income, before taxes	(68)	(102)	(155)	(119)	(60)
Tax expense (benefit) of investment income⁷	14)	21)	33)	25)	21)
Investment income, after taxes⁸	(54)	(81)	(122)	(94)	(39)
Net operating profit after taxes (NOPAT)	2,015)	1,867)	2,347)	2,098)	1,187)

Based on: 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), 10-K (reporting date: 2017-12-31).

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 earnings.

⁴ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 422 × 2.86% = 12

⁵ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 349 × 21.00% = 73

⁶ Addition of after taxes interest expense to net earnings.

⁷ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 68 × 21.00% = 14

⁸ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Stryker Corp. NOPAT decreased from 2019 to 2020 but then slightly increased from 2020 to 2021.

Stryker Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income tax expense (benefit)	287)	355)	479)	(1,197)	1,043)
Less: Deferred income tax expense (benefit)	(237)	48)	126)	(1,582)	36)
Add: Tax savings from interest expense	73)	68)	63)	57)	90)
Less: Tax imposed on investment income	14)	21)	33)	25)	21)
Cash operating taxes	583)	354)	383)	417)	1,076)

Based on: 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), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Stryker Corp. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Stryker Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Current maturities of debt	7)	761)	859)	1,373)	632)
Long-term debt, excluding current maturities	12,472)	13,230)	10,231)	8,486)	6,590)
Operating lease liability¹	422)	434)	387)	308)	296)
Total reported debt & leases	12,901)	14,425)	11,477)	10,167)	7,518)
Total Stryker shareholders’ equity	14,877)	13,084)	12,807)	11,730)	9,966)
Net deferred tax (assets) liabilities²	(1,692)	(1,413)	(1,467)	(1,624)	(236)
Allowance for doubtful accounts³	167)	131)	88)	64)	59)
Equity equivalents⁴	(1,525)	(1,282)	(1,379)	(1,560)	(177)
Accumulated other comprehensive (income) loss, net of tax⁵	531)	1,157)	606)	631)	553)
Non-controlling interest	—)	—)	—)	—)	14)
Adjusted total Stryker shareholders’ equity	13,883)	12,959)	12,034)	10,801)	10,356)
Marketable securities⁶	(268)	(252)	(237)	(201)	(372)
Invested capital	26,516)	27,132)	23,274)	20,767)	17,502)

Based on: 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), 10-K (reporting date: 2017-12-31).

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 Stryker shareholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Stryker Corp. invested capital increased from 2019 to 2020 but then slightly decreased from 2020 to 2021.

Stryker Corp., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	95,009)	95,009)	÷	108,832)	=	0.87	0.87	×	13.82%	=	12.07%
Debt³	13,401)	13,401)	÷	108,832)	=	0.12	0.12	×	2.33% × (1 – 21.00%)	=	0.23%
Operating lease liability⁴	422)	422)	÷	108,832)	=	0.00	0.00	×	2.86% × (1 – 21.00%)	=	0.01%
Total:	108,832)					1.00					12.30%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	92,297)	92,297)	÷	108,169)	=	0.85	0.85	×	13.82%	=	11.79%
Debt³	15,438)	15,438)	÷	108,169)	=	0.14	0.14	×	2.32% × (1 – 21.00%)	=	0.26%
Operating lease liability⁴	434)	434)	÷	108,169)	=	0.00	0.00	×	2.57% × (1 – 21.00%)	=	0.01%
Total:	108,169)					1.00					12.06%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	81,747)	81,747)	÷	94,070)	=	0.87	0.87	×	13.82%	=	12.01%
Debt³	11,936)	11,936)	÷	94,070)	=	0.13	0.13	×	2.63% × (1 – 21.00%)	=	0.26%
Operating lease liability⁴	387)	387)	÷	94,070)	=	0.00	0.00	×	3.34% × (1 – 21.00%)	=	0.01%
Total:	94,070)					1.00					12.29%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	67,359)	67,359)	÷	77,539)	=	0.87	0.87	×	13.82%	=	12.01%
Debt³	9,872)	9,872)	÷	77,539)	=	0.13	0.13	×	3.09% × (1 – 21.00%)	=	0.31%
Operating lease liability⁴	308)	308)	÷	77,539)	=	0.00	0.00	×	3.09% × (1 – 21.00%)	=	0.01%
Total:	77,539)					1.00					12.33%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	55,451)	55,451)	÷	63,303)	=	0.88	0.88	×	13.82%	=	12.11%
Debt³	7,556)	7,556)	÷	63,303)	=	0.12	0.12	×	3.22% × (1 – 35.00%)	=	0.25%
Operating lease liability⁴	296)	296)	÷	63,303)	=	0.00	0.00	×	3.22% × (1 – 35.00%)	=	0.01%
Total:	63,303)					1.00					12.37%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Stryker Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	(1,247)	(1,406)	(512)	(462)	(978)
Invested capital²	26,516)	27,132)	23,274)	20,767)	17,502)
Performance Ratio
Economic spread ratio³	-4.70%	-5.18%	-2.20%	-2.22%	-5.59%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	0.66%	-2.61%	-3.93%	—	—
Cigna Group	-0.21%	2.68%	-0.53%	—	—
CVS Health Corp.	-0.03%	0.42%	-0.36%	—	—
Elevance Health Inc.	1.08%	-0.90%	-0.07%	—	—
Humana Inc.	2.69%	9.55%	7.68%	—	—
Intuitive Surgical Inc.	20.60%	8.59%	25.27%	—	—
Medtronic PLC	-4.49%	-3.60%	-2.52%	—	—
UnitedHealth Group Inc.	4.57%	5.14%	5.17%	—	—

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,247 ÷ 26,516 = -4.70%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Stryker Corp. economic spread ratio deteriorated from 2019 to 2020 but then slightly improved from 2020 to 2021.

Stryker Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	(1,247)	(1,406)	(512)	(462)	(978)
Net sales	17,108)	14,351)	14,884)	13,601)	12,444)
Performance Ratio
Economic profit margin²	-7.29%	-9.80%	-3.44%	-3.40%	-7.86%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	0.95%	-4.55%	-7.16%	—	—
Cigna Group	-0.11%	1.58%	-0.32%	—	—
CVS Health Corp.	-0.01%	0.21%	-0.20%	—	—
Elevance Health Inc.	0.50%	-0.43%	-0.04%	—	—
Humana Inc.	0.99%	2.74%	2.25%	—	—
Intuitive Surgical Inc.	16.21%	8.81%	18.73%	—	—
Medtronic PLC	-10.76%	-8.87%	-5.98%	—	—
UnitedHealth Group Inc.	2.24%	2.62%	2.52%	—	—

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -1,247 ÷ 17,108 = -7.29%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Stryker Corp. economic profit margin deteriorated from 2019 to 2020 but then slightly improved from 2020 to 2021.

Stryker Corp. (NYSE:SYK)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin