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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Abbott Laboratories pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Net Profit Margin since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Economic Profit
Abbott Laboratories, 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
= – × =
The financial data reflects several significant trends in the company’s profitability and capital efficiency over the reported period. Key observations relate to net operating profit after taxes (NOPAT), cost of capital, invested capital, and economic profit.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT experienced a notable increase from 2020 to 2021, rising from 4,838 million USD to 7,014 million USD. However, this peak was followed by a decline in the subsequent years, falling to 6,718 million USD in 2022 and further decreasing to 5,289 million USD in 2023. There is a slight recovery observed in 2024, with NOPAT increasing to 5,601 million USD. Overall, the trend indicates initial strong profitability growth followed by volatility and partial recovery.
- Cost of Capital
- The cost of capital shows a gradual upward trend over the five-year span, increasing steadily from 11.19% in 2020 to 11.59% in 2024. This incremental rise suggests an increased cost associated with financing the company’s operations and investments, which could impact the hurdle rate for new projects and the assessment of value creation.
- Invested Capital
- Invested capital displays moderate fluctuation, starting at 60,387 million USD in 2020, increasing slightly to 62,076 million USD in 2021, and then steadily declining through 2023 to 59,651 million USD. There is a small uptick in 2024 to 60,065 million USD. These variations indicate adjustments in the asset base or capital investments during the period, likely reflecting operational decisions or capital structure changes.
- Economic Profit
- The economic profit figures are consistently negative except for the marginally positive value of 56 million USD in 2021. Starting at a loss of 1,918 million USD in 2020, economic profit improved in 2021, turned slightly negative at 223 million USD in 2022, and then declined significantly in 2023 and 2024 to losses of 1,539 million USD and 1,364 million USD respectively. This pattern signifies that, on an economic value-added basis, the company struggled to generate returns above its cost of capital for the majority of the period.
In summary, despite a peak in operating profitability in 2021, the company faced challenges in maintaining consistent profitability growth thereafter. The gradual increase in cost of capital and the negative economic profit across most years highlight pressures on value creation. Simultaneously, fluctuations in invested capital reflect ongoing adjustments in asset deployment, which may be associated with strategic initiatives or operational dynamics. The overall picture indicates a need for enhanced capital efficiency and profitability improvement to better exceed the cost of capital and generate sustainable economic profit.
Net Operating Profit after Taxes (NOPAT)
Abbott Laboratories, 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 allowance for doubtful accounts.
3 Addition of increase (decrease) in restructuring Plans, accrued balance.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net earnings.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
The financial performance over the observed periods highlights variability in both net earnings and net operating profit after taxes (NOPAT), with distinct trends and fluctuations evident.
- Net Earnings
- Net earnings demonstrated significant growth from 2020 to 2021, increasing from 4,495 million US dollars to 7,071 million US dollars. Following this peak, there was a slight decline in 2022 to 6,933 million US dollars, and a more pronounced decrease in 2023 to 5,723 million US dollars. However, in 2024, net earnings surged substantially, reaching 13,402 million US dollars, representing the highest value in the entire period under review.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited a rising trend from 2020 to 2021, increasing from 4,838 million US dollars to 7,014 million US dollars. Subsequently, NOPAT decreased each year through 2023, falling to 5,289 million US dollars. In 2024, there was a modest recovery, with NOPAT rising to 5,601 million US dollars, although this value remained below the peak observed in 2021.
The patterns indicate a strong performance improvement initially, peaking in 2021 for both profitability metrics, followed by a downturn over the next two years. Notably, net earnings exhibited a remarkable recovery and acceleration in 2024, far exceeding previous years' performance, whereas NOPAT showed only a slight improvement without returning to earlier peak levels. This divergence in 2024 suggests that factors impacting net earnings positively may not have equivalently affected operating efficiency or core profitability as measured by NOPAT.
Cash Operating Taxes
Abbott Laboratories, 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).
The data reveals notable fluctuations in both taxes on earnings from continuing operations and cash operating taxes over the five-year period analyzed.
- Taxes on earnings from continuing operations
-
This item shows an overall increasing trend from 497 million USD in 2020 to a peak of 1,373 million USD in 2022, followed by a decline to 941 million USD in 2023. Notably, 2024 exhibits a significant negative value of -6,389 million USD, indicating a substantial tax benefit or reversal relative to earnings taxation for that year.
- Cash operating taxes
-
Cash operating taxes also increased from 718 million USD in 2020 to 2,118 million USD in 2022. However, in contrast to taxes on earnings, cash operating taxes declined only slightly to 1,463 million USD in 2023, followed by a moderate increase to 1,626 million USD in 2024. The cash tax payments did not reflect the large negative swing seen in tax expenses on earnings for 2024.
This divergence in 2024 between taxes on earnings and cash operating taxes may suggest the presence of deferred tax assets, tax refunds, adjustments, or accounting reclassifications influencing reported earnings taxes without an immediate effect on cash taxes paid. The general increase in both tax metrics until 2022 aligns with growing taxable earnings or changes in tax rates but the pronounced changes in 2023 and especially 2024 highlight significant tax-related events or accounting impacts during these years.
Invested Capital
Abbott Laboratories, 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 allowance for doubtful accounts receivable.
4 Addition of restructuring Plans, accrued balance.
5 Addition of equity equivalents to total Abbott shareholders’ investment.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of marketable securities.
- Total reported debt & leases
-
The total reported debt and leases demonstrate a consistent downward trend over the observed five-year period. Beginning at approximately 19,890 million US dollars in 2020, the debt level gradually decreased each year, reaching around 15,275 million US dollars by the end of 2024. This steady reduction suggests a focus on debt management or deleveraging initiatives, contributing to an improved financial structure.
- Total Abbott shareholders’ investment
-
Shareholders’ investment exhibits a steady increase across the years. Starting at 32,784 million US dollars in 2020, this figure rose progressively to 47,664 million US dollars by 2024. The growth reflects a strengthening equity base, possibly due to accumulated earnings, retained profits, or new equity infusions, enhancing the company's financial stability and shareholder value.
- Invested capital
-
Invested capital shows a relatively stable pattern with slight fluctuations throughout the period. The value starts at 60,387 million US dollars in 2020 and peaks near 62,076 million in 2021 before slightly declining and stabilizing around 60,065 million by 2024. This relative stability indicates consistent investment levels in the business operations and assets, with minor adjustments potentially reflecting operational changes or capital expenditure variations.
- Overall Insights
-
The financial data highlights a strategic decrease in debt concurrent with increasing shareholder equity, indicating a strengthening financial position. The reduction in debt paired with rising equity suggests improved solvency and reduced financial risk. Stability in invested capital implies maintained operational capacity, supporting sustainable growth. Collectively, these trends point to robust financial management and a focus on enhancing the company’s balance sheet quality over the observed period.
Cost of Capital
Abbott Laboratories, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (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. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Abbott Laboratories, 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 | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 exhibited significant volatility over the five-year period. It started with a substantial negative value in 2020 at -1918 million US dollars, improved sharply to a positive 56 million in 2021, then declined again into negative territory in subsequent years with -223 million in 2022, followed by further decreases to -1539 million in 2023 and -1364 million in 2024. This pattern indicates challenges in generating returns above the cost of capital for most of the period, with a brief positive result in 2021.
- Invested Capital
- The invested capital remained relatively stable across the reported years, fluctuating within a narrow range. It began at 60,387 million US dollars in 2020, increased slightly to 62,076 million in 2021, and then showed a gradual decline to 59,651 million by 2023, with a slight uptick to 60,065 million in 2024. This stability suggests a consistent level of asset investment without large expansions or contractions.
- Economic Spread Ratio
- The economic spread ratio, reflecting the difference between return on invested capital and cost of capital, mirrored the fluctuations in economic profit. It was negative at -3.18% in 2020, moved to a marginally positive 0.09% in 2021, then reverted to negative values from 2022 to 2024 (-0.36%, -2.58%, and -2.27% respectively). The persistent negative spread after 2021 signals a struggle to generate returns exceeding the capital costs in the latter periods.
Economic Profit Margin
Abbott Laboratories, 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 sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period under review.
- Economic Profit
- Economic profit demonstrates significant fluctuations. It starts with a considerable loss of 1,918 million US dollars in 2020, improves substantially to a positive 56 million US dollars in 2021, and then declines again into losses in subsequent years: 223 million in 2022, 1,539 million in 2023, and 1,364 million in 2024. The data indicate that the company struggled to sustain economic profit improvements beyond 2021.
- Net Sales
- Net sales exhibit an overall growth trend during the period, rising from 34,608 million US dollars in 2020 to a peak of 43,653 million in 2022. However, sales declined in 2023 to 40,109 million, followed by a partial recovery to 41,950 million in 2024. Despite this dip in 2023, the general direction still reflects growth compared to the initial year.
- Economic Profit Margin
- The economic profit margin mirrors the pattern of economic profit closely. Initially negative at -5.54% in 2020, it peaks near breakeven at 0.13% in 2021, then reverts to negative values of -0.51%, -3.84%, and -3.25% in the succeeding years. These margins reflect ongoing challenges in converting sales growth into economic value creation consistently.
Overall, the data suggest that while net sales experienced growth with some volatility, economic profitability remains a challenge. The company achieved a brief period of positive economic profit and margin in 2021 but was unable to maintain this, indicating potential issues with cost control, capital efficiency, or competitive pressures impacting long-term value generation.