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 – 8.78% × 10,584,200 = 2,202,401
The economic performance between 2021 and 2025 is characterized by significant volatility, specifically a severe contraction in 2024 followed by a robust recovery in 2025. While the company generally generated positive economic value, the 2024 fiscal year represents a notable outlier in terms of both operational profitability and value creation.
- Net Operating Profit After Taxes (NOPAT)
- An initial growth phase is observed from 2021 to 2022, with NOPAT increasing from 2,239,320 thousand US$ to 2,986,401 thousand US$. A moderate decline occurred in 2023, followed by a sharp reversal in 2024, where NOPAT fell to -1,271,806 thousand US$. A strong recovery is evident in 2025, with NOPAT reaching a period high of 3,131,283 thousand US$.
- Invested Capital and Cost of Capital
- The cost of capital remained remarkably consistent throughout the period, fluctuating narrowly between 8.78% and 8.83%. Invested capital grew steadily from 2021 to 2023, peaking at 13,244,000 thousand US$. This was followed by a significant reduction to 9,046,000 thousand US$ in 2024, before rising again to 10,584,200 thousand US$ in 2025.
- Economic Profit Trends
- Economic profit mirrored the fluctuations of NOPAT. Positive value creation was maintained from 2021 through 2023, peaking at 1,825,919 thousand US$ in 2022. In 2024, economic profit transitioned to a substantial deficit of -2,066,269 thousand US$, indicating that the operating returns were insufficient to cover the cost of invested capital. By 2025, economic profit rebounded to 2,202,401 thousand US$, marking the highest level of value creation in the five-year sequence.
The analysis indicates a strong correlation between the volatility of NOPAT and the resulting economic profit. The sharp decline in both NOPAT and invested capital in 2024 suggests a period of significant operational or strategic adjustment. The recovery in 2025 is particularly notable, as the company achieved its maximum economic profit with a lower capital base than that seen in 2022 and 2023, suggesting an improvement in capital efficiency.
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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$18,665,800 thousand in 2025. This indicates a generally strengthening equity position, despite the temporary dip in 2024.
The interplay between decreasing debt and increasing equity initially contributed to the growth in invested capital. The subsequent increase in debt, coupled with a slight decrease in equity in 2024, resulted in a significant reduction in invested capital that year. The partial recovery in invested capital in 2025 is attributable to the increase in shareholders’ equity offsetting some of the continued debt growth.
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Cost of Capital
Vertex Pharmaceuticals Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 124,850,183) | 124,850,183) | ÷ | 126,886,183) | = | 0.98 | 0.98 | × | 8.86% | = | 8.72% | ||
| Finance lease liabilities3 | 112,200) | 112,200) | ÷ | 126,886,183) | = | 0.00 | 0.00 | × | 4.51% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,923,800) | 1,923,800) | ÷ | 126,886,183) | = | 0.02 | 0.02 | × | 4.75% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 126,886,183) | 1.00 | 8.78% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 8.86% | = | 8.73% | ||
| 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 | 8.78% | ||||||||||
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 | × | 8.86% | = | 8.79% | ||
| 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 | 8.83% | ||||||||||
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 | × | 8.86% | = | 8.76% | ||
| 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 | 8.81% | ||||||||||
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 | × | 8.86% | = | 8.72% | ||
| 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 | 8.79% | ||||||||||
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 | 2,202,401) | (2,066,269) | 1,470,820) | 1,825,919) | 1,414,171) | |
| Invested capital2 | 10,584,200) | 9,046,000) | 13,244,000) | 13,178,000) | 9,387,100) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 20.81% | -22.84% | 11.11% | 13.86% | 15.07% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.73% | -2.21% | -3.92% | 5.50% | 4.88% | |
| Amgen Inc. | 6.24% | -0.54% | 2.28% | 6.80% | 6.80% | |
| Bristol-Myers Squibb Co. | 5.68% | -22.00% | 1.56% | -1.19% | 1.10% | |
| Danaher Corp. | -10.76% | -10.92% | -11.69% | -6.68% | -5.85% | |
| Eli Lilly & Co. | 30.15% | 14.50% | 1.43% | 8.53% | 10.20% | |
| Gilead Sciences Inc. | 12.62% | -10.46% | 2.86% | -0.26% | 6.76% | |
| Johnson & Johnson | 11.56% | 1.89% | 0.04% | 5.30% | 10.36% | |
| Merck & Co. Inc. | 10.51% | 13.38% | -8.92% | 11.26% | 11.43% | |
| Pfizer Inc. | -3.69% | -3.37% | -9.48% | 17.97% | 11.14% | |
| Regeneron Pharmaceuticals Inc. | 13.82% | 16.64% | 13.44% | 18.81% | 62.56% | |
| Thermo Fisher Scientific Inc. | -7.50% | -8.30% | -8.77% | -7.02% | -5.00% | |
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 × 2,202,401 ÷ 10,584,200 = 20.81%
4 Click competitor name to see calculations.
Analysis of the economic value added metrics reveals a volatile performance trend between 2021 and 2025, characterized by a period of gradual decline, a severe contraction in 2024, and a robust recovery in 2025.
- Economic Spread Ratio
- The economic spread ratio exhibited a consistent downward trajectory from 2021 to 2023, moving from 15.07% to 11.11%. This decline accelerated sharply in 2024, with the ratio falling to -22.84%, indicating that the return on invested capital failed to cover the cost of capital. In 2025, a significant reversal occurred, with the ratio climbing to a period peak of 20.81%, suggesting a substantial increase in value creation efficiency.
- Economic Profit
- Economic profit remained positive from 2021 through 2023, reaching a local peak of approximately 1.83 billion US dollars in 2022. A critical downturn is observed in 2024, where economic profit transitioned to a deficit of approximately 2.07 billion US dollars. This trend was corrected in 2025, as economic profit rebounded to 2.20 billion US dollars, the highest absolute value within the five-year period.
- Invested Capital
- Invested capital increased significantly from 9.39 billion US dollars in 2021 to 13.18 billion US dollars in 2022, remaining relatively stable through 2023. A sharp contraction occurred in 2024, with invested capital dropping to 9.05 billion US dollars. By 2025, the capital base saw a moderate increase to 10.58 billion US dollars.
The alignment of the 2024 negative economic spread and the simultaneous reduction in invested capital suggests a period of significant financial restructuring or asset impairment. The subsequent surge in the economic spread ratio and economic profit in 2025 indicates that the organization successfully optimized its capital base to generate higher returns relative to its cost of capital.
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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 | 2,202,401) | (2,066,269) | 1,470,820) | 1,825,919) | 1,414,171) | |
| Revenues | 12,001,300) | 11,020,100) | 9,869,200) | 8,930,700) | 7,574,400) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 18.35% | -18.75% | 14.90% | 20.45% | 18.67% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.73% | -2.72% | -4.93% | 7.78% | 8.32% | |
| Amgen Inc. | 10.41% | -1.07% | 5.92% | 10.89% | 11.26% | |
| Bristol-Myers Squibb Co. | 6.98% | -28.53% | 2.35% | -1.85% | 1.91% | |
| Danaher Corp. | -32.97% | -33.72% | -38.40% | -16.61% | -14.62% | |
| Eli Lilly & Co. | 22.95% | 11.52% | 1.23% | 7.26% | 9.40% | |
| Gilead Sciences Inc. | 18.68% | -16.21% | 4.87% | -0.45% | 11.96% | |
| Johnson & Johnson | 16.95% | 2.26% | 0.04% | 6.35% | 10.84% | |
| Merck & Co. Inc. | 15.83% | 16.56% | -10.39% | 14.04% | 16.59% | |
| Pfizer Inc. | -8.24% | -7.18% | -24.67% | 19.67% | 11.89% | |
| Regeneron Pharmaceuticals Inc. | 12.76% | 14.59% | 12.26% | 18.94% | 42.30% | |
| Thermo Fisher Scientific Inc. | -15.85% | -15.89% | -17.51% | -12.94% | -10.17% | |
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 × 2,202,401 ÷ 12,001,300 = 18.35%
3 Click competitor name to see calculations.
An analysis of financial performance from 2021 to 2025 reveals a divergence between consistent revenue growth and volatile economic value creation. While top-line figures expanded steadily throughout the period, economic profit experienced significant fluctuations, including a substantial deficit in 2024 followed by a strong recovery in 2025.
- Revenue Growth Trends
- Total revenues exhibited a continuous upward trajectory, increasing from US$ 7,574,400 thousand in 2021 to US$ 12,001,300 thousand by 2025. This steady growth indicates a consistent expansion in the company's scale of operations over the five-year period.
- Economic Profit Volatility
- Economic profit did not follow the linear growth pattern observed in revenues. After an initial increase to a peak of US$ 1,825,919 thousand in 2022, a decline was noted in 2023. This was followed by a sharp contraction in 2024, where economic profit fell to negative US$ 2,066,269 thousand. A significant reversal occurred in 2025, with economic profit rebounding to its highest level in the period at US$ 2,202,401 thousand.
- Economic Profit Margin Analysis
- The economic profit margin reflects the underlying volatility of value creation relative to revenue. The margin peaked at 20.45% in 2022 but contracted to 14.90% in 2023. The most critical downturn occurred in 2024, with the margin dropping to -18.75%, signaling a period where the cost of capital exceeded the operating returns. By 2025, the margin recovered to 18.35%, returning to a level of efficiency similar to that seen in 2021.
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