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.
Economic Profit
PepsiCo Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
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
= 9,762 – 9.01% × 83,234 = 2,262
The analysis of economic profit from 2021 to 2025 reveals a period of fluctuation, culminating in a significant contraction in the final year. While the company consistently generated positive economic profit, the relationship between operating earnings and the capital base shifted, resulting in a peak of value creation in 2024 followed by a sharp decline in 2025.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability showed a non-linear trend, starting at 9,629 million in 2021 and dipping slightly in 2022. A period of growth followed, with NOPAT reaching a five-year peak of 10,978 million in 2024. However, this growth reversed in 2025, with NOPAT falling to 9,762 million, indicating a reduction in the company's ability to generate operating income after taxes.
- Invested Capital
- A consistent long-term increase in invested capital is evident, rising from 69,829 million in 2021 to 83,234 million in 2025. The most aggressive expansion of the capital base occurred between 2024 and 2025, where invested capital grew by approximately 6,560 million.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, oscillating within a narrow range between 9.01% and 9.29%. The highest rate was observed in 2022, while the lowest rate of 9.01% was maintained during 2024 and 2025.
- Economic Profit Synthesis
- Economic profit fluctuated from 3,316 million in 2021 to a peak of 4,066 million in 2024. The subsequent drop to 2,262 million in 2025 represents the lowest value in the analyzed period. This decline is the result of a dual negative impact: a decrease in NOPAT combined with a substantial increase in invested capital. The expanded capital base increased the total capital charge, which, when paired with lower operating profits, significantly eroded the economic value added.
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Net Operating Profit after Taxes (NOPAT)
PepsiCo Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance.
3 Addition of increase (decrease) in restructuring liability.
4 Addition of increase (decrease) in equity equivalents to net income attributable to PepsiCo.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,846 × 5.00% = 192
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 2,032 × 21.00% = 427
7 Addition of after taxes interest expense to net income attributable to PepsiCo.
Analysis of the presented financial information reveals trends in net income attributable to PepsiCo and net operating profit after taxes (NOPAT) over a five-year period. NOPAT demonstrates a generally positive trajectory, while net income exhibits more fluctuation.
- NOPAT Trend
- NOPAT experienced a slight decrease from US$9,629 million in 2021 to US$9,364 million in 2022. However, subsequent years show consistent growth, reaching US$10,029 million in 2023 and further increasing to US$10,978 million in 2024. A modest decline is observed in 2025, with NOPAT reported at US$9,762 million. Overall, the period indicates a positive trend in NOPAT, despite the final year’s reduction.
- Net Income Trend
- Net income attributable to PepsiCo increased from US$7,618 million in 2021 to US$8,910 million in 2022. This growth continued into 2023, reaching US$9,074 million, and further to US$9,578 million in 2024. A notable decrease is observed in 2025, with net income falling to US$8,240 million. The net income trend is characterized by more variability than the NOPAT trend.
- Relationship between NOPAT and Net Income
- While both metrics generally increased between 2021 and 2024, the divergence in 2025 suggests a potential shift in factors impacting profitability. The larger decrease in net income compared to NOPAT in 2025 could indicate changes in non-operating items, such as interest expense or other income, or a difference in the effective tax rate. Further investigation into these areas would be warranted.
The observed trends suggest that the core operating performance, as measured by NOPAT, remains relatively strong. However, fluctuations in net income highlight the importance of considering factors beyond core operations when assessing overall financial performance.
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Cash Operating Taxes
PepsiCo Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
The provision for income taxes and cash operating taxes exhibited distinct patterns over the five-year period. While the provision for income taxes fluctuated, cash operating taxes generally increased before declining in the most recent year.
- Provision for Income Taxes
- The provision for income taxes decreased from US$2,142 million in 2021 to US$1,727 million in 2022, representing a decline of approximately 19.3%. It then increased to US$2,262 million in 2023 and further to US$2,320 million in 2024. A subsequent decrease was observed in 2025, with the provision falling to US$1,949 million. This indicates volatility in reported income tax expense.
- Cash Operating Taxes
- Cash operating taxes demonstrated an upward trend from 2021 to 2024. Starting at US$2,131 million in 2021, it rose to US$2,660 million in 2022, an increase of roughly 24.8%. Continued growth was seen in 2023, reaching US$2,970 million, and in 2024, reaching US$3,060 million. However, 2025 saw a decrease to US$2,351 million, representing a decline of approximately 23.1% from the 2024 peak. This suggests a potential shift in the company’s actual cash tax payments.
- Relationship between Provision and Cash Taxes
- The difference between the provision for income taxes and cash operating taxes varied across the period. In 2021, the difference was minimal, at US$11 million. This difference widened in 2022 to US$933 million, and further in 2023 to US$708 million, and 2024 to US$740 million. The gap narrowed significantly in 2025, falling to US$398 million. These variations could be attributed to factors such as deferred tax assets/liabilities, tax credits, or changes in tax laws impacting the timing of cash tax payments versus reported tax expense.
The divergence between the provision for income taxes and cash operating taxes warrants further investigation to understand the underlying drivers and potential implications for future cash flows and economic value added calculations.
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Invested Capital
PepsiCo Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
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 liability.
5 Addition of equity equivalents to total PepsiCo common shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of short-term investments.
Over the five-year period examined, invested capital demonstrated a generally increasing trend. While fluctuations occurred, the overall trajectory indicates growing capital employed within the business. A closer examination of the components contributing to invested capital reveals further insights.
- Total Reported Debt & Leases
- Total reported debt and leases exhibited initial stability, decreasing from US$42,378 million in 2021 to US$41,487 million in 2022. However, beginning in 2022, an upward trend is observed, with values reaching US$47,061 million in 2023, US$47,751 million in 2024, and culminating in US$53,028 million in 2025. This suggests an increasing reliance on debt financing or potentially significant capital lease obligations.
- Total PepsiCo Common Shareholders’ Equity
- Total PepsiCo common shareholders’ equity generally increased throughout the period. From US$16,043 million in 2021, it rose to US$17,149 million in 2022 and continued to US$18,503 million in 2023. A slight decrease was noted in 2024, falling to US$18,041 million, before resuming an upward trend and reaching US$20,406 million in 2025. This indicates growing retained earnings and/or successful equity issuance.
- Invested Capital
- Invested capital, calculated as the sum of total debt and shareholders’ equity, remained relatively stable between 2021 and 2022, fluctuating around US$69.8 billion. A noticeable increase occurred in 2023, reaching US$75,038 million, and continued into 2024 with a value of US$76,674 million. The most substantial increase was observed between 2024 and 2025, with invested capital growing to US$83,234 million. This growth is consistent with the trends observed in both debt and equity, suggesting a deliberate expansion of the capital base.
The consistent growth in invested capital, particularly in the later years of the period, warrants further investigation to determine the effectiveness of capital allocation and its impact on returns. The increasing proportion of debt within the capital structure should also be monitored for potential financial risk.
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Cost of Capital
PepsiCo Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 222,559) | 222,559) | ÷ | 272,405) | = | 0.82 | 0.82 | × | 10.41% | = | 8.50% | ||
| Debt obligations3 | 46,000) | 46,000) | ÷ | 272,405) | = | 0.17 | 0.17 | × | 3.39% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 3,846) | 3,846) | ÷ | 272,405) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 272,405) | 1.00 | 9.01% | ||||||||||
Based on: 10-K (reporting date: 2025-12-27).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 196,797) | 196,797) | ÷ | 240,242) | = | 0.82 | 0.82 | × | 10.41% | = | 8.52% | ||
| Debt obligations3 | 40,000) | 40,000) | ÷ | 240,242) | = | 0.17 | 0.17 | × | 3.38% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 3,445) | 3,445) | ÷ | 240,242) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 240,242) | 1.00 | 9.01% | ||||||||||
Based on: 10-K (reporting date: 2024-12-28).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 230,451) | 230,451) | ÷ | 274,407) | = | 0.84 | 0.84 | × | 10.41% | = | 8.74% | ||
| Debt obligations3 | 41,000) | 41,000) | ÷ | 274,407) | = | 0.15 | 0.15 | × | 3.14% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 2,956) | 2,956) | ÷ | 274,407) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 274,407) | 1.00 | 9.14% | ||||||||||
Based on: 10-K (reporting date: 2023-12-30).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 237,961) | 237,961) | ÷ | 275,377) | = | 0.86 | 0.86 | × | 10.41% | = | 8.99% | ||
| Debt obligations3 | 35,000) | 35,000) | ÷ | 275,377) | = | 0.13 | 0.13 | × | 2.76% × (1 – 21.00%) | = | 0.28% | ||
| Operating lease liability4 | 2,416) | 2,416) | ÷ | 275,377) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 275,377) | 1.00 | 9.29% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 232,932) | 232,932) | ÷ | 277,976) | = | 0.84 | 0.84 | × | 10.41% | = | 8.72% | ||
| Debt obligations3 | 43,000) | 43,000) | ÷ | 277,976) | = | 0.15 | 0.15 | × | 2.48% × (1 – 21.00%) | = | 0.30% | ||
| Operating lease liability4 | 2,044) | 2,044) | ÷ | 277,976) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 277,976) | 1.00 | 9.04% | ||||||||||
Based on: 10-K (reporting date: 2021-12-25).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
PepsiCo Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 27, 2025 | Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 2,262) | 4,066) | 3,167) | 2,912) | 3,316) | |
| Invested capital2 | 83,234) | 76,674) | 75,038) | 69,452) | 69,829) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 2.72% | 5.30% | 4.22% | 4.19% | 4.75% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 5.93% | 3.47% | 3.97% | 3.66% | 5.20% | |
| Mondelēz International Inc. | -3.78% | 0.04% | -0.12% | -3.93% | -0.92% | |
| Philip Morris International Inc. | 13.11% | 8.14% | 8.81% | 11.75% | 26.08% | |
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,262 ÷ 83,234 = 2.72%
4 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of volatility in economic profit coupled with a consistent upward trajectory in invested capital, resulting in a fluctuating economic spread ratio over the five-year period ending December 2025.
- Economic Profit Trends
- Economic profit exhibited instability, beginning at 3,316 million US$ in 2021 and declining to 2,912 million US$ in 2022. A recovery phase followed, with profit increasing to 3,167 million US$ in 2023 and peaking at 4,066 million US$ in 2024. However, a significant contraction occurred in 2025, with economic profit falling to 2,262 million US$, representing the lowest value in the observed period.
- Invested Capital Growth
- Invested capital remained relatively stable between 2021 and 2022, with a slight decrease from 69,829 million US$ to 69,452 million US$. From 2023 onward, a consistent expansion is observed, with capital growing to 75,038 million US$ in 2023, 76,674 million US$ in 2024, and reaching a peak of 83,234 million US$ by December 2025.
- Economic Spread Ratio Performance
- The economic spread ratio demonstrated significant variance, reflecting the relationship between return on capital and the cost of capital. After a decline from 4.75% in 2021 to 4.19% in 2022 and a marginal recovery to 4.22% in 2023, the ratio reached a peak of 5.30% in 2024. This peak coincided with the highest recorded economic profit despite the increase in invested capital. A sharp deterioration followed in 2025, where the ratio dropped to 2.72%, suggesting a substantial decline in capital efficiency or an increase in the weighted average cost of capital.
The divergence observed in 2025, characterized by increasing invested capital and decreasing economic profit, indicates a compression of the economic spread. While the organization successfully expanded its capital base and improved its spread until 2024, the subsequent decline in 2025 points to a reduction in the value generated per unit of capital employed.
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Economic Profit Margin
PepsiCo Inc., economic profit margin calculation, comparison to benchmarks
| Dec 27, 2025 | Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 2,262) | 4,066) | 3,167) | 2,912) | 3,316) | |
| Net revenue | 93,925) | 91,854) | 91,471) | 86,392) | 79,474) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 2.41% | 4.43% | 3.46% | 3.37% | 4.17% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 11.49% | 6.41% | 7.25% | 6.81% | 10.80% | |
| Mondelēz International Inc. | -6.03% | 0.06% | -0.21% | -7.96% | -1.98% | |
| Philip Morris International Inc. | 17.19% | 10.38% | 12.87% | 17.52% | 24.21% | |
Based on: 10-K (reporting date: 2025-12-27), 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × 2,262 ÷ 93,925 = 2.41%
3 Click competitor name to see calculations.
The financial performance from December 2021 to December 2025 is characterized by steady top-line growth contrasted with significant volatility in economic value creation. While net revenue increased consistently year-over-year, the economic profit and its corresponding margin experienced substantial fluctuations, culminating in a sharp decline in the final year of the period.
- Net Revenue Trajectory
- A consistent upward trend in net revenue is observed, rising from 79,474 million US$ in 2021 to 93,925 million US$ by 2025. This represents a steady expansion of the revenue base over the five-year horizon.
- Economic Profit Volatility
- Economic profit demonstrated a non-linear pattern. Following a decrease from 3,316 million US$ in 2021 to 2,912 million US$ in 2022, a recovery phase occurred, peaking at 4,066 million US$ in 2024. However, this peak was followed by a significant contraction in 2025, where economic profit fell to its lowest point in the series at 2,262 million US$.
- Economic Profit Margin Efficiency
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin declined from 4.17% in 2021 to 3.37% in 2022, followed by a gradual recovery to 3.46% in 2023 and a peak of 4.43% in 2024. The period concluded with a substantial compression of the margin to 2.41% in 2025, indicating that revenue growth in the final year was not matched by a proportional increase in economic value creation.
The divergence between the steady growth in net revenue and the precipitous drop in economic profit margin in 2025 suggests a significant increase in the cost of capital or a decrease in operational efficiency relative to the capital employed during the final year of the analysis.
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