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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- Cash Flow Statement
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Selected Financial Data since 2012
- Total Asset Turnover since 2012
- Price to Earnings (P/E) since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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Economic Profit
Zoetis Inc., 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 period under review demonstrates fluctuating economic profit alongside increases in net operating profit after taxes and invested capital. While NOPAT generally increased, economic profit exhibited considerable variation year-to-year. The cost of capital remained relatively stable throughout the analyzed timeframe.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$1,570 million in 2019 to US$1,727 million in 2020, representing a growth of approximately 9.7%. A significant increase was then observed in 2021, reaching US$2,131 million. NOPAT decreased slightly in 2022 to US$1,958 million before rising again to US$2,410 million in 2023, the highest value recorded during the period. This indicates a generally positive trend in operational profitability, though not consistently linear.
- Cost of Capital
- The cost of capital remained consistently high, fluctuating between 14.73% and 15.01% over the five-year period. The incremental increases observed each year were minimal, suggesting a stable capital structure and financing environment. The relative consistency of this figure is important when evaluating changes in economic profit.
- Invested Capital
- Invested capital increased from US$9,838 million in 2019 to US$11,557 million in 2020, a substantial rise of approximately 17.5%. It continued to grow, albeit at a slower pace, reaching US$11,612 million in 2021 and US$12,542 million in 2022. A decrease was noted in 2023, with invested capital falling to US$11,550 million. This suggests periods of significant investment followed by a potential recalibration or divestment in the most recent year.
- Economic Profit
- Economic profit was US$116 million in 2019. It decreased substantially in 2020 to US$25 million. A significant recovery occurred in 2021, with economic profit reaching US$396 million. However, this was followed by a decline to US$78 million in 2022. The most recent year, 2023, saw a substantial increase to US$676 million, representing the highest economic profit recorded in the period. The volatility in economic profit suggests that while NOPAT is growing, the returns generated are sensitive to changes in invested capital and the cost of capital. The large increase in 2023, despite a slight decrease in invested capital, indicates improved efficiency in capital utilization or a favorable shift in the relationship between NOPAT and invested capital.
In summary, the organization experienced growth in NOPAT and invested capital, but economic profit demonstrated significant fluctuations. The relatively stable cost of capital suggests these variations in economic profit are primarily driven by changes in NOPAT and the level of invested capital.
Net Operating Profit after Taxes (NOPAT)
Zoetis Inc., NOPAT calculation
US$ 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 doubtful accounts.
3 Addition of increase (decrease) in restructuring accruals.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Zoetis Inc..
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2023 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Zoetis Inc..
8 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net income attributable to Zoetis Inc.
- The net income shows a consistent upward trend across the five-year period. Starting at 1,500 million USD in 2019, it increased each year, reaching 2,344 million USD by the end of 2023. The growth was steady, with notable acceleration between 2020 and 2021, and continuing to rise through 2023, indicating improving profitability over time.
- Net operating profit after taxes (NOPAT)
- NOPAT generally trended upwards from 1,570 million USD in 2019 to 2,410 million USD in 2023. There was a significant increase between 2019 and 2021, peaking at 2,131 million USD. A decline was observed in 2022, dropping to 1,958 million USD, before rebounding strongly in 2023 to the highest level in the period. This pattern suggests strong operational performance with some volatility in 2022, followed by recovery and growth.
Cash Operating Taxes
Zoetis Inc., 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).
- Provision for Taxes on Income
- The provision for taxes on income exhibits a consistent upward trend over the five-year period. Starting at $301 million in 2019, the amount increased each subsequent year, reaching $596 million in 2023. The growth appears steady, with noticeable jumps especially between 2020 and 2021, and continuing through 2022 and 2023. This indicates increasing tax liabilities or higher taxable income over time.
- Cash Operating Taxes
- Cash operating taxes generally increased from 2019 to 2022, starting at $422 million and peaking at $867 million in 2022. However, there is a significant decline observed in 2023, dropping to $687 million. While the overall trend is upward through most years, the decrease in the last year suggests changes in tax payment timing, effective tax rates, or operational adjustments impacting cash taxes paid.
- Comparative Insights
- Although both provisions for taxes on income and cash operating taxes increased overall, the divergence in 2023 is noteworthy. The provision continues to rise, whereas cash taxes paid decline, which may signal temporary timing differences or more efficient tax planning. The increasing provision paired with fluctuating cash taxes suggests that the accrual for taxes is rising in anticipation of income growth despite a recent drop in cash outflows for taxes.
Invested Capital
Zoetis Inc., invested capital calculation (financing approach)
US$ 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 restructuring accruals.
5 Addition of equity equivalents to total Zoetis Inc. equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
8 Subtraction of available-for-sale debt securities.
- Total reported debt & leases
- The total reported debt and lease obligations exhibited some fluctuation over the five-year period. Initially, the debt increased from $6,646 million in 2019 to $7,402 million in 2020. This was followed by a decrease to $6,784 million in 2021. Subsequently, there was a noticeable rise to the peak value of $8,133 million in 2022, before dropping again to $6,812 million in 2023. Overall, the pattern shows volatility with a tendency to revert toward levels close to those observed at the beginning of the period.
- Total Zoetis Inc. equity
- The equity of the company demonstrated a generally upward trend throughout the period. Starting at $2,708 million in 2019, equity increased steadily, reaching $3,769 million in 2020 and continuing to $4,543 million in 2021. There was a slight decline in 2022 to $4,405 million, but equity rebounded to its highest value of $4,997 million by 2023. This upward trajectory indicates strengthening shareholder value over time despite the minor dip in 2022.
- Invested capital
- Invested capital rose consistently from $9,838 million in 2019 to $11,557 million in 2020. It then experienced marginal growth to $11,612 million in 2021, followed by a more pronounced increase to $12,542 million in 2022. In 2023, invested capital decreased to $11,550 million, marking a reversal after several years of growth. Overall, the data points to an expanding investment base, with some retrenchment in the latest year.
Cost of Capital
Zoetis Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Zoetis Inc., 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
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.
The economic spread ratio demonstrates significant fluctuation over the five-year period. Initial values were followed by substantial increases and decreases, culminating in a strong positive trend in the most recent year.
- Economic Spread Ratio
- In 2019, the economic spread ratio was 1.18%. This decreased substantially to 0.22% in 2020, indicating a diminished ability to generate returns exceeding the cost of capital. A considerable recovery occurred in 2021, with the ratio rising to 3.41%. However, this improvement was not sustained, as the ratio declined to 0.62% in 2022. The most recent year, 2023, shows a marked increase to 5.85%, representing the highest value within the observed period and suggesting a strong improvement in profitability relative to invested capital.
The economic spread ratio’s movement appears to correlate with changes in economic profit. The low ratio in 2020 aligns with the lowest economic profit during the period. Conversely, the highest ratio in 2023 corresponds with the highest economic profit. This suggests a strong relationship between the company’s ability to generate economic profit and its economic spread.
- Invested Capital
- Invested capital generally increased from 2019 to 2022, moving from US$9,838 million to US$12,542 million. A slight decrease was observed in 2023, with invested capital falling to US$11,550 million. Despite this decrease, the economic spread ratio increased significantly in 2023, indicating that the company was able to generate a higher return on a slightly smaller capital base.
The observed volatility in the economic spread ratio warrants further investigation. While the 2023 result is positive, the prior fluctuations suggest potential instability or sensitivity to external factors. The relationship between invested capital and economic spread should be monitored to understand the drivers of performance.
- Economic Profit
- Economic profit exhibited considerable variability. It began at US$116 million in 2019, decreased to US$25 million in 2020, then increased dramatically to US$396 million in 2021. A decline to US$78 million occurred in 2022, followed by a substantial increase to US$676 million in 2023. This pattern directly influences the economic spread ratio, as the ratio is calculated based on economic profit and invested capital.
Economic Profit Margin
Zoetis Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
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 ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation between 2019 and 2023. Initial values demonstrated a substantial decline followed by a period of strong recovery and subsequent growth. A detailed examination of the trends is presented below.
- Economic Profit Margin
- In 2019, the economic profit margin stood at 1.85%. This figure experienced a considerable decrease in 2020, falling to 0.38%. A dramatic increase was then observed in 2021, with the margin reaching 5.09%. The margin decreased again in 2022 to 0.97%, before rising sharply to 7.91% in 2023. This represents the highest margin observed within the analyzed period.
- Relationship to Revenue
- Revenue consistently increased throughout the period, moving from US$6,260 million in 2019 to US$8,544 million in 2023. The initial decline in economic profit margin in 2020 occurred despite an increase in revenue, suggesting a potential issue with cost management or capital allocation during that year. The substantial margin improvement in 2021 and 2023 coincided with continued revenue growth, indicating improved profitability and efficient capital utilization.
- Economic Profit
- Economic profit itself mirrored the volatility seen in the economic profit margin. It decreased significantly from US$116 million in 2019 to US$25 million in 2020. A substantial recovery occurred in 2021, reaching US$396 million, followed by a decrease to US$78 million in 2022. Finally, economic profit increased significantly to US$676 million in 2023, aligning with the peak in economic profit margin.
Overall, the period demonstrates a recovery from an initial setback in profitability, culminating in a strong performance in 2023. The increasing economic profit margin alongside revenue growth suggests improving operational efficiency and value creation.