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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Amgen Inc. pages available for free this week:
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
Amgen Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of economic value creation reveals a period of significant capital volatility and fluctuating operating performance between 2021 and 2025.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability remained relatively stable between 2021 and 2022 before experiencing an increase in 2023. A significant contraction occurred in 2024, with NOPAT falling to its lowest point in the period at 5,377 million US$. This was followed by a sharp recovery in 2025, reaching a peak of 9,219 million US$, indicating a substantial rebound in core operating efficiency.
- Invested Capital and Cost of Capital
- Invested capital remained consistent at approximately 40 billion US$ until 2023, when a substantial increase to 69,976 million US$ was recorded. This capital base gradually contracted over the subsequent two years. Throughout this period, the cost of capital remained relatively stable, fluctuating within a narrow range between 8.83% and 9.44%. This suggests that fluctuations in economic profit were driven primarily by operational performance and capital allocation rather than shifts in the cost of funding.
- Economic Profit and Value Creation
- Economic profit exhibited a downward trend from 2021 through 2024. Despite the increase in NOPAT in 2023, the massive expansion of the invested capital base resulted in a decrease in economic profit to 1,621 million US$. This trend culminated in 2024 with a negative economic profit of -317 million US$, representing a period of value destruction where operating returns were insufficient to cover the cost of capital. A significant reversal occurred in 2025, with economic profit surging to 3,686 million US$, the highest level in the analyzed timeframe, driven by the combination of peak NOPAT and a reduced invested capital base.
Net Operating Profit after Taxes (NOPAT)
Amgen Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
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 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 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.
Net operating profit after taxes (NOPAT) exhibited fluctuations over the five-year period. While net income demonstrated an overall positive trend, NOPAT presented a more complex pattern. Initial stability was followed by a significant increase and then a subsequent decline before recovering strongly in the final year.
- Overall Trend
- NOPAT began at US$6,412 million in 2021, experienced a slight decrease to US$6,399 million in 2022, then increased substantially to US$7,802 million in 2023. A decrease was then observed in 2024, with NOPAT falling to US$5,377 million, before a considerable recovery to US$9,219 million in 2025.
- Year-over-Year Changes
- The period from 2021 to 2022 showed a minimal decrease in NOPAT. The most significant year-over-year change occurred between 2022 and 2023, with an increase of US$1,403 million. The largest decline occurred between 2023 and 2024, representing a decrease of US$2,425 million. Finally, 2024 to 2025 saw a substantial increase of US$3,842 million.
- Relationship to Net Income
- While both NOPAT and net income generally moved in the same direction, the magnitudes of change differed. NOPAT’s fluctuations were more pronounced than those of net income. In 2021, NOPAT exceeded net income by US$519 million. This difference narrowed in 2022 to US$153 million. In 2023, NOPAT exceeded net income by US$1,085 million. The gap widened again in 2024, with NOPAT exceeding net income by US$1,287 million, and then further increased in 2025 to US$1,508 million.
The substantial increase in NOPAT in 2025 suggests improved operational efficiency or a change in the company’s capital structure. The decline in 2024 warrants further investigation to determine the underlying causes, such as increased operating expenses or changes in tax rates. The consistent difference between NOPAT and net income indicates the presence of non-operating items impacting net income.
Cash Operating Taxes
Amgen Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The provision for income taxes and cash operating taxes exhibited distinct patterns over the five-year period. A review of these figures reveals fluctuations in both reported tax expense and actual cash outflows for tax obligations.
- Provision for Income Taxes
- The provision for income taxes initially decreased from US$808 million in 2021 to US$794 million in 2022. A substantial increase was then observed in 2023, reaching US$1,138 million, before declining significantly to US$519 million in 2024. The provision increased again in 2025, closing at US$1,265 million. This suggests potential volatility influenced by changes in taxable income, tax rates, or the recognition of deferred tax assets or liabilities.
- Cash Operating Taxes
- Cash operating taxes demonstrated an upward trend from US$1,497 million in 2021 to US$2,368 million in 2022, representing a considerable increase. This growth continued into 2023, with cash taxes reaching US$2,963 million. A decrease was then noted in 2024, with cash taxes reported at US$2,426 million, followed by a slight increase to US$2,551 million in 2025. The cash tax figures generally remained above the provision for income taxes throughout the period.
- Relationship between Provision and Cash Taxes
- A consistent difference exists between the provision for income taxes and cash operating taxes. Cash operating taxes are consistently higher than the provision for income taxes across all reported years. This disparity could be attributed to several factors, including timing differences between when income is recognized for accounting purposes versus when taxes are paid, the utilization of tax loss carryforwards, or differences related to stock-based compensation. The widening gap in 2022 and 2023, followed by a narrowing in 2024 and 2025, warrants further investigation to understand the underlying drivers.
The observed trends suggest a dynamic tax profile. Further analysis, incorporating details regarding changes in tax legislation, deferred tax items, and the company’s overall income structure, would be necessary to provide a more comprehensive understanding of these fluctuations.
Invested Capital
Amgen Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
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.
The reported invested capital exhibited fluctuations over the five-year period. Total reported debt & leases and stockholders’ equity are the components used to calculate invested capital, and both experienced considerable changes during this timeframe.
- Invested Capital Trend
- Invested capital remained relatively stable between 2021 and 2022, at approximately US$40 billion. A significant increase was observed in 2023, rising to nearly US$70 billion. Subsequently, invested capital decreased in both 2024 and 2025, reaching US$58.6 billion by the end of 2025. This suggests a period of substantial capital deployment followed by a reduction in capital employed.
- Debt & Leases
- Total reported debt & leases increased from US$33.98 billion in 2021 to US$39.64 billion in 2022. A substantial rise occurred in 2023, reaching US$65.42 billion. This was followed by a decrease to US$60.88 billion in 2024 and a further reduction to US$55.44 billion in 2025. The pattern indicates increased reliance on debt financing in 2023, followed by a deliberate effort to reduce debt levels.
- Stockholders’ Equity
- Stockholders’ equity experienced a notable decline from US$6.7 billion in 2021 to US$3.66 billion in 2022. A recovery was seen in 2023, with equity rising to US$6.23 billion. This trend continued modestly in 2024, reaching US$5.88 billion, and then increased significantly in 2025 to US$8.66 billion. The fluctuations suggest changes in profitability, share repurchases, or other equity-related activities.
The interplay between debt and equity significantly influenced the overall invested capital. The increase in invested capital in 2023 was primarily driven by the substantial increase in debt, while the subsequent decrease in invested capital in 2024 and 2025 was influenced by both debt reduction and, to a lesser extent, fluctuations in stockholders’ equity.
Cost of Capital
Amgen Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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: 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 »
Economic Spread Ratio
Amgen Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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: 2025-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance concerning economic value creation exhibits a period of significant volatility between 2021 and 2025, characterized by a sharp contraction in value generation followed by a substantial recovery.
- Economic Profit Trends
- Economic profit remained relatively stable between 2021 and 2022, before experiencing a downward trajectory that culminated in a negative value of -317 million US dollars in 2024. This decline indicates a period where the return on invested capital failed to cover the cost of that capital. However, a strong reversal occurred in 2025, with economic profit reaching its highest point in the analyzed period at 3,686 million US dollars.
- Invested Capital Dynamics
- A substantial increase in invested capital is observed in 2023, where the figure rose from 39,722 million US dollars in 2022 to 69,976 million US dollars. This sharp expansion suggests a significant capital deployment or acquisition. Following this peak, invested capital showed a steady decline through 2024 and 2025, ending at 58,618 million US dollars.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the excess return over the cost of capital, remained constant at 6.84% during 2021 and 2022. This ratio contracted sharply to 2.32% in 2023 and became negative in 2024 at -0.50%, coinciding with the peak in invested capital. The negative spread in 2024 highlights a temporary destruction of economic value. By 2025, the ratio recovered to 6.29%, indicating that the capital base is once again generating returns significantly above the weighted average cost of capital.
The correlation between the surge in invested capital in 2023 and the subsequent dip in the economic spread ratio suggests a lag between capital investment and the realization of economic returns. The recovery in 2025 demonstrates an improved efficiency in capital utilization and a return to sustainable value creation.
Economic Profit Margin
Amgen Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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: 2025-12-31), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Product sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 exhibits a divergence between revenue growth and economic value creation. While product sales demonstrated consistent annual expansion, economic profit underwent a period of contraction and volatility, reaching a nadir in 2024 before a significant recovery in 2025.
- Product Sales Growth
- A steady upward trend is observed in product sales, which increased from 24,297 million USD in 2021 to 35,148 million USD by 2025. This reflects a consistent expansion of the top line throughout the analyzed period.
- Economic Profit Volatility
- Economic profit declined progressively from 2,752 million USD in 2021 to 1,621 million USD in 2023, eventually turning negative at -317 million USD in 2024. A sharp reversal occurred in 2025, with economic profit rising to 3,686 million USD, representing the highest absolute value within the five-year window.
- Economic Profit Margin Analysis
- The economic profit margin followed a trajectory consistent with economic profit, contracting from 11.33% in 2021 to a low of -0.99% in 2024. The negative margin in 2024 indicates that the company's returns were insufficient to cover its cost of capital during that fiscal year. By 2025, the margin recovered to 10.49%, suggesting a return to efficient value creation and an improved relationship between sales growth and capital costs.