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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Valero Energy Corp. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
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Economic Profit
Valero Energy Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data illustrates key performance indicators of the company over five years, revealing notable fluctuations and trends in profitability and capital efficiency.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows significant variability throughout the examined period. There was a considerable decrease from a positive value of 4,429 million USD in 2019 to a negative result of -1,650 million USD in 2020, indicating a substantial operational loss during that year. This was followed by a strong recovery in 2021, with NOPAT rising to 5,561 million USD, and further increasing sharply to a peak of 13,520 million USD in 2022. However, in 2023, NOPAT declined to 7,868 million USD, marking a decrease from the previous year but still maintaining a positive performance.
- Cost of Capital
- The cost of capital showed a moderate fluctuation across the years. It initially decreased from 15.56% in 2019 to 14.22% in 2020, suggesting a reduction in the company’s required return or risk associated with its capital structure. Subsequently, it increased to 15% in 2021 and further escalated to 17.15% in 2022. In 2023, the cost of capital slightly decreased to 16.98%, remaining elevated compared to earlier years.
- Invested Capital
- Invested capital demonstrated a steady upward trend year-over-year, growing from 40,757 million USD in 2019 to 51,119 million USD in 2023. This indicates ongoing investment in the company’s operations and assets, expanding the capital base by approximately 25% over the five-year span.
- Economic Profit
- Economic profit, which reflects the value created beyond the cost of capital, exhibits a volatile pattern. The company recorded negative economic profits in 2019 (-1,915 million USD) and 2020 (-7,474 million USD), with the latter indicating a pronounced destruction of shareholder value. In 2021, economic profit improved significantly but remained negative (-1,116 million USD). The year 2022 marked a turning point with a positive economic profit of 4,985 million USD, suggesting value creation surpassing the cost of capital. However, in 2023, economic profit turned negative again (-810 million USD), implying a decline in value generation despite positive operating profits.
Overall, the company’s operational profitability recovered strongly after a significant downturn in 2020, supported by continuous investment increases. Nevertheless, the rising cost of capital and fluctuating economic profit signal challenges in consistently generating value above the cost incurred from the capital employed. The negative economic profit in 2023 amid positive NOPAT suggests that despite healthy operating earnings, capital costs remain a critical factor affecting overall financial performance.
Net Operating Profit after Taxes (NOPAT)
Valero Energy Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Valero Energy Corporation stockholders.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2023 Calculation
Tax benefit of interest and debt expense, net of capitalized interest = Adjusted interest and debt expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income (loss) attributable to Valero Energy Corporation stockholders.
- Net Income (Loss) Attributable to Stockholders
- The net income experienced a significant decline in the year ending 2020, moving from a positive 2,422 million US dollars in 2019 to a negative 1,421 million US dollars. This was followed by a recovery period, with net income rising to 930 million US dollars in 2021. The company then showed strong profitability in 2022, reaching 11,528 million US dollars, before seeing a decrease to 8,835 million US dollars in 2023. Overall, this pattern indicates volatility with a substantial rebound post-2020.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT data mirrors the trends seen in net income, starting at 4,429 million US dollars in 2019 and dropping to negative 1,650 million US dollars in 2020. There was a pronounced recovery in 2021, with NOPAT increasing to 5,561 million US dollars. The highest value in the series occurred in 2022, with 13,520 million US dollars, followed by a reduction to 7,868 million US dollars in 2023. This fluctuation highlights a similar pattern of operational profitability impact and recovery as observed in net income.
Cash Operating Taxes
Valero Energy Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
The analysis of the annual financial data reveals significant fluctuations in the income tax expense (benefit) and cash operating taxes over the five-year period.
- Income Tax Expense (Benefit)
- The income tax expense exhibited a notable negative value in 2020, reaching a benefit of -$903 million, which contrasts sharply with the positive expense of $702 million in 2019. Following this period, the tax expense rose to $255 million in 2021, before surging substantially to $3,428 million in 2022. In 2023, this figure decreased somewhat but remained elevated at $2,619 million, indicating a return to significant tax liabilities compared to the earlier years.
- Cash Operating Taxes
- Cash operating taxes mirrored the trend seen in the income tax expense, with a negative outflow of -$931 million in 2020 compared to $577 million in 2019. Subsequently, there was a marked increase to $519 million in 2021, which escalated dramatically to $3,508 million in 2022. In the most recent year, 2023, cash operating taxes declined slightly to $2,654 million, but still remained considerably higher than pre-2020 levels.
Overall, the data indicates a period of tax benefit in 2020 followed by a consistent and substantial increase in tax expenses and cash operating taxes in the subsequent years. The sharp rise in both metrics during 2022 and 2023 suggests changes in earnings, tax policies, or other factors impacting the company's tax payable status, resulting in a significantly higher cash outflow related to taxes despite the decrease from the 2022 peak.
Invested Capital
Valero Energy Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
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 LIFO reserve. See details »
5 Addition of equity equivalents to total Valero Energy Corporation stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
- Total reported debt & leases
- The total reported debt and leases exhibited a rising trend from 2019 to 2020, increasing from $10,962 million to $15,847 million. Subsequently, there was a consistent decline over the next three years, with figures decreasing to $15,125 million in 2021, then dropping more significantly to $12,722 million in 2022, and further to $12,637 million by the end of 2023. This indicates a period of increased leverage followed by a notable reduction in debt levels.
- Total Valero Energy Corporation stockholders’ equity
- Stockholders' equity showed a downward trajectory between 2019 and 2021, falling from $21,803 million to $18,430 million. However, a reversal occurred in 2022 when equity increased sharply to $23,561 million and continued to grow substantially to $26,346 million in 2023. This pattern suggests an initial period of equity erosion followed by a recovery and strengthening of the equity base.
- Invested capital
- Invested capital demonstrated a mostly steady upward movement over the five-year span. Starting at $40,757 million in 2019, it slightly increased in 2020 to $40,966 million, then advanced more markedly to $44,526 million in 2021. The growth trend continued with an increase to $49,772 million in 2022, reaching $51,119 million in 2023. This represents ongoing investment and capital deployment over the period.
- Summary
- Overall, the financial data reflect a phase of increased debt leverage in 2020, followed by deliberate deleveraging from 2021 onward. Concurrently, stockholders’ equity declined in the early years but rebounded strongly in the latest two years, indicating improved financial health or retained earnings accumulation. The continuous growth in invested capital suggests sustained investment efforts, aligning with the strengthening equity position and reduced reliance on debt financing during the latter years.
Cost of Capital
Valero Energy Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations, including current portion3 | ÷ | = | × | × (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 and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations, including current portion3 | ÷ | = | × | × (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 and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations, including current portion3 | ÷ | = | × | × (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 and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations, including current portion3 | ÷ | = | × | × (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 and finance lease obligations, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Valero Energy Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit Trends
- The economic profit figures indicate significant volatility over the five-year period. The company experienced negative economic profit consistently from 2019 through 2021, with the largest loss occurring in 2020 at -7,474 million US$. This was followed by a recovery in 2022, where the company achieved positive economic profit of 4,985 million US$. However, this positive result was not sustained, as the economic profit declined again to -810 million US$ in 2023. Overall, the data reflects a challenging financial environment with fluctuating profitability.
- Invested Capital Trends
- Invested capital has shown a gradual but steady increase from 40,757 million US$ in 2019 to 51,119 million US$ in 2023. This upward trend indicates continued investment and asset growth over the period, with a particularly notable rise between 2021 and 2022. The steady capital base suggests the company maintained or expanded its operational capacity despite fluctuations in profitability.
- Economic Spread Ratio Trends
- The economic spread ratio aligns closely with the trends in economic profit, starting with negative values throughout 2019 to 2021, reaching a low of -18.24% in 2020. In 2022, the ratio turned positive to 10.01%, reflecting the company’s improved economic profit performance during that year. However, in 2023, the ratio again reverted to a negative value of -1.59%, signifying a decline in returns relative to the invested capital. This pattern demonstrates volatility in the company’s ability to generate returns exceeding its cost of capital.
- Overall Analysis
- The data reveals a cyclical performance with a significant downturn in 2020, followed by recovery in 2022, and a subsequent decline in 2023. While the invested capital shows a consistent increase, the economic profitability and spread ratios highlight challenges in sustaining value creation over time. The company’s return on capital improved momentarily in 2022, but the return to negative spreads in 2023 suggests ongoing difficulty in achieving stable and positive economic profits.
Economic Profit Margin
Valero Energy Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues, includes excise taxes on sales by certain of foreign operations | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues, includes excise taxes on sales by certain of foreign operations
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several important trends in the company's performance over the five-year period ending December 31, 2023. The economic profit figures and related margins exhibit significant fluctuations, while revenues show variable growth patterns.
- Economic Profit
- Economic profit demonstrated considerable volatility. The value started negative at -1,915 million USD in 2019, worsened substantially to -7,474 million USD in 2020, rebounded sharply to a less negative value of -1,116 million USD in 2021, and then transitioned to a positive 4,985 million USD in 2022. However, the figure declined again in 2023 to -810 million USD. This oscillation indicates fluctuations in the company's profitability and ability to generate returns above its cost of capital, with a notable peak in 2022.
- Revenues
- Revenues, inclusive of excise taxes on sales from foreign operations, exhibited a marked decrease during the initial period, dropping from 108,324 million USD in 2019 to 64,912 million USD in 2020. This decline may be attributed to external or market factors impacting sales. Subsequently, revenues recovered robustly, rising to 113,977 million USD in 2021 and reaching a peak of 176,383 million USD in 2022. In 2023, revenues decreased again to 144,766 million USD but remained above pre-pandemic levels, suggesting overall growth despite recent contraction.
- Economic Profit Margin
- The economic profit margin trends closely reflect the movements in economic profit. It started at a negative margin of -1.77% in 2019, deteriorated significantly in 2020 to -11.51%, improved dramatically in 2021 to -0.98%, and turned positive at 2.83% in 2022. In 2023, the margin declined to -0.56%, indicating a slight return to negative profitability levels. This margin behavior points to challenges in maintaining sustained profitability, with a peak in 2022 indicating a temporary period of improved economic returns.
Overall, the data suggests considerable instability in profitability over the observed period, with revenues experiencing a sharp decline in 2020 followed by strong recovery and subsequent moderation. The positive economic profit and margin in 2022 mark a significant improvement, though the downturn in 2023 signals ongoing challenges to maintaining consistent economic value creation.