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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Verizon Communications Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Reportable Segments
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Price to Earnings (P/E) since 2005
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Economic Profit
Verizon Communications Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a general upward trend from 24,311 million US$ in 2020 to a peak of 29,903 million US$ in 2021. However, this was followed by a decline to 28,039 million US$ in 2022 and a more significant drop to 19,450 million US$ in 2023. There was a partial recovery in 2024 to 24,675 million US$, yet this value remained below the earlier peak.
- Cost of Capital
- The cost of capital demonstrated a slight downward trend from 7.72% in 2020 to 7.31% in 2022, indicating a modest decrease in the company's financing costs or risk perception. Thereafter, it experienced a mild increase in 2023 and 2024, reaching 7.49%, suggesting a small rise in capital costs or risk factors during the latter period.
- Invested Capital
- Invested capital consistently increased over the five-year period, growing from 247,730 million US$ in 2020 to 307,881 million US$ in 2024. This steady expansion reflects ongoing investment in the company's asset base or operating framework.
- Economic Profit
- Economic profit was positive in 2020 and 2021, reaching a high of 7,917 million US$ in 2021. However, it declined in 2022 to 5,989 million US$ and turned negative in 2023 with a loss of 3,169 million US$. The year 2024 showed a return to positive economic profit at 1,618 million US$, although the level remained significantly lower compared to previous years.
- Overall Analysis
- The data reveals that while invested capital has steadily increased, the company’s ability to generate economic profit has fluctuated considerably, particularly showing weakness in 2023. The reduction in NOPAT and the negative economic profit in that year suggest operational challenges or adverse market conditions. The slight recovery observed in 2024 indicates some improvement, though profitability metrics remain below earlier peaks. The relatively stable cost of capital suggests that changes in performance were driven more by operational factors than by shifts in financing costs.
Net Operating Profit after Taxes (NOPAT)
Verizon Communications Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Verizon.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 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 Verizon.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data indicate fluctuations in net income attributable to Verizon over the five-year period. Initially, net income rose from 17,801 million US dollars in 2020 to a peak of 22,065 million US dollars in 2021. It slightly declined in 2022 to 21,256 million US dollars, followed by a more pronounced decrease to 11,614 million US dollars in 2023. This was followed by a recovery in 2024, with net income increasing to 17,506 million US dollars, yet remaining below the 2020 and 2021 levels.
Net operating profit after taxes (NOPAT) exhibited a somewhat similar trend, with growth from 24,311 million US dollars in 2020 to a high of 29,903 million US dollars in 2021. It then decreased to 28,039 million US dollars in 2022 and experienced a substantial drop to 19,450 million US dollars in 2023. In 2024, NOPAT rebounded to 24,675 million US dollars, approaching the 2020 level but still below the 2021 and 2022 peaks.
- Net Income Trends
- There was an overall increase from 2020 to 2021, followed by a decline in 2022 and a sharper decrease in 2023, with partial recovery in 2024.
- NOPAT Trends
- The pattern mirrored net income, with growth until 2021, a slight reduction in 2022, a significant drop in 2023, and a recovery in 2024.
- Comparative Observations
- Net income showed more volatility compared to NOPAT, particularly noticeable in 2023 where the decline was more pronounced, suggesting potential non-operating factors affecting net income during that period.
- Recovery in 2024
- Both net income and NOPAT indicate a recovery from the 2023 downturn, though neither fully returned to the peak levels observed in 2021.
Overall, the data reveal a period of growth until 2021, followed by a two-year downturn, with partial recovery by 2024. This suggests operational and possibly market challenges during 2022 and 2023, with improving conditions or strategic adjustments reflected in the 2024 figures.
Cash Operating Taxes
Verizon Communications Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
The financial data indicates varying trends in both income tax provision and cash operating taxes over the five-year period.
- Income Tax Provision
- The income tax provision generally increased from 2020 to 2021, rising from $5,619 million to $6,802 million. It slightly decreased in 2022 to $6,523 million, followed by a more pronounced drop in 2023 to $4,892 million. In 2024, a moderate recovery is observed with the provision increasing to $5,030 million. Overall, the data reveals a peak in tax provision in 2021, after which there is a downward adjustment with some stabilization in the latest year.
- Cash Operating Taxes
- Cash operating taxes exhibited more volatility during the period. Starting relatively high at $5,100 million in 2020, there is a significant decline in 2021 to $3,436 million. This is followed by an increase in 2022 to $4,451 million, a subsequent decrease in 2023 to $3,774 million, and a sharp rise in 2024 to $5,750 million, the highest level in the five years. The fluctuations suggest variable cash tax payments, potentially influenced by operational performance, timing of payments, or tax planning measures.
In summary, while the income tax provision shows a general peak followed by stabilization at a lower level, cash operating taxes display more pronounced variability with a significant rebound in the final year of the series. These trends may reflect changes in earnings, tax policies, or cash management strategies impacting the company's tax obligations over time.
Invested Capital
Verizon Communications Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 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).
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 equity attributable to Verizon.
5 Removal of accumulated other comprehensive income.
6 Subtraction of work in progress.
7 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases show an initial increase from 150,547 million USD in 2020 to a peak of 177,930 million USD in 2021. Subsequently, there is a gradual decline reaching 168,357 million USD by 2024. This pattern suggests a period of increased borrowing or lease commitments followed by deleveraging or reduction in lease obligations in the most recent years.
- Equity Attributable to Verizon
- Equity attributable to Verizon demonstrates a consistent upward trend over the five-year period. Starting at 67,842 million USD in 2020, it rises steadily each year to reach 99,237 million USD by the end of 2024. This reflects an accumulation of retained earnings and/or capital infusion, indicating strengthening shareholder equity.
- Invested Capital
- Invested capital increases notably from 247,730 million USD in 2020 to 307,881 million USD in 2024. The rise is steady but slows in growth rate after 2022, suggesting ongoing investment activities with a moderation in expansion or capital expenditure intensity in the later years.
- Overall Insights
- The company's financial structure over this period indicates a strategic adjustment towards lowering debt and lease obligations after initial growth, while continuing to enhance equity and maintain steady invested capital accumulation. The trend of increasing equity alongside decreasing debt levels implies strengthening financial stability and possibly improved creditworthiness. Invested capital growth, albeit at a slower pace towards the end, signals maintenance of investment in the business operations and asset base.
Cost of Capital
Verizon Communications Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (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 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Verizon Communications Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited notable fluctuations over the analyzed period. Starting at a positive level of 5,183 million US dollars in 2020, it increased substantially to 7,917 million US dollars in 2021. However, it experienced a decline in 2022, falling to 5,989 million US dollars. The year 2023 marked a significant downturn, with economic profit turning negative, reaching -3,169 million US dollars. There was a partial recovery in 2024, with economic profit rising to 1,618 million US dollars, yet still remaining below earlier positive peaks.
- Invested Capital
- Invested capital demonstrated a consistent upward trend throughout the entire period. It increased steadily from 247,730 million US dollars in 2020 to 307,881 million US dollars in 2024. The growth in invested capital appears gradual but persistent, suggesting continuous investment or asset accumulation over the years without any periods of decline.
- Economic Spread Ratio
- The economic spread ratio, an indicator of value creation relative to invested capital, showed marked variability. It rose from 2.09% in 2020 to 2.73% in 2021, signaling improved economic efficiency or returns. In 2022, the ratio declined to 1.99%, remaining positive but lower than the previous year. A notable shift occurred in 2023, with the ratio becoming negative (-1.04%), aligning with the observed negative economic profit for the same year, indicating deterioration in capital efficiency or increased costs exceeding returns. In 2024, the ratio somewhat improved to 0.53%, suggesting a modest rebound in economic value generation.
- Overall Analysis
- The overall trends reflect a period of growth and positive performance up to 2021, followed by decline and challenges starting in 2022 and peaking in 2023 with negative economic profit and spread ratio. Despite continued investment as shown by rising invested capital, the company faced profitability and value creation difficulties in the mid-to-late period. The partial recovery in 2024 indicates a potential turnaround, although economic profit and spread remain below earlier high points. Continuous monitoring and analysis of factors driving these fluctuations would be advisable.
Economic Profit Margin
Verizon Communications Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Operating Revenues
- Operating revenues demonstrated a consistent upward trend from 2020 through 2022, increasing from approximately $128.3 billion to $136.8 billion. However, in 2023, there was a slight decline to around $134.0 billion, followed by a modest recovery to about $134.8 billion in 2024. Overall, while the revenue growth slowed and experienced a minor dip, it remained at a relatively stable level in the latter years.
- Economic Profit
- The economic profit followed a more volatile pattern across the examined period. After rising from about $5.2 billion in 2020 to nearly $7.9 billion in 2021, it decreased to roughly $6.0 billion in 2022. Notably, in 2023, the economic profit turned negative, recording a loss of approximately $3.2 billion. In 2024, economic profit rebounded to a positive figure of about $1.6 billion, indicating some recovery but still significantly below the peak in 2021.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations seen in economic profit. It improved from 4.04% in 2020 to 5.93% in 2021, then declined to 4.38% in 2022. The margin turned negative in 2023 at -2.37%, reflecting the negative economic profit during that year. By 2024, the margin returned to a positive value of 1.20%, suggesting partial improvement but still indicating lower profitability compared to earlier years.
- Summary
- The analyzed financial metrics indicate that while operating revenues maintained relative stability with slight growth and minor setbacks, the economic profit and its margin experienced considerable volatility. The peak profitability occurred in 2021, followed by a notable decline culminating in negative economic profit and margin in 2023. The subsequent year showed signs of recovery, but profitability levels remained subdued compared to the earlier peak. This pattern suggests challenges impacting economic efficiency and returns during the middle of the period, despite steady top-line revenue figures.