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
Vertex Pharmaceuticals Inc., economic profit calculation
US$ in thousands
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
= 3,131,283 – 8.79% × 10,584,200 = 2,200,642
The analysis of economic profit from 2021 to 2025 reveals a volatile trajectory in value creation, characterized by steady growth in the early period, a significant contraction in 2024, and a robust recovery by 2025. While the company consistently generated positive economic value in most years, the 2024 fiscal year represents a notable outlier where the entity failed to cover its cost of capital, resulting in economic value destruction.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited significant fluctuations over the five-year period. After rising from 2,239,320 thousand USD in 2021 to a peak of 2,986,401 thousand USD in 2022, a moderate decline occurred in 2023. A severe downturn was recorded in 2024, with NOPAT falling to -1,271,806 thousand USD, indicating a substantial operational loss. However, a strong rebound followed in 2025, with NOPAT reaching its highest level in the analyzed period at 3,131,283 thousand USD.
- Invested Capital Dynamics
- Invested capital showed a period of expansion between 2021 and 2023, growing from 9,387,100 thousand USD to a peak of 13,244,000 thousand USD. This expansion was followed by a sharp contraction in 2024 to 9,046,000 thousand USD, suggesting a significant reduction in the asset base or a restructuring of invested resources. By 2025, invested capital trended upward again to 10,584,200 thousand USD.
- Cost of Capital Stability
- The cost of capital remained remarkably stable throughout the period, fluctuating minimally between 8.79% and 8.84%. This stability indicates that the changes in economic profit were driven primarily by operational performance and changes in the capital base rather than shifts in the weighted average cost of capital or market risk premiums.
- Economic Profit and Value Creation
- Economic profit mirrored the volatility of NOPAT. Value creation peaked in 2022 at 1,823,719 thousand USD before declining in 2023. The negative NOPAT in 2024 led to an economic profit of -2,067,775 thousand USD, signifying that the return on invested capital was insufficient to cover the cost of financing. The 2025 recovery was comprehensive, with economic profit reaching a period high of 2,200,642 thousand USD, demonstrating a restoration of high-efficiency value creation.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Vertex Pharmaceuticals Inc., NOPAT calculation
US$ in thousands
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 equity equivalents to net income (loss).
3 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,923,800 × 4.75% = 91,381
4 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 104,681 × 21.00% = 21,983
5 Addition of after taxes interest expense to net income (loss).
6 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 498,500 × 21.00% = 104,685
7 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) exhibited fluctuating performance over the five-year period. While both metrics generally increased from 2021 to 2023, a significant downturn occurred in 2024, followed by a recovery in 2025. The divergence between net income and NOPAT in 2024 is particularly noteworthy.
- NOPAT Trend
- NOPAT increased from US$2,239,320 thousand in 2021 to US$2,986,401 thousand in 2022, representing a growth of approximately 33.3%. This upward trend continued, albeit at a slower pace, reaching US$2,639,623 thousand in 2023. However, 2024 witnessed a substantial decline, with NOPAT falling to a loss of US$1,271,806 thousand. A recovery was observed in 2025, with NOPAT rebounding to US$3,131,283 thousand, exceeding the 2022 level.
- Net Income Trend
- Net income mirrored the general trend of NOPAT, increasing from US$2,342,100 thousand in 2021 to US$3,322,000 thousand in 2022 (approximately 41.8% growth) and further to US$3,619,600 thousand in 2023. Similar to NOPAT, net income experienced a significant decrease in 2024, resulting in a net loss of US$535,600 thousand. Net income also recovered in 2025, reaching US$3,953,200 thousand, establishing a new high for the period.
- Relationship between NOPAT and Net Income
- From 2021 to 2023, NOPAT and net income moved in a similar direction, suggesting a consistent relationship between operating profitability and overall earnings. However, the substantial difference in 2024, where NOPAT experienced a larger loss than net income, indicates the presence of non-operating factors significantly impacting the bottom line. This could be due to items such as interest expense, gains or losses on investments, or unusual tax adjustments. The recovery in both metrics in 2025 suggests these non-operating factors had a less pronounced effect that year.
The volatility observed in both NOPAT and net income, particularly the sharp decline in 2024, warrants further investigation to understand the underlying drivers and assess the sustainability of the 2025 recovery.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
Vertex Pharmaceuticals Inc., cash operating taxes calculation
US$ in thousands
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 both demonstrate significant fluctuations over the five-year period. A clear upward trend is initially observed, followed by periods of stabilization and decline. Cash operating taxes consistently exceed the provision for income taxes throughout the analyzed timeframe.
- Provision for Income Taxes
- The provision for income taxes increased substantially from US$388.3 million in 2021 to US$910.4 million in 2022, representing a more than 134% increase. This was followed by a decrease to US$760.2 million in 2023. A modest increase to US$784.1 million occurred in 2024, before declining again to US$690.0 million in 2025. This suggests potential volatility influenced by changes in taxable income or applicable tax rates.
- Cash Operating Taxes
- Cash operating taxes mirrored the trend of the provision for income taxes, increasing from US$556.7 million in 2021 to US$1,170.4 million in 2022, a rise of over 110%. The value remained relatively stable in 2023 at US$1,178.8 million, before decreasing to US$1,029.9 million in 2024 and increasing slightly to US$1,118.1 million in 2025. The consistency of cash operating taxes being higher than the provision for income taxes indicates timing differences between reported income tax expense and actual cash payments.
The divergence between the provision for income taxes and cash operating taxes suggests the presence of deferred tax assets or liabilities. The magnitude of this difference warrants further investigation to understand the underlying causes and potential impact on future cash flows. The fluctuations in both metrics indicate sensitivity to underlying business performance and tax regulations.
- Relationship between Metrics
- The difference between cash operating taxes and the provision for income taxes ranged from approximately US$168.4 million in 2021 to US$418.2 million in 2022, then decreased to US$418.6 million in 2023, US$245.8 million in 2024, and US$428.1 million in 2025. This fluctuating difference highlights the dynamic nature of the company’s tax position and the impact of non-cash tax items.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
Vertex Pharmaceuticals Inc., invested capital calculation (financing approach)
US$ in thousands
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 equity equivalents to shareholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of marketable securities.
The invested capital of the company demonstrates a fluctuating pattern over the five-year period. Total reported debt & leases and shareholders’ equity both contribute to the calculation of invested capital, and their individual trends influence the overall invested capital figure.
- Invested Capital Trend
- Invested capital increased significantly from 2021 to 2022, rising from US$9,387,100 thousand to US$13,178,000 thousand. This growth slowed in 2023, with a marginal increase to US$13,244,000 thousand. A substantial decrease occurred in 2024, falling to US$9,046,000 thousand, before partially recovering to US$10,584,200 thousand in 2025.
- Debt & Leases
- Total reported debt & leases decreased from 2021 to 2023, moving from US$967,400 thousand to US$808,400 thousand. However, a considerable increase is observed in 2024 and 2025, reaching US$1,749,500 thousand and US$2,036,000 thousand respectively. This suggests a shift in the company’s capital structure towards greater reliance on debt financing in the later years of the period.
- Shareholders’ Equity
- Shareholders’ equity exhibited a consistent upward trend from 2021 to 2023, increasing from US$10,100,000 thousand to US$17,580,400 thousand. A decrease occurred in 2024, to US$16,409,600 thousand, followed by a recovery to US$18,665,800 thousand in 2025. This indicates a generally strengthening equity position, despite the temporary dip in 2024.
The interplay between decreasing debt and increasing equity initially contributed to the growth in invested capital. The subsequent increase in debt, coupled with a slight decrease in equity in 2024, resulted in a significant reduction in invested capital that year. The partial recovery in invested capital in 2025 is attributable to the increase in shareholders’ equity offsetting some of the continued debt growth.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
Vertex Pharmaceuticals Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 124,850,183) | 124,850,183) | ÷ | 126,886,183) | = | 0.98 | 0.98 | × | 8.88% | = | 8.73% | ||
| Finance lease liabilities3 | 112,200) | 112,200) | ÷ | 126,886,183) | = | 0.00 | 0.00 | × | 4.51% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,923,800) | 1,923,800) | ÷ | 126,886,183) | = | 0.02 | 0.02 | × | 4.75% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 126,886,183) | 1.00 | 8.79% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
2 Equity. See details »
3 Finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 118,785,858) | 118,785,858) | ÷ | 120,535,358) | = | 0.99 | 0.99 | × | 8.88% | = | 8.75% | ||
| Finance lease liabilities3 | 118,000) | 118,000) | ÷ | 120,535,358) | = | 0.00 | 0.00 | × | 4.58% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,631,500) | 1,631,500) | ÷ | 120,535,358) | = | 0.01 | 0.01 | × | 4.61% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 120,535,358) | 1.00 | 8.80% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 110,114,039) | 110,114,039) | ÷ | 110,922,439) | = | 0.99 | 0.99 | × | 8.88% | = | 8.81% | ||
| Finance lease liabilities3 | 426,700) | 426,700) | ÷ | 110,922,439) | = | 0.00 | 0.00 | × | 8.20% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 381,700) | 381,700) | ÷ | 110,922,439) | = | 0.00 | 0.00 | × | 2.42% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 110,922,439) | 1.00 | 8.84% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 76,458,995) | 76,458,995) | ÷ | 77,358,695) | = | 0.99 | 0.99 | × | 8.88% | = | 8.77% | ||
| Finance lease liabilities3 | 471,600) | 471,600) | ÷ | 77,358,695) | = | 0.01 | 0.01 | × | 8.36% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 428,100) | 428,100) | ÷ | 77,358,695) | = | 0.01 | 0.01 | × | 2.46% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 77,358,695) | 1.00 | 8.82% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 62,177,811) | 62,177,811) | ÷ | 63,145,211) | = | 0.98 | 0.98 | × | 8.88% | = | 8.74% | ||
| Finance lease liabilities3 | 556,700) | 556,700) | ÷ | 63,145,211) | = | 0.01 | 0.01 | × | 8.11% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 410,700) | 410,700) | ÷ | 63,145,211) | = | 0.01 | 0.01 | × | 2.19% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 63,145,211) | 1.00 | 8.81% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Vertex Pharmaceuticals 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 thousands) | ||||||
| Economic profit1 | 2,200,642) | (2,067,775) | 1,468,599) | 1,823,719) | 1,412,610) | |
| Invested capital2 | 10,584,200) | 9,046,000) | 13,244,000) | 13,178,000) | 9,387,100) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 20.79% | -22.86% | 11.09% | 13.84% | 15.05% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.72% | -2.22% | -3.93% | 5.49% | 4.87% | |
| Amgen Inc. | 6.25% | -0.54% | 2.28% | 6.80% | 6.80% | |
| Bristol-Myers Squibb Co. | 5.66% | -22.01% | 1.55% | -1.21% | 1.09% | |
| Danaher Corp. | -10.71% | -10.87% | -11.64% | -6.63% | -5.80% | |
| Eli Lilly & Co. | 30.14% | 14.49% | 1.42% | 8.52% | 10.19% | |
| Gilead Sciences Inc. | 12.61% | -10.47% | 2.85% | -0.27% | 6.76% | |
| Johnson & Johnson | 11.55% | 1.88% | 0.03% | 5.29% | 10.35% | |
| Merck & Co. Inc. | 10.49% | 13.36% | -8.94% | 11.24% | 11.41% | |
| Pfizer Inc. | -3.69% | -3.37% | -9.48% | 17.97% | 11.14% | |
| Regeneron Pharmaceuticals Inc. | 13.82% | 16.64% | 13.44% | 18.80% | 62.56% | |
| Thermo Fisher Scientific Inc. | -7.45% | -8.25% | -8.72% | -6.97% | -4.95% | |
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 × 2,200,642 ÷ 10,584,200 = 20.79%
4 Click competitor name to see calculations.
The analysis of economic value creation from 2021 to 2025 reveals a period of significant volatility, characterized by a severe downturn in 2024 followed by a robust recovery in 2025.
- Economic Profit
- Economic profit experienced an initial increase in 2022, reaching 1.82 billion, before trending downward through 2023. A substantial deficit of approximately 2.07 billion was recorded in 2024, representing a period of significant value destruction. However, 2025 saw a sharp reversal, with economic profit peaking at 2.20 billion, the highest level within the analyzed period.
- Invested Capital
- Invested capital expanded from 9.39 billion in 2021 to a peak of 13.24 billion in 2023. This was followed by a sharp contraction to 9.05 billion in 2024, which occurred simultaneously with the decline into negative economic profit. By 2025, invested capital moderately increased to 10.58 billion.
- Economic Spread Ratio
- The economic spread ratio exhibited a consistent decline from 15.05% in 2021 to 11.09% in 2023, indicating a narrowing margin between the return on capital and the cost of capital. This decline culminated in a deep negative spread of -22.86% in 2024, signaling that the returns were significantly below the required cost of capital. The 2025 period marks a substantial recovery, with the ratio climbing to 20.79%, reflecting the most efficient economic performance of the five-year sequence.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Economic Profit Margin
Vertex Pharmaceuticals 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 thousands) | ||||||
| Economic profit1 | 2,200,642) | (2,067,775) | 1,468,599) | 1,823,719) | 1,412,610) | |
| Revenues | 12,001,300) | 11,020,100) | 9,869,200) | 8,930,700) | 7,574,400) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 18.34% | -18.76% | 14.88% | 20.42% | 18.65% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.72% | -2.73% | -4.94% | 7.77% | 8.31% | |
| Amgen Inc. | 10.42% | -1.06% | 5.93% | 10.90% | 11.26% | |
| Bristol-Myers Squibb Co. | 6.96% | -28.55% | 2.33% | -1.87% | 1.88% | |
| Danaher Corp. | -32.81% | -33.56% | -38.22% | -16.48% | -14.50% | |
| Eli Lilly & Co. | 22.94% | 11.51% | 1.22% | 7.25% | 9.40% | |
| Gilead Sciences Inc. | 18.67% | -16.23% | 4.86% | -0.46% | 11.95% | |
| Johnson & Johnson | 16.94% | 2.25% | 0.03% | 6.34% | 10.83% | |
| Merck & Co. Inc. | 15.81% | 16.54% | -10.41% | 14.02% | 16.57% | |
| Pfizer Inc. | -8.24% | -7.17% | -24.66% | 19.67% | 11.89% | |
| Regeneron Pharmaceuticals Inc. | 12.76% | 14.59% | 12.26% | 18.93% | 42.30% | |
| Thermo Fisher Scientific Inc. | -15.75% | -15.79% | -17.42% | -12.85% | -10.07% | |
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 ÷ Revenues
= 100 × 2,200,642 ÷ 12,001,300 = 18.34%
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a consistent expansion in top-line revenue contrasted with significant volatility in economic profit and its corresponding margin. While the company successfully scaled its operations, the ability to generate value above the cost of capital experienced a severe disruption in 2024 before recovering in 2025.
- Revenue Growth Trajectory
- A steady upward trend is observed in total revenues, which grew from US$ 7,574,400 thousand in 2021 to US$ 12,001,300 thousand by 2025. This represents a consistent year-over-year increase, indicating a sustained growth in market demand or pricing power over the five-year period.
- Economic Profit Volatility
- Economic profit exhibited a non-linear pattern. After increasing from US$ 1,412,610 thousand in 2021 to a peak of US$ 1,823,719 thousand in 2022, the figure declined in 2023. A substantial negative swing occurred in 2024, where economic profit dropped to negative US$ 2,067,775 thousand. This suggests that during 2024, the net operating profit after tax was insufficient to cover the cost of capital employed. However, a strong recovery followed in 2025, with economic profit rebounding to US$ 2,200,642 thousand, the highest level in the observed period.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit. The margin peaked at 20.42% in 2022 before contracting to 14.88% in 2023. The contraction culminated in a sharp decline to negative 18.76% in 2024, signaling a period of significant value erosion relative to revenues. By 2025, the margin returned to a positive 18.34%, effectively normalizing the ratio to levels comparable to those seen at the start of the period.
Overall, the divergence between the linear growth of revenues and the fluctuating economic profit suggests that external factors or internal capital investments heavily influenced the company's value creation capacity, particularly during the fiscal year 2024.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?