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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Economic Profit
United States Steel Corp., economic profit calculation
US$ in millions
| 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
= – × =
An analysis of the economic value added from 2018 to 2022 reveals a period of significant volatility, characterized by a transition from consistent value destruction to a period of value creation.
- Net Operating Profit After Taxes (NOPAT)
- Operating performance exhibited extreme fluctuations over the five-year period. Following a positive result in 2018, NOPAT declined into negative territory in 2019 and reached a trough of -1,095 million USD in 2020. A substantial recovery occurred in 2021, with profits peaking at 4,449 million USD, before moderating to 3,060 million USD in 2022.
- Invested Capital
- A consistent upward trend is observed in the capital base, which grew from 6,762 million USD in 2018 to 12,723 million USD by 2022. A notable acceleration in investment occurred between 2020 and 2021, during which invested capital increased by approximately 42%.
- Cost of Capital
- The cost of capital remained high and experienced fluctuations. After decreasing to 12.50% in 2019, the rate rose steadily to reach 21.34% by 2022. This increasing trend indicates a higher hurdle rate for the company to generate positive economic value.
- Economic Profit
- Economic profit mirrored the volatility of operating profits while being influenced by the expanding capital base and rising cost of capital. Value destruction intensified between 2018 and 2020, with losses widening from -564 million USD to -2,584 million USD. A sharp reversal was achieved in 2021, resulting in a positive economic profit of 1,984 million USD. By 2022, economic profit declined significantly to 345 million USD, reflecting the combined pressure of reduced NOPAT and a higher cost of capital applied to a larger investment base.
Net Operating Profit after Taxes (NOPAT)
United States Steel Corp., NOPAT calculation
US$ in millions
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 allowance for doubtful accounts.
3 Addition of increase (decrease) in accrued liabilities for restructuring and other cost reduction programs.
4 Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to United States Steel Corporation.
5 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2022 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 (loss) attributable to United States Steel Corporation.
8 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data over the analyzed periods exhibit notable fluctuations in profitability metrics for the entity. The net earnings attributable to the company reveal a volatile trajectory, characterized by a significant loss phase between 2019 and 2020, followed by a pronounced recovery and peak in 2021, and a subsequent decrease in 2022, though remaining positive.
- Net Earnings (Loss) Attributable
- In 2018, the company reported net earnings amounting to 1,115 million US dollars, followed by a sharp decline to a loss of 630 million in 2019. This adverse trend intensified in 2020 with a deeper loss of 1,165 million. The year 2021 marked a substantial turnaround with net earnings reaching 4,174 million, representing the highest value in the dataset. In 2022, earnings declined to 2,524 million, which, despite being lower than the previous year, remained robust and positive.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values mirror the net earnings trend closely, confirming the operational profitability challenges faced during 2019 and 2020. In 2018, NOPAT was recorded at 893 million US dollars, declining sharply to a negative 121 million in 2019, and further deteriorating to a negative 1,095 million in 2020. A significant recovery occurred in 2021, with NOPAT peaking at 4,449 million. Although there was a decrease in 2022 to 3,060 million, the figure remained strongly positive, indicative of sustained operational improvement relative to the loss years.
Overall, the data indicate a period of financial stress and operational difficulty during 2019 and 2020, likely reflective of external or internal challenges during those years. The strong rebound in 2021 signifies effective recovery measures, enhanced profitability, or favorable market conditions. The subsequent decline in 2022, while noteworthy, does not negate the positive turnaround, suggesting a period of stabilization at an improved profit level compared to the negative earnings years.
Cash Operating Taxes
United States Steel Corp., cash operating taxes calculation
US$ in millions
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).
The data reveals notable fluctuations in the income tax provision (benefit) over the five-year period. Initially, there was a substantial tax benefit recorded in 2018 at -$303 million, indicating a negative tax expense or a tax benefit. This shifted to a positive income tax provision of $178 million in 2019, signaling a tax expense rather than a benefit during that year. The year 2020 once again saw a tax benefit of -$142 million, suggesting a reversal or reduction in tax obligations. However, in 2021 and 2022, the trend changed significantly, with the income tax provision increasing to $170 million and then sharply rising to $735 million. This indicates progressively higher tax expenses in the later years, with 2022 showing the most substantial tax charge over the period analyzed.
Cash operating taxes displayed a different pattern. From 2018 to 2019, there was a marked decrease from $60 million to $6 million. This was followed by a recovery to $49 million in 2020, and a substantial increase in 2021 to $290 million, suggesting a significant rise in actual cash payments for taxes in that year. In 2022, the cash operating taxes slightly decreased to $260 million, yet remained considerably higher than the levels observed in the earlier years.
Overall, the data points to considerable volatility in both the income tax provision and cash operating taxes, with a general trend towards higher tax expenses and cash tax payments in the most recent years. The divergence between income tax provision and cash operating taxes in certain years, such as 2018 and 2020 where provisions were negative but cash taxes positive, may indicate timing differences, tax credits, or adjustments impacting accounting and cash tax reporting differently.
Invested Capital
United States Steel Corp., invested capital calculation (financing approach)
US$ in millions
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 allowance for doubtful accounts receivable.
4 Addition of accrued liabilities for restructuring and other cost reduction programs.
5 Addition of equity equivalents to total United States Steel Corporation stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in process.
The financial data exhibits notable fluctuations in key measures over the five-year period ending in 2022.
- Total Reported Debt & Leases
- There is a general upward trend from 2018 to 2020, with debt rising from $2,624 million to $5,109 million. This is followed by a decrease in 2021 to $4,085 million, after which the debt level stabilizes in 2022 at $4,131 million. The initial increase suggests a phase of leveraging or increased borrowing, while the subsequent reduction and stabilization indicate efforts to manage or reduce debt obligations.
- Total United States Steel Corporation Stockholders’ Equity
- Equity demonstrates a mixed trajectory. The equity declined from $4,202 million in 2018 to $3,786 million in 2020, possibly reflecting losses or distributions exceeding earnings. A significant reversal occurs in 2021 with equity surging to $9,010 million and further increasing to $10,218 million in 2022. This sharp rise in equity suggests substantial profits, capital injections, or retained earnings during these years, strengthening the company's financial position.
- Invested Capital
- Invested capital has consistently increased year over year, growing from $6,762 million in 2018 to $12,723 million in 2022. The steady rise indicates ongoing investment in assets or operations that support the business. The substantial jump between 2020 and 2021 aligns with the marked increase in equity, implying financed growth and asset expansion during this period.
Cost of Capital
United States Steel Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
United States Steel Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial trajectory between 2018 and 2022 is characterized by a period of intensifying value erosion followed by a sharp recovery and a subsequent contraction in economic performance. The overall trend indicates a volatile relationship between the capital deployed and the actual economic value generated.
- Economic Profit Trends
- A significant downward trend in economic profit is observed from 2018 through 2020, with losses widening from -564 million USD to a peak deficit of -2,584 million USD. This period suggests a sustained failure to generate returns exceeding the cost of capital. A dramatic reversal occurred in 2021, where economic profit shifted to a positive 1,984 million USD. However, this gain was not sustained into 2022, as economic profit declined to 345 million USD, although it remained in positive territory.
- Invested Capital Growth
- Invested capital exhibited a consistent upward trend throughout the five-year period, increasing from 6,762 million USD in 2018 to 12,723 million USD in 2022. A notable acceleration in capital investment is evident between 2020 and 2021, where invested capital rose by approximately 42%, coinciding with the pivot toward positive economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects high volatility and mirrors the fluctuations in economic profit. The ratio deteriorated from -8.34% in 2018 to a low of -29.97% in 2020, indicating a substantial gap between the return on invested capital and the cost of capital. The ratio peaked at 16.07% in 2021, marking the period of maximum value creation. By 2022, the ratio contracted sharply to 2.71%, suggesting that while the company continued to create value, the margin of economic spread narrowed significantly despite the continued increase in the total capital base.
Economic Profit Margin
United States Steel Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | ||||||
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 ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory between 2018 and 2022 is characterized by a period of severe value erosion followed by a sharp recovery and subsequent stabilization. The transition from significant economic losses to positive value creation indicates a volatile operational environment with a strong correlation between revenue growth and economic profit.
- Economic Profit Trends
- A deteriorating trend is observed from 2018 to 2020, with economic profit falling from negative 564 million USD to a trough of negative 2.58 billion USD. This represents a substantial destruction of economic value over a three-year period. A reversal occurred in 2021, where economic profit surged to a peak of 1.98 billion USD. However, this gain was not sustained into 2022, as profit contracted to 345 million USD, although it remained in positive territory.
- Net Sales Performance
- Revenue experienced a V-shaped recovery. Net sales declined steadily from 14.18 billion USD in 2018 to a low of 9.74 billion USD in 2020. Following this decline, a rapid expansion occurred in 2021, with sales more than doubling the 2020 figures to reach 20.27 billion USD. This upward momentum continued slightly into 2022, peaking at 21.06 billion USD.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute profit and sales figures. The margin widened negatively from -3.98% in 2018 to -26.53% in 2020, signaling a critical failure to cover the cost of capital relative to sales. The recovery in 2021 was profound, with the margin shifting to a positive 9.79%. By 2022, despite the increase in net sales, the margin compressed significantly to 1.64%, suggesting that the costs associated with generating those sales increased or the efficiency of capital utilization diminished.