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 – 9.03% × 10,584,200 = 2,175,650
The financial performance regarding economic value added demonstrates a general trend of value creation, punctuated by a significant anomaly in 2024. For the majority of the period analyzed, the entity successfully generated economic profit, indicating that operating returns exceeded the cost of the capital employed. A sharp contraction occurred in 2024, followed by a strong recovery in 2025, reaching a five-year peak in value creation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited substantial volatility over the five-year period. After an initial increase from 2,239,320 thousand US$ in 2021 to 2,986,401 thousand US$ in 2022, a moderate decline occurred in 2023. A severe downturn was recorded in 2024, where NOPAT fell to negative 1,271,806 thousand US$. However, 2025 saw a significant reversal, with NOPAT ascending to 3,131,283 thousand US$, the highest level in the observed timeframe.
- Capital Structure and Cost of Capital
- The cost of capital remained remarkably stable, fluctuating minimally between 9.03% and 9.08%, suggesting a consistent risk profile and stable financing costs. Invested capital saw a notable expansion between 2021 and 2023, rising from 9,387,100 thousand US$ to a peak of 13,244,000 thousand US$. A sharp reduction in invested capital was observed in 2024, dropping to 9,046,000 thousand US$, before increasing again to 10,584,200 thousand US$ in 2025.
- Economic Profit Trends
- Economic profit followed the trajectory of NOPAT, reflecting the company's ability to generate returns above its weighted average cost of capital. Positive economic profit was maintained from 2021 through 2023, peaking at 1,792,463 thousand US$ in 2022. The collapse in operating profit in 2024 resulted in a negative economic profit of 2,089,168 thousand US$, representing a total destruction of economic value for that fiscal year. The period concluded with a robust recovery in 2025, achieving an economic profit of 2,175,650 thousand US$, indicating a return to efficient capital utilization and enhanced value creation.
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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$3,953,200 thousand, establishing a new high for the period.
- Relationship between NOPAT and Net Income
- From 2021 to 2023, NOPAT and net income moved in a similar direction, suggesting a consistent relationship between operating profitability and overall earnings. However, the substantial difference in 2024, where NOPAT experienced a larger loss than net income, indicates the presence of non-operating factors significantly impacting the bottom line. This could be due to items such as interest expense, gains or losses on investments, or unusual tax adjustments. The recovery in both metrics in 2025 suggests these non-operating factors had a less pronounced effect that year.
The volatility observed in both NOPAT and net income, particularly the sharp decline in 2024, warrants further investigation to understand the underlying drivers and assess the sustainability of the 2025 recovery.
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Cash Operating Taxes
Vertex Pharmaceuticals Inc., cash operating taxes calculation
US$ 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$428.1 million in 2025. This fluctuating difference highlights the dynamic nature of the company’s tax position and the impact of non-cash tax items.
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Invested Capital
Vertex Pharmaceuticals Inc., invested capital calculation (financing approach)
US$ 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$18,665,800 thousand in 2025. This indicates a generally strengthening equity position, despite the temporary dip in 2024.
The interplay between decreasing debt and increasing equity initially contributed to the growth in invested capital. The subsequent increase in debt, coupled with a slight decrease in equity in 2024, resulted in a significant reduction in invested capital that year. The partial recovery in invested capital in 2025 is attributable to the increase in shareholders’ equity offsetting some of the continued debt growth.
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Cost of Capital
Vertex Pharmaceuticals Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 124,850,183) | 124,850,183) | ÷ | 126,886,183) | = | 0.98 | 0.98 | × | 9.12% | = | 8.97% | ||
| Finance lease liabilities3 | 112,200) | 112,200) | ÷ | 126,886,183) | = | 0.00 | 0.00 | × | 4.51% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,923,800) | 1,923,800) | ÷ | 126,886,183) | = | 0.02 | 0.02 | × | 4.75% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 126,886,183) | 1.00 | 9.03% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 9.12% | = | 8.98% | ||
| 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 | 9.04% | ||||||||||
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 | × | 9.12% | = | 9.05% | ||
| 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 | 9.08% | ||||||||||
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 | × | 9.12% | = | 9.01% | ||
| 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 | 9.06% | ||||||||||
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 | × | 9.12% | = | 8.98% | ||
| 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 | 9.04% | ||||||||||
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 | 2,175,650) | (2,089,168) | 1,437,049) | 1,792,463) | 1,390,428) | |
| Invested capital2 | 10,584,200) | 9,046,000) | 13,244,000) | 13,178,000) | 9,387,100) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 20.56% | -23.09% | 10.85% | 13.60% | 14.81% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.54% | -2.40% | -4.11% | 5.32% | 4.71% | |
| Amgen Inc. | 6.11% | -0.67% | 2.15% | 6.66% | 6.66% | |
| Bristol-Myers Squibb Co. | 5.48% | -22.18% | 1.38% | -1.40% | 0.91% | |
| Danaher Corp. | -10.72% | -10.89% | -11.66% | -6.65% | -5.82% | |
| Eli Lilly & Co. | 29.94% | 14.28% | 1.21% | 8.31% | 9.99% | |
| Gilead Sciences Inc. | 12.42% | -10.66% | 2.68% | -0.45% | 6.60% | |
| Johnson & Johnson | 11.34% | 1.67% | -0.18% | 5.09% | 10.15% | |
| Merck & Co. Inc. | 10.27% | 13.14% | -9.17% | 11.01% | 11.20% | |
| Pfizer Inc. | -3.81% | -3.50% | -9.60% | 17.82% | 10.99% | |
| Regeneron Pharmaceuticals Inc. | 13.62% | 16.44% | 13.24% | 18.61% | 62.36% | |
| Thermo Fisher Scientific Inc. | -7.47% | -8.27% | -8.74% | -6.99% | -4.97% | |
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 × 2,175,650 ÷ 10,584,200 = 20.56%
4 Click competitor name to see calculations.
The analysis of economic value creation between 2021 and 2025 reveals a period of significant volatility, characterized by a steady decline in efficiency leading up to a severe contraction in 2024, followed by a robust recovery in 2025.
- Economic Profit Trends
- Economic profit experienced an initial increase from 1.39 billion in 2021 to 1.79 billion in 2022, followed by a moderate decline to 1.44 billion in 2023. A critical downturn occurred in 2024, where economic profit transitioned to a substantial loss of 2.09 billion. However, 2025 saw a strong reversal, with economic profit reaching a five-year peak of 2.18 billion.
- Invested Capital Dynamics
- Invested capital increased sharply from 9.39 billion in 2021 to 13.18 billion in 2022, remaining relatively stable at 13.24 billion in 2023. A significant reduction was observed in 2024, with capital dropping to 9.05 billion, suggesting a major reallocation or reduction of the capital base. By 2025, invested capital moderately increased to 10.58 billion.
- Economic Spread Ratio Performance
- The economic spread ratio exhibited a consistent downward trend from 2021 (14.81%) through 2023 (10.85%), indicating a diminishing margin between the return on invested capital and the cost of capital. This trend culminated in a sharp collapse to -23.09% in 2024, reflecting a period where the cost of capital significantly exceeded the returns generated. The ratio rebounded aggressively in 2025 to 20.56%, the highest level recorded in the analyzed period, signaling a marked improvement in the efficiency of capital deployment.
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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 | 2,175,650) | (2,089,168) | 1,437,049) | 1,792,463) | 1,390,428) | |
| Revenues | 12,001,300) | 11,020,100) | 9,869,200) | 8,930,700) | 7,574,400) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 18.13% | -18.96% | 14.56% | 20.07% | 18.36% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.54% | -2.95% | -5.16% | 7.52% | 8.04% | |
| Amgen Inc. | 10.18% | -1.32% | 5.60% | 10.67% | 11.04% | |
| Bristol-Myers Squibb Co. | 6.74% | -28.77% | 2.07% | -2.18% | 1.57% | |
| Danaher Corp. | -32.86% | -33.60% | -38.27% | -16.51% | -14.53% | |
| Eli Lilly & Co. | 22.79% | 11.35% | 1.04% | 7.07% | 9.22% | |
| Gilead Sciences Inc. | 18.38% | -16.51% | 4.56% | -0.76% | 11.67% | |
| Johnson & Johnson | 16.64% | 2.01% | -0.21% | 6.10% | 10.61% | |
| Merck & Co. Inc. | 15.48% | 16.26% | -10.67% | 13.73% | 16.26% | |
| Pfizer Inc. | -8.52% | -7.44% | -24.97% | 19.50% | 11.73% | |
| Regeneron Pharmaceuticals Inc. | 12.58% | 14.42% | 12.08% | 18.73% | 42.17% | |
| Thermo Fisher Scientific Inc. | -15.79% | -15.83% | -17.45% | -12.89% | -10.11% | |
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 × 2,175,650 ÷ 12,001,300 = 18.13%
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 the resulting economic profit margin.
- Revenue Growth Trends
- A steady upward trajectory in revenues is observed over the five-year period. Total revenues increased from 7.57 billion US dollars in 2021 to 12.00 billion US dollars by 2025, representing a continuous year-over-year growth pattern regardless of fluctuations in profitability metrics.
- Economic Profit Volatility
- Economic profit exhibited substantial instability. After peaking in 2022 at 1.79 billion US dollars, the figure declined in 2023 and experienced a severe contraction in 2024, falling to a deficit of 2.09 billion US dollars. A strong recovery followed in 2025, with economic profit rebounding to 2.18 billion US dollars, the highest value in the analyzed period.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin increased from 18.36% in 2021 to a peak of 20.07% in 2022, before declining to 14.56% in 2023. The most significant deviation occurred in 2024, where the margin dropped to -18.96%, indicating that the cost of capital exceeded the net operating profit after tax during that fiscal year. By 2025, the margin normalized to 18.13%, returning to levels comparable with the 2021 baseline.
The divergence observed in 2024, where revenues continued to grow despite a sharp decline in economic profit, suggests a period of intensive capital investment or a temporary surge in the cost of capital that outweighed operating gains. The recovery in 2025 indicates a restoration of value creation capacity.
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