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:
- Income Statement
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
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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 financial trajectory from 2021 to 2025 is characterized by significant volatility in operating performance and capital allocation, culminating in a strong recovery in the final period. While the cost of capital remained remarkably stable, fluctuations in net operating profit after taxes (NOPAT) and invested capital drove substantial swings in economic profit, indicating periods of both value creation and value destruction.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability exhibited a non-linear trend. Following an initial increase from 2,239,320 thousand USD in 2021 to a peak of 2,986,401 thousand USD in 2022, NOPAT experienced a slight contraction in 2023. A severe downturn occurred in 2024, where NOPAT fell to a negative 1,271,806 thousand USD. However, a robust recovery followed in 2025, with NOPAT reaching its five-year high of 3,131,283 thousand USD.
- Invested Capital and Cost of Capital
- Invested capital saw a sharp expansion between 2021 and 2022, rising from 9,387,100 thousand USD to 13,178,000 thousand USD, remaining relatively flat through 2023. A significant reduction in the capital base occurred in 2024, dropping to 9,046,000 thousand USD, before moderately increasing to 10,584,200 thousand USD in 2025. Throughout this period, the cost of capital remained virtually constant, oscillating narrowly between 8.52% and 8.57%, suggesting that changes in economic value were driven by operational performance rather than shifts in the weighted average cost of capital.
- Economic Profit Analysis
- The company generated positive economic profit from 2021 through 2023, peaking in 2022 at 1,859,442 thousand USD. This trend was abruptly reversed in 2024, resulting in a substantial economic loss of 2,043,325 thousand USD, coinciding with the collapse in NOPAT. The 2025 period marks the most successful year in the sequence, with economic profit rebounding to 2,229,205 thousand USD, the highest value observed in the dataset, indicating that the entity is once again generating returns significantly above its cost of capital.
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 analysis of economic value added reveals a period of significant volatility between 2021 and 2025. The trajectory is characterized by moderate growth and stability through 2023, a severe contraction in 2024, and a robust recovery in 2025, reaching the highest levels recorded within the period.
- Economic Profit Trends
- Economic profit exhibited an upward trend from 2021 to 2022, peaking at 1,859,442 thousand USD. A gradual decline occurred in 2023, followed by a substantial collapse in 2024, where profit turned negative to -2,043,325 thousand USD. However, a sharp reversal is noted in 2025, with economic profit rebounding to 2,229,205 thousand USD, surpassing all previous years.
- Invested Capital Fluctuations
- Invested capital increased significantly between 2021 and 2022, rising from 9,387,100 thousand USD to 13,178,000 thousand USD, remaining relatively stable through 2023. A notable contraction occurred in 2024, with capital dropping to 9,046,000 thousand USD, before increasing again to 10,584,200 thousand USD in 2025.
- Economic Spread Ratio Performance
- The economic spread ratio shows a steady decline from 15.32% in 2021 to 11.36% in 2023, indicating a narrowing margin between the return on invested capital and the cost of capital. This metric plummeted to -22.59% in 2024, coinciding with the negative economic profit, which suggests that the cost of capital significantly exceeded the returns generated during that period. By 2025, the ratio recovered sharply to 21.06%, representing the most efficient capital utilization observed in the five-year period.
The correlation between the economic spread ratio and economic profit is evident, particularly in 2024, where the negative spread directly resulted in a loss of economic value. The recovery in 2025 suggests a significant improvement in operational efficiency or a reduction in the cost of capital relative to returns.
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.
An analysis of the financial performance from 2021 to 2025 reveals a consistent upward trajectory in revenues contrasted by significant volatility in economic profit and the corresponding economic profit margin. While top-line growth remained steady, the company's ability to generate value above its cost of capital experienced a severe disruption in 2024 before a substantial recovery in 2025.
- Revenue Growth Trend
- Revenues demonstrated uninterrupted annual growth throughout the period, increasing from US$ 7.57 billion in 2021 to US$ 12.00 billion by 2025. This steady expansion indicates a consistent increase in the company's scale of operations and market reach.
- Economic Profit Volatility
- Economic profit exhibited significant fluctuations, peaking at US$ 1.86 billion in 2022 before declining to US$ 1.50 billion in 2023. A sharp reversal occurred in 2024, with economic profit falling to negative US$ 2.04 billion, suggesting that the net operating profit for that year was insufficient to cover the cost of capital. However, a strong recovery followed in 2025, with economic profit reaching its highest absolute value of US$ 2.23 billion.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit figures. The margin increased from 18.98% in 2021 to a peak of 20.82% in 2022, followed by a decline to 15.25% in 2023. The margin contracted sharply to -18.54% in 2024, marking a period of value destruction. By 2025, the margin rebounded to 18.57%, returning the company to a state of value creation nearly identical to its 2021 performance level.