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.
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AbbVie Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2012
- Current Ratio since 2012
- Debt to Equity since 2012
- Analysis of Revenues
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Economic Profit
AbbVie Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited considerable volatility over the five-year period. Beginning at $4,455 million in 2020, NOPAT experienced a substantial increase to $12,362 million in 2021, followed by a slight decline to $11,543 million in 2022. Subsequently, it sharply decreased to $3,292 million in 2023 before showing a moderate recovery to $4,563 million in 2024. This pattern suggests fluctuating operational efficiency or possible external factors impacting profitability.
- Cost of Capital
- The cost of capital showed a steady upward trend throughout the timeframe. Starting at 7.9% in 2020, it increased annually to reach 9.6% by 2024. This incremental rise indicates potential increases in the risk profile of the company or shifts in market interest rates, which could have implications for investment and financing decisions.
- Invested Capital
- Invested capital steadily declined from $103,725 million in 2020 to $68,204 million in 2023, reflecting a reduction in asset base or strategic divestments. In 2024, a slight increase occurred, rising to $69,263 million. This downward trend over several years may signal a focus on capital efficiency or restructuring efforts.
- Economic Profit
- The economic profit metric displayed significant fluctuations, starting with a negative value of -$3,740 million in 2020, turning positive to $3,993 million in 2021, and maintaining a similar level ($3,875 million) in 2022. However, in 2023, economic profit again fell sharply negative to -$3,223 million and improved slightly to -$2,085 million in 2024. These swings imply variability in value creation, where positive economic profits in the middle years contrast with notable losses at the beginning and end of the series, potentially attributable to changing operational conditions or capital charges influenced by the rising cost of capital.
Net Operating Profit after Taxes (NOPAT)
AbbVie Inc., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in restructuring reserve.
3 Addition of increase (decrease) in equity equivalents to net earnings attributable to AbbVie Inc..
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net earnings attributable to AbbVie Inc..
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
The financial data reveals significant fluctuations in key profitability metrics over the five-year period from 2020 to 2024. Net earnings attributable to the company show a marked increase between 2020 and 2021, more than doubling from 4,616 million USD to 11,542 million USD. This upward trend continued slightly into 2022, reaching 11,836 million USD. However, a sharp decline is observed in 2023, where net earnings drop to 4,863 million USD, followed by a further decrease in 2024 to 4,278 million USD.
Similarly, net operating profit after taxes (NOPAT) exhibits a strong growth trajectory in the initial years, rising from 4,455 million USD in 2020 to 12,362 million USD in 2021, before slightly decreasing to 11,543 million USD in 2022. In contrast to the early upward momentum, NOPAT experiences a significant fall in 2023 to 3,292 million USD, although it recovers somewhat in 2024 to 4,563 million USD.
- Net Earnings Attributable to the Company
- Demonstrated substantial growth in the first two years, peaking in 2022.
- Experienced a pronounced decline in the subsequent years, reaching the lowest point in 2024 within the presented timeframe.
- Net Operating Profit After Taxes (NOPAT)
- Followed a similar pattern to net earnings, with rapid growth through 2021, slight reduction in 2022.
- Showed a sharp decline beginning in 2023, with modest recovery in 2024 albeit remaining well below earlier peak levels.
Overall, the data points toward a period of strong profitability gains up to 2022, followed by notable erosion in both net earnings and NOPAT over the last two years. The decline in profitability metrics during 2023 and 2024 suggests the presence of operational challenges or market conditions adversely impacting financial performance. The partial resurgence of NOPAT in 2024 hints at potential stabilization or early signs of financial recovery.
Cash Operating Taxes
AbbVie Inc., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
- Income Tax Expense (Benefit) Trend
- The income tax expense exhibited significant volatility over the analyzed period. It began with a notable benefit of -$1,224 million at the end of 2020, indicating a tax gain or credit that reduced tax burden during that year. This reversed sharply in 2021 to a tax expense of $1,440 million, then further increased to $1,632 million in 2022. In 2023, it slightly decreased but remained high at $1,377 million. However, in 2024, the income tax expense again turned negative, showing a benefit of -$570 million. This pattern suggests fluctuating tax positions or adjustments possibly due to changes in tax regulations, earnings variations, or deferred tax accounting impacts.
- Cash Operating Taxes Trend
- The cash operating taxes consistently increased from 2020 through 2023, indicating increasing cash payments for taxes despite fluctuations in reported income tax expense. In 2020, cash taxes were $1,585 million, which rose significantly each year to reach $4,625 million in 2023. However, in 2024, there was a notable decline in cash operating taxes to $1,339 million, which is substantially lower than the prior years. This decline could suggest a one-time tax payment adjustment, changes in taxable income, tax credits utilization, or other operational tax strategies impacting cash outflows.
- General Observations
- While reported income tax expenses fluctuated between benefits and expenses, cash taxes paid showed a general increasing trend until a sharp drop in 2024. The divergence between income tax expense and cash operating taxes through the years implies differences between accounting recognition of tax expenses and actual tax payments, which is common in companies with complex tax structures. The decline in both income tax expense and cash operating taxes in 2024 may indicate significant tax planning outcomes or shifts in profitability affecting tax liabilities.
Invested Capital
AbbVie Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of restructuring reserve.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of available-for-sale investment securities.
The financial data over the provided periods reveal several significant trends related to debt, equity, and capital structure.
- Total reported debt & leases
- The total reported debt and leases exhibit a decreasing trend from 87,063 million USD at the end of 2020 to 60,286 million USD by the end of 2023, reflecting a substantial reduction in leverage over the first four years. However, in 2024, there is a noticeable increase to 68,019 million USD, indicating a reversal of the prior downward trend in debt levels.
- Stockholders’ equity
- Stockholders' equity initially increases from 13,076 million USD in 2020 to a peak of 17,254 million USD in 2022. Subsequently, it declines sharply to 10,360 million USD in 2023 and continues to deteriorate significantly in 2024, dropping to 3,325 million USD. This steep decrease in equity over the last two years suggests increased challenges with retained earnings or potential capital losses.
- Invested capital
- Invested capital shows a consistent downward trajectory, reducing from 103,725 million USD in 2020 to 68,204 million USD in 2023. Unlike other trends, invested capital appears to stabilize in 2024 with a slight increase to 69,263 million USD, signaling a possible floor or minor recovery in invested assets or operational capital use.
Overall, the data suggest a focused effort on debt reduction from 2020 to 2023 accompanied by increasing equity till 2022. However, the last two years highlight financial stress with declining equity and rising debt, raising concerns about the company’s capital structure stability and financial leverage. The decline and subsequent stabilization in invested capital corroborate a contraction phase followed by an attempt to maintain or increment operational investment.
Cost of Capital
AbbVie Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
AbbVie Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| 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. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the examined period. Beginning with a negative value of -3740 million USD at the end of 2020, it improved substantially to positive figures in 2021 and 2022, reaching 3993 million USD and 3875 million USD respectively. However, this positive trend reversed in 2023 and 2024, with economic profit declining sharply to -3223 million USD and further to -2085 million USD, indicating a return to economic losses.
- Invested Capital
- Invested capital showed a consistent downward trend from 103,725 million USD at the end of 2020 to 68,204 million USD by the end of 2023, reflecting a significant reduction over four years. In 2024, invested capital slightly increased to 69,263 million USD, marking a minor recovery after the continuous decline. This overall contraction may suggest divestitures, asset sales, or efficiency improvements.
- Economic Spread Ratio
- The economic spread ratio mirrored the volatility seen in economic profit. Initially negative at -3.61% in 2020, it improved to positive values in 2021 and 2022 of 4.16% and 4.72%, respectively. This improvement indicated that returns on invested capital exceeded the cost of capital during these years. However, in 2023 the ratio fell sharply to -4.73%, turning negative again, and then slightly improved to -3.01% in 2024, signaling that the company's investments failed to generate value over its cost during those periods.
Economic Profit Margin
AbbVie Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| 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. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited significant fluctuation during the observed periods. It started with a notable negative value of -3,740 million USD in 2020, turned positive with a substantial increase to 3,993 million USD in 2021, and slightly declined to 3,875 million USD in 2022. However, in 2023 and 2024, the economic profit reverted to negative figures, recording -3,223 million USD and -2,085 million USD respectively. This pattern indicates instability in creating economic value, with two distinct phases of positive and negative economic profit within the five-year span.
- Net Revenues
- Net revenues demonstrated an overall growth trend, starting at 45,804 million USD in 2020 and peaking in 2022 at 58,054 million USD. Despite a decrease in 2023 to 54,318 million USD, revenues appeared to regain momentum in 2024, increasing to 56,334 million USD. The data suggests resilience in revenue generation with a temporary setback in 2023, followed by a recovery.
- Economic Profit Margin
- The economic profit margin aligned closely with the trends observed in economic profit. It shifted from a negative margin of -8.17% in 2020 to positive margins in 2021 and 2022, registering 7.11% and 6.67% respectively. In 2023 and 2024, the margin declined again to negative values, -5.93% and -3.7%. This indicates a fluctuating profitability relative to net revenues, with periods of both value creation and value erosion for the company.