Economic Value Added (EVA)
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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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Vertex Pharmaceuticals Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Analysis of Debt
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Economic Profit
Vertex Pharmaceuticals Inc., economic profit calculation
US$ in thousands
| 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 economic profit trend exhibits significant volatility over the five-year period, characterized by consistent value creation from 2021 to 2023, a severe contraction in 2024, and a robust recovery in 2025.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced an initial increase from 2.24 billion in 2021 to 2.99 billion in 2022, followed by a slight moderation to 2.64 billion in 2023. A substantial reversal occurred in 2024, with NOPAT falling to negative 1.27 billion. This decline was sharply corrected in 2025, as NOPAT ascended to its peak value of 3.13 billion.
- Invested Capital and Cost of Capital
- The cost of capital remained nearly constant throughout the period, oscillating marginally between 8.52% and 8.56%, indicating a stable risk profile and financing environment. Invested capital grew significantly between 2021 and 2022, increasing from 9.39 billion to 13.18 billion. This figure remained steady in 2023 before dropping to 9.05 billion in 2024 and subsequently recovering to 10.58 billion by 2025.
- Economic Profit Analysis
- Positive economic profit was maintained from 2021 to 2023, peaking at 1.86 billion in 2022, which confirms that the entity generated returns in excess of its cost of capital during this interval. The year 2024 marked a period of significant value destruction, with economic profit plummeting to negative 2.04 billion, driven primarily by the negative NOPAT. The trend reversed in 2025, with economic profit reaching its highest point of 2.23 billion, signaling a strong return to value creation.
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
= × =
4 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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$3,953,200 thousand, establishing a new high for the period.
- Relationship between NOPAT and Net Income
- From 2021 to 2023, NOPAT and net income moved in a similar direction, suggesting a consistent relationship between operating profitability and overall earnings. However, the substantial difference in 2024, where NOPAT experienced a larger loss than net income, indicates the presence of non-operating factors significantly impacting the bottom line. This could be due to items such as interest expense, gains or losses on investments, or unusual tax adjustments. The recovery in both metrics in 2025 suggests these non-operating factors had a less pronounced effect that year.
The volatility observed in both NOPAT and net income, particularly the sharp decline in 2024, warrants further investigation to understand the underlying drivers and assess the sustainability of the 2025 recovery.
Cash Operating Taxes
Vertex Pharmaceuticals Inc., cash operating taxes calculation
US$ 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$428.1 million in 2025. This fluctuating difference highlights the dynamic nature of the company’s tax position and the impact of non-cash tax items.
Invested Capital
Vertex Pharmaceuticals Inc., invested capital calculation (financing approach)
US$ 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$18,665,800 thousand in 2025. This indicates a generally strengthening equity position, despite the temporary dip in 2024.
The interplay between decreasing debt and increasing equity initially contributed to the growth in invested capital. The subsequent increase in debt, coupled with a slight decrease in equity in 2024, resulted in a significant reduction in invested capital that year. The partial recovery in invested capital in 2025 is attributable to the increase in shareholders’ equity offsetting some of the continued debt growth.
Cost of Capital
Vertex Pharmaceuticals Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen 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. | ||||||
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 over the five-year period is characterized by significant volatility, featuring a severe downturn in 2024 followed by a robust recovery in 2025. The relationship between invested capital and economic profit indicates a fluctuating capacity to generate value above the cost of capital, with 2024 serving as a critical outlier in the trend.
- Economic Profit Trends
- Economic profit exhibited growth between 2021 and 2022, reaching 1.86 billion US$, before experiencing a moderate decline in 2023. A sharp reversal occurred in 2024, where economic profit shifted to a deficit of approximately 2.04 billion US$. This negative trajectory was corrected in 2025, with profit rebounding to 2.23 billion US$, the highest absolute value recorded in the analyzed period.
- Invested Capital Dynamics
- Invested capital followed an upward trajectory from 2021 to 2023, peaking at 13.24 billion US$. This expansion was followed by a substantial contraction in 2024, with capital levels dropping to 9.05 billion US$. A partial recovery was observed in 2025, as invested capital rose to 10.58 billion US$, suggesting a realignment of the asset base following the 2024 contraction.
- Economic Spread Ratio Analysis
- The economic spread ratio demonstrated a consistent downward trend from 2021 (15.33%) through 2023 (11.37%), signaling a gradual erosion of the margin over the cost of capital. This decline culminated in a severe negative spread of -22.58% in 2024, indicating a period of significant value destruction. The recovery in 2025 was substantial, with the ratio climbing to 21.07%, surpassing all previous levels of efficiency and indicating a strong return to value creation.
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 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen 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. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 is characterized by consistent top-line expansion contrasted with significant volatility in economic value creation. While revenues grew steadily throughout the period, economic profit experienced a severe contraction into negative territory in 2024 before achieving a strong recovery in 2025.
- Revenue Growth Trends
- Revenues demonstrated a continuous and linear upward trajectory, increasing from US$ 7.57 billion in 2021 to US$ 12.00 billion by 2025. This steady growth indicates a consistent expansion of market scale and top-line performance over the five-year period.
- Economic Profit Volatility
- Economic profit exhibited substantial fluctuations, peaking at US$ 1.86 billion in 2022 before declining to US$ 1.51 billion in 2023. A significant downturn occurred in 2024, where economic profit fell to negative US$ 2.04 billion. However, a sharp rebound followed in 2025, with economic profit reaching its period high of US$ 2.23 billion.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute profit figures. The margin rose from 18.99% in 2021 to a peak of 20.83% in 2022, followed by a contraction to 15.26% in 2023. The most notable shift was the decline to -18.54% in 2024, signaling a period where the cost of capital exceeded the net operating profit after tax. The recovery to 18.58% in 2025 indicates a restoration of value creation capabilities, returning the margin to levels consistent with the 2021-2022 period.