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.
Economic Profit
Valero Energy Corp., economic profit 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 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
= 7,868 – 19.81% × 51,119 = -2,259
The analysis of economic value added reveals a period of significant volatility in operational performance coupled with a steady expansion of the capital base. Economic profit remained negative for four of the five years analyzed, indicating that the returns generated from operations were generally insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited extreme fluctuations, falling to a deficit of US$ 1,650 million in 2020 before recovering sharply to a peak of US$ 13,520 million in 2022. A subsequent decline to US$ 7,868 million in 2023 suggests a normalization of operational earnings following the exceptional surge observed in 2022.
- Invested Capital and Cost of Capital
- Invested capital followed a consistent upward trajectory, increasing from US$ 40,757 million in 2019 to US$ 51,119 million by 2023. During this same period, the cost of capital remained elevated, trending from 18.08% in 2019 to a peak of 20.02% in 2022, ending at 19.81% in 2023. The simultaneous increase in both the total capital deployed and the cost of that capital created a higher financial hurdle for achieving value creation.
- Economic Profit Trends
- Economic profit was negative for the majority of the period, reaching its lowest point of US$ -8,407 million in 2020. A transition to positive economic profit occurred only in 2022, reaching US$ 3,554 million, which directly coincided with the peak in NOPAT. The return to a negative economic profit of US$ -2,259 million in 2023 underscores a recurring inability to sustain returns that exceed the weighted average cost of capital.
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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
= 1,113 × 5.70% = 63
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
= 655 × 21.00% = 138
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.
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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 $2,654 million, but still remained considerably higher than pre-2020 levels.
Overall, the data indicates a period of tax benefit in 2020 followed by a consistent and substantial increase in tax expenses and cash operating taxes in the subsequent years. The sharp rise in both metrics during 2022 and 2023 suggests changes in earnings, tax policies, or other factors impacting the company's tax payable status, resulting in a significantly higher cash outflow related to taxes despite the decrease from the 2022 peak.
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Invested Capital
Valero Energy Corp., invested capital calculation (financing approach)
US$ 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 $51,119 million in 2023. This represents ongoing investment and capital deployment over the period.
- Summary
- Overall, the financial data reflect a phase of increased debt leverage in 2020, followed by deliberate deleveraging from 2021 onward. Concurrently, stockholders’ equity declined in the early years but rebounded strongly in the latest two years, indicating improved financial health or retained earnings accumulation. The continuous growth in invested capital suggests sustained investment efforts, aligning with the strengthening equity position and reduced reliance on debt financing during the latter years.
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Cost of Capital
Valero Energy Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 46,474) | 46,474) | ÷ | 59,002) | = | 0.79 | 0.79 | × | 24.11% | = | 18.99% | ||
| Debt and finance lease obligations, including current portion3 | 11,415) | 11,415) | ÷ | 59,002) | = | 0.19 | 0.19 | × | 4.80% × (1 – 21.00%) | = | 0.73% | ||
| Operating lease liability4 | 1,113) | 1,113) | ÷ | 59,002) | = | 0.02 | 0.02 | × | 5.70% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 59,002) | 1.00 | 19.81% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | 49,152) | 49,152) | ÷ | 61,535) | = | 0.80 | 0.80 | × | 24.11% | = | 19.26% | ||
| Debt and finance lease obligations, including current portion3 | 11,296) | 11,296) | ÷ | 61,535) | = | 0.18 | 0.18 | × | 4.76% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 1,087) | 1,087) | ÷ | 61,535) | = | 0.02 | 0.02 | × | 5.20% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 61,535) | 1.00 | 20.02% | ||||||||||
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 | 35,135) | 35,135) | ÷ | 51,978) | = | 0.68 | 0.68 | × | 24.11% | = | 16.30% | ||
| Debt and finance lease obligations, including current portion3 | 15,588) | 15,588) | ÷ | 51,978) | = | 0.30 | 0.30 | × | 4.43% × (1 – 21.00%) | = | 1.05% | ||
| Operating lease liability4 | 1,255) | 1,255) | ÷ | 51,978) | = | 0.02 | 0.02 | × | 4.20% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 51,978) | 1.00 | 17.43% | ||||||||||
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 | 30,973) | 30,973) | ÷ | 48,910) | = | 0.63 | 0.63 | × | 24.11% | = | 15.27% | ||
| Debt and finance lease obligations, including current portion3 | 16,767) | 16,767) | ÷ | 48,910) | = | 0.34 | 0.34 | × | 4.20% × (1 – 21.00%) | = | 1.14% | ||
| Operating lease liability4 | 1,170) | 1,170) | ÷ | 48,910) | = | 0.02 | 0.02 | × | 4.70% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 48,910) | 1.00 | 16.50% | ||||||||||
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 | 29,358) | 29,358) | ÷ | 42,022) | = | 0.70 | 0.70 | × | 24.11% | = | 16.85% | ||
| Debt and finance lease obligations, including current portion3 | 11,374) | 11,374) | ÷ | 42,022) | = | 0.27 | 0.27 | × | 5.21% × (1 – 21.00%) | = | 1.11% | ||
| Operating lease liability4 | 1,290) | 1,290) | ÷ | 42,022) | = | 0.03 | 0.03 | × | 4.90% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 42,022) | 1.00 | 18.08% | ||||||||||
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 | (2,259) | 3,554) | (2,199) | (8,407) | (2,939) | |
| Invested capital2 | 51,119) | 49,772) | 44,526) | 40,966) | 40,757) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -4.42% | 7.14% | -4.94% | -20.52% | -7.21% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | -3.81% | 6.69% | -2.42% | — | — | |
| ConocoPhillips | 6.56% | 19.30% | 4.99% | — | — | |
| Exxon Mobil Corp. | 3.08% | 11.84% | 3.21% | — | — | |
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 × -2,259 ÷ 51,119 = -4.42%
4 Click competitor name to see calculations.
An analysis of the financial metrics reveals a period of significant volatility in economic value creation characterized by a consistent expansion of the capital base. For the majority of the observed five-year period, the organization failed to generate a positive economic spread, indicating that returns on invested capital were generally insufficient to cover the cost of that capital.
- Invested Capital Trends
- A steady upward trajectory is observed in the invested capital, which increased from 40,757 million US$ in 2019 to 51,119 million US$ in 2023. This represents a continuous growth in the total resources deployed within the business operations over the five-year duration.
- Economic Profit Fluctuations
- Economic profit exhibits extreme variance. A sharp decline was recorded in 2020, reaching a minimum of negative 8,407 million US$. This was followed by a recovery trend that peaked in 2022 with a positive economic profit of 3,554 million US$. However, this gain was not sustained, as the figure reverted to a negative 2,259 million US$ in 2023.
- Economic Spread Ratio Performance
- The economic spread ratio reflects the instability of value creation. The most significant contraction occurred in 2020, with the ratio dropping to -20.52%. A reversal to positive territory was achieved in 2022, reaching a peak of 7.14%, which marks the only period of positive economic value added. The ratio subsequently declined to -4.42% by the end of 2023, signaling a return to negative economic spread.
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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 | (2,259) | 3,554) | (2,199) | (8,407) | (2,939) | |
| Revenues, includes excise taxes on sales by certain of foreign operations | 144,766) | 176,383) | 113,977) | 64,912) | 108,324) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.56% | 2.01% | -1.93% | -12.95% | -2.71% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Chevron Corp. | -4.10% | 6.03% | -3.01% | — | — | |
| ConocoPhillips | 9.50% | 18.57% | 8.31% | — | — | |
| Exxon Mobil Corp. | 2.82% | 8.82% | 3.17% | — | — | |
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 × -2,259 ÷ 144,766 = -1.56%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant volatility in both revenue generation and economic profitability between 2019 and 2023.
- Revenue Trends
- Revenues experienced a severe contraction in 2020, falling to 64,912 million US dollars from 108,324 million US dollars in 2019. A subsequent recovery followed, with revenues peaking in 2022 at 176,383 million US dollars before moderating to 144,766 million US dollars by the end of 2023.
- Economic Profit Performance
- Economic profit remained negative for the majority of the observed period. The deepest deficit occurred in 2020, reaching negative 8,407 million US dollars. A notable turnaround was achieved in 2022, when economic profit transitioned to a positive 3,554 million US dollars. However, this gain was not sustained, as 2023 saw a return to a negative economic profit of 2,259 million US dollars.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the fluctuations in absolute profit and revenue. The margin deteriorated sharply to -12.95% in 2020, representing the lowest point of capital efficiency. Improvement occurred in 2021 (-1.93%) and peaked in 2022 with a positive margin of 2.01%. By 2023, the margin compressed again to -1.56%, indicating that returns once again fell below the cost of capital.
Overall, the evidence indicates a cyclical pattern where the 2022 peak in revenue and economic profit served as a temporary outlier in a broader trend of negative economic value addition over the five-year window.
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