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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- Income Statement
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Amgen 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
= – × =
The financial data reveals several important trends and shifts in key performance indicators over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT decreased from 7,889 million USD in 2020 to 6,412 million USD in 2021, remaining almost flat in 2022 at 6,399 million USD. There was a notable recovery in 2023, with NOPAT increasing to 7,802 million USD. However, a significant decline occurred in 2024, with NOPAT falling sharply to 5,377 million USD, the lowest point in the period observed.
- Cost of Capital
- The cost of capital remained fairly stable, fluctuating slightly between 8.43% and 8.82% throughout the period. A slight downward trend was seen in 2023 at 8.43% before a modest rise back to 8.6% in 2024. This indicates relatively consistent financing costs over time.
- Invested Capital
- Invested capital showed a steady increase from 38,776 million USD in 2020 to 40,247 million USD in 2021, followed by a slight decrease to 39,722 million USD in 2022. A sharp increase occurred in 2023, surging to 69,976 million USD, likely reflecting expansion or significant asset acquisition. This was followed by a reduction to 63,169 million USD in 2024, though still substantially higher than earlier years.
- Economic Profit
- Economic profit declined consistently over the period. Starting at 4,494 million USD in 2020, it decreased to 2,925 million USD in 2021 and then slightly to 2,893 million USD in 2022. The downward trend accelerated with economic profit dropping to 1,900 million USD in 2023, before turning negative to -57 million USD in 2024. The negative economic profit in 2024 suggests that the returns generated did not cover the cost of capital, indicating diminished value creation.
Overall, the data indicates volatility in operational profitability with a significant downturn in the latest year analyzed. Despite stable cost of capital, invested capital grew substantially in 2023 before decreasing in 2024. However, economic profit has trended downwards, ending in a slight negative, highlighting challenges in generating returns above capital costs in recent periods.
Net Operating Profit after Taxes (NOPAT)
Amgen 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 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, net = Adjusted interest expense, net × 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.
- Net Income
- The net income experienced a decline from 7,264 million US dollars in 2020 to 5,893 million US dollars in 2021, representing a notable decrease. It then rebounded moderately to 6,552 million US dollars in 2022, followed by a slight increase to 6,717 million US dollars in 2023. However, net income dropped considerably to 4,090 million US dollars in 2024, the lowest level during the observed period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a decreasing trend from 7,889 million US dollars in 2020 to 6,412 million US dollars in 2021. It remained relatively stable in 2022 at 6,399 million US dollars, then rose significantly to 7,802 million US dollars in 2023, reaching the highest point in the series. In 2024, NOPAT dropped sharply to 5,377 million US dollars, marking a substantial decline compared to the previous year.
- Overall Trends and Insights
- Both net income and NOPAT exhibited volatility throughout the five-year period. After declines in 2021, both metrics partially recovered in 2022 and 2023 before falling steeply in 2024. The divergence between net income and NOPAT in certain years is moderate, with both generally following similar downward and upward moves. The steep drops in 2024 for both indicators may suggest operational or external challenges impacting profitability during that year.
Cash Operating Taxes
Amgen 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).
- Provision for Income Taxes
- The provision for income taxes initially decreased from 869 million USD in 2020 to 808 million USD in 2021, followed by a further slight decline to 794 million USD in 2022. However, there was a noticeable increase in 2023, reaching 1,138 million USD, before dropping significantly to 519 million USD in 2024. This pattern indicates some volatility, with a peak in 2023 before a steep reduction in the latest year.
- Cash Operating Taxes
- Cash operating taxes showed a consistent upward trend from 1,493 million USD in 2020 to 1,497 million USD in 2021, then sharply increased to 2,368 million USD in 2022 and further to 2,963 million USD in 2023. However, in 2024, the amount fell to 2,426 million USD, indicating a partial decline after a period of substantial growth. Overall, cash operating taxes more than doubled over the five-year period despite the slight drop in the final year.
- General Insights
- The data reveals a divergence between provision for income taxes and cash operating taxes. While provision for income taxes fluctuated with a peak in 2023 and a marked decline in 2024, cash operating taxes demonstrated a generally strong upward trajectory with a moderate pullback towards the end. This could suggest variations in tax management strategies, timing differences, or changes in taxable income and cash tax payments over the periods analyzed.
Invested Capital
Amgen 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 stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of marketable securities.
- Total reported debt & leases
- The total reported debt and leases show a general upward trend from 2020 to 2024. Beginning at 33,445 million USD in 2020, the figure rises slightly to 33,979 million USD in 2021, followed by a more pronounced increase to 39,640 million USD in 2022. A significant surge occurs in 2023, reaching 65,423 million USD, before slightly declining to 60,879 million USD in 2024. This pattern indicates increased leverage, particularly in 2023, potentially reflecting elevated borrowing or lease obligations during that period.
- Stockholders’ equity
- Stockholders’ equity demonstrates a declining trend over the analyzed years. Starting at 9,409 million USD in 2020, equity decreases sharply to 6,700 million USD in 2021 and continues downward to 3,661 million USD in 2022. A recovery is observed in 2023 with equity rising to 6,232 million USD, followed by a slight decrease to 5,877 million USD in 2024. Overall, the substantial reduction early in the period suggests diminished net assets, while the partial rebound in 2023 may indicate some restoration of equity value.
- Invested capital
- Invested capital remains relatively stable from 2020 through 2022, starting at 38,776 million USD in 2020, increasing slightly to 40,247 million USD in 2021, then marginally decreasing to 39,722 million USD in 2022. A significant increase occurs in 2023, with invested capital reaching 69,976 million USD, before declining to 63,169 million USD in 2024. This growth in 2023 aligns with the increase in reported debt and leases, suggesting substantial capital investment or acquisition activities funded by increased liabilities.
Cost of Capital
Amgen Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Amgen 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 | ||||||
| AbbVie 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: 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 experienced a consistent decline over the reported periods. Starting from a high of 4,494 million US dollars at the end of 2020, it decreased to 2,925 million in 2021 and then slightly declined to 2,893 million in 2022. The downward trend continued more sharply in 2023, dropping to 1,900 million, before turning negative to -57 million in 2024. This suggests that the company’s profitability relative to its cost of capital has deteriorated, culminating in a loss in economic profit by the latest period.
- Invested Capital
- The invested capital showed an increasing trend from 2020 through 2023. It grew from 38,776 million US dollars in 2020 to 40,247 million in 2021 and then slightly decreased to 39,722 million in 2022. However, there was a significant increase in 2023, reaching 69,976 million, before dropping to 63,169 million in 2024. This pattern indicates a major capital investment or revaluation in 2023, followed by a partial reduction the subsequent year, reflecting dynamic management of capital resources.
- Economic Spread Ratio
- The economic spread ratio demonstrated a clear downward trajectory across the observed years. Initially, the ratio was 11.59% in 2020 but decreased sharply to 7.27% in 2021 and remained relatively stable at 7.28% in 2022. Afterwards, it fell substantially to 2.71% in 2023 and further declined to -0.09% in 2024. The declining economic spread ratio signifies a diminishing return on invested capital above the cost of capital, aligning with the negative economic profit at the end of the period.
Economic Profit Margin
Amgen 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 | ||||||
| Product sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie 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: 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 ÷ Product sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a declining trend over the observed periods. Starting at 4,494 million US dollars in 2020, it decreased significantly to 2,925 million in 2021 and remained relatively stable at 2,893 million in 2022. However, the decline accelerated in the following years, dropping to 1,900 million in 2023 and ultimately turning negative to -57 million in 2024. This indicates a deterioration in the company's ability to generate profit exceeding its cost of capital.
- Product Sales
- Product sales showed consistent growth throughout the periods. Sales increased steadily from 24,240 million US dollars in 2020 to 24,297 million in 2021, followed by a modest rise to 24,801 million in 2022. The growth rate accelerated in the subsequent years, with sales reaching 26,910 million in 2023 and 32,026 million in 2024. This upward trend reflects successful revenue expansion efforts.
- Economic Profit Margin
- The economic profit margin exhibited a continuous downward trajectory, consistent with the economic profit figures. It decreased from 18.54% in 2020 to 12.04% in 2021, then slightly declined further to 11.67% in 2022. A sharper reduction was observed thereafter, dropping to 7.06% in 2023 and becoming negative at -0.18% in 2024. This suggests increasing pressure on the profitability relative to sales, culminating in a loss in economic value added in the most recent year.
- Overall Analysis
- Despite the solid growth in product sales over the five-year period, the economic profit and economic profit margin both declined markedly, with the economic profit turning negative in the final year analyzed. This implies rising costs, diminishing returns, or other financial pressures that overshadow revenue gains. The company appears to be facing challenges in maintaining profitability that exceeds its capital costs, which may warrant further investigation into cost structure, pricing strategy, or investment efficiency.