Economic Value Added (EVA)
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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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e.l.f. Beauty, Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2016
- Net Profit Margin since 2016
- Operating Profit Margin since 2016
- Return on Assets (ROA) since 2016
- Debt to Equity since 2016
- Analysis of Revenues
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Economic Profit
e.l.f. Beauty, Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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
= – × =
The financial performance, as measured by economic profit, demonstrates a consistent pattern of negative value creation over the five-year period. While net operating profit after taxes (NOPAT) exhibits significant fluctuation, it has not been sufficient to cover the cost of capital employed.
- NOPAT Trend
- Net operating profit after taxes experienced a substantial decrease from $26.428 million in 2020 to $0.618 million in 2021. A recovery was observed in 2022, reaching $20.327 million, followed by further growth to $57.046 million in 2023. The most recent year, 2024, shows a considerable increase to $132.182 million. Despite this positive trend in NOPAT, it has not translated into positive economic profit.
- Cost of Capital Trend
- The cost of capital has remained relatively stable, fluctuating between 20.89% and 23.98% over the period. An initial increase from 20.89% in 2020 to 22.24% in 2021 was followed by a slight increase to 22.39% in 2022 and a more pronounced rise to 23.98% in 2023. The cost of capital decreased slightly to 23.75% in 2024, but remained high enough to consistently exceed NOPAT.
- Invested Capital Trend
- Invested capital has shown a consistent upward trend, increasing from $418.026 million in 2020 to $936.268 million in 2024. This growth suggests expansion of operations or increased investment in assets. The increasing capital base, coupled with a consistently high cost of capital, contributes to the negative economic profit.
- Economic Profit
- Economic profit remained negative throughout the observed period, ranging from -$60.888 million to -$95.932 million. The largest negative economic profit was recorded in 2021 at -$95.932 million. While the magnitude of the loss decreased in 2022 and 2023, it increased again in 2024 to -$90.168 million, indicating that the return generated from invested capital continues to fall short of the required return.
In summary, despite a significant increase in NOPAT in recent years, the company continues to destroy economic value. The increasing invested capital and relatively high cost of capital are key factors contributing to this outcome. Further investigation into the drivers of NOPAT growth and the efficiency of capital allocation is warranted.
Net Operating Profit after Taxes (NOPAT)
e.l.f. Beauty, Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net income.
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.
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 analysis of the financial performance over the reported periods reveals significant fluctuations and an overall strong upward trend in profitability metrics.
- Net Income
- The net income experienced a notable decline from 17,884 thousand USD in 2020 to 6,232 thousand USD in 2021, indicating a decrease in profitability. However, from 2021 onwards, the net income showed a robust recovery and growth, rising substantially to 21,770 thousand USD in 2022 and accelerating sharply to 61,530 thousand USD in 2023. This growth continued into 2024, with net income reaching 127,663 thousand USD, reflecting a significant improvement in the company's earnings over the five-year span.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT followed a somewhat similar pattern, starting at 26,428 thousand USD in 2020 and dumping dramatically to 618 thousand USD in 2021, which suggests operational challenges or increased expenses during that year. Subsequently, NOPAT rebounded to 20,327 thousand USD in 2022 and increased strongly to 57,046 thousand USD in 2023. The upward trajectory persisted, with NOPAT climbing to 132,182 thousand USD in 2024, indicating enhanced operational efficiency and profitability after accounting for taxes.
Overall, the data indicates that despite a difficult year in 2021, both net income and NOPAT improved significantly in the following years, culminating in record-high results in 2024. This suggests effective management strategies, operational improvements, or market conditions that positively impacted profitability and operational performance.
Cash Operating Taxes
e.l.f. Beauty, Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
- Provision (benefit) for income taxes
- The provision for income taxes displayed notable volatility over the analyzed periods. In the year ending March 31, 2020, there was a positive provision amounting to 6,185 thousand US dollars, which turned into a tax benefit (negative provision) of 2,542 thousand US dollars in the subsequent year. The provision reverted to a positive figure of 3,661 thousand US dollars for the year ending March 31, 2022, then increased slightly to 2,544 thousand US dollars in 2023, followed by a substantial rise to 13,327 thousand US dollars in 2024. This substantial increase in 2024 suggests a significant rise in taxable income or changes in tax strategy or rates affecting the provision.
- Cash operating taxes
- Cash operating taxes exhibited a consistent upward trajectory throughout the analyzed timeline. Starting at 5,178 thousand US dollars in 2020, this figure increased year-over-year, reaching 7,044 thousand US dollars in 2021, 7,989 thousand US dollars in 2022, then 9,455 thousand US dollars in 2023. The most pronounced increase occurred between 2023 and 2024, when cash operating taxes nearly doubled to 18,383 thousand US dollars. This trend indicates increasing cash outflows related to tax obligations, potentially reflecting higher taxable profits, changes in tax regulations, or improved collection and payment practices.
Invested Capital
e.l.f. Beauty, Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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 stockholders’ equity.
5 Removal of accumulated other comprehensive income.
- Total Reported Debt & Leases
- The total reported debt and leases showed a declining trend from March 31, 2020, through March 31, 2023, decreasing from $152.978 million to $82.167 million. This represents a substantial reduction in debt and lease obligations over this period. However, as of March 31, 2024, there was a significant increase to $290.601 million, indicating a sharp rise in leverage or financing commitments in the most recent year.
- Stockholders' Equity
- Stockholders' equity demonstrated consistent growth over the five-year period. Starting at $242.171 million in March 2020, it increased steadily each year, reaching $642.572 million by March 2024. This reflects a strong accumulation of equity, potentially through retained earnings and/or capital infusions, suggesting an improvement in the company's net assets and financial strength.
- Invested Capital
- Invested capital rose gradually from $418.026 million in March 2020 to $496.463 million in March 2023. Notably, there was a considerable jump to $936.268 million as of March 2024. This substantial increase parallels the surge in total debt and leases, possibly indicating increased investments or assets financed by the higher debt levels. The overall trend suggests expansion or significant investment activities in the latest fiscal year.
Cost of Capital
e.l.f. Beauty, Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-03-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
e.l.f. Beauty, Inc., economic spread ratio calculation, comparison to benchmarks
| Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
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.
The economic spread ratio demonstrates a generally improving, though still negative, trend over the five-year period. While economic profit remains negative across all observed years, the magnitude of the loss appears to be decreasing relative to invested capital.
- Economic Spread Ratio Trend
- The economic spread ratio moved from -14.57% in 2020 to -22.10% in 2021, indicating a widening gap between the return on invested capital and the cost of that capital. A subsequent improvement is observed, with the ratio reaching -17.76% in 2022 and -12.49% in 2023. This suggests a narrowing of the gap. However, the most recent year, 2024, shows a slight increase to -9.63%, indicating a potential stabilization or a slower rate of improvement.
Invested capital has generally increased over the period, with a significant jump occurring between 2023 and 2024. This increase in invested capital, coupled with continued negative economic profit, likely contributes to the observed fluctuations in the economic spread ratio.
- Relationship between Economic Profit and Invested Capital
- Despite the increasing invested capital, the absolute value of economic profit did not increase proportionally. While economic profit decreased from 2020 to 2021, it showed some improvement in 2022 and 2023 before declining again in 2024. This suggests that while the company is investing more, it is not yet generating sufficient returns to offset the cost of that capital, although the rate of underperformance is improving.
The trend in the economic spread ratio suggests that the company is becoming more efficient in utilizing its invested capital, but it is still not achieving a positive economic profit. The substantial increase in invested capital in 2024 warrants further investigation to determine if the anticipated returns will materialize and ultimately lead to a positive economic spread.
Economic Profit Margin
e.l.f. Beauty, Inc., economic profit margin calculation, comparison to benchmarks
| Mar 31, 2024 | Mar 31, 2023 | Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Procter & Gamble Co. | ||||||
Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin demonstrates a fluctuating, yet generally improving, trend over the five-year period. While consistently negative, the magnitude of the negative margin has decreased in recent years, indicating a lessening disparity between economic profit and net sales.
- Economic Profit Margin Trend
- In fiscal year 2020, the economic profit margin stood at -21.53%. This represented the most negative margin observed during the analyzed period.
- The margin deteriorated further in 2021, reaching -30.16%, suggesting a widening gap between returns and the cost of capital. This coincided with an increase in the absolute value of economic profit loss.
- A notable improvement occurred in 2022, with the economic profit margin moving to -19.89%. This indicates a reduction in the negative economic profit relative to net sales.
- The trend of improvement continued into 2023, as the margin reached -10.71%. This represents a significant decrease in the negative margin compared to the prior two years.
- In fiscal year 2024, the economic profit margin further improved to -8.81%, the least negative value in the observed period. This improvement occurred alongside substantial growth in net sales.
The consistent negative economic profit suggests that, despite revenue growth, the company’s returns have not consistently exceeded its cost of capital throughout the analyzed period. However, the decreasing negative margin indicates a positive trajectory in the company’s ability to generate returns that approach, and potentially surpass, its cost of capital, particularly as evidenced by the results in 2023 and 2024.
- Relationship to Net Sales
- The economic profit margin’s improvement in 2023 and 2024 aligns with substantial increases in net sales. While economic profit remained negative in absolute terms, the percentage impact on net sales diminished, suggesting improved operational efficiency or capital allocation as sales grew.