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
Abbott Laboratories, economic profit calculation
US$ in millions
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
= 7,106 – 13.72% × 62,400 = -1,453
The analysis of economic value creation from 2021 through 2025 reveals a consistent failure to generate positive economic profit, indicating that the return on invested capital remained below the company's cost of capital throughout the entire period. While there is a visible trend toward recovery in the final two years, the entity operated in a value-destructive state for the duration of the observed timeframe.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited significant volatility, starting at 7,014 million US$ in 2021 and declining to a trough of 5,289 million US$ in 2023. This decline represents a substantial contraction in operating profitability. However, a recovery phase followed, with profit increasing to 5,543 million US$ in 2024 and returning to peak levels of 7,106 million US$ by 2025.
- Cost of Capital and Invested Capital Dynamics
- The cost of capital showed a steady upward trajectory, rising from 13.32% in 2021 to a peak of 13.80% in 2024, before slightly easing to 13.72% in 2025. Simultaneously, invested capital remained relatively stable, experiencing a slight contraction to 59,651 million US$ in 2023 before expanding back to 62,400 million US$ by 2025. The combination of rising capital costs and a stable capital base increased the financial hurdle required to achieve positive economic profit.
- Economic Profit Performance
- Economic profit remained negative throughout the period, reflecting a persistent gap between NOPAT and the imputed cost of capital. The economic loss widened significantly from -1,256 million US$ in 2021 to a maximum deficit of -2,832 million US$ in 2023, coinciding with the decline in NOPAT. A reversal of this trend began in 2024, with the economic loss narrowing to -1,453 million US$ by 2025, driven primarily by the rebound in operating profitability.
Overall, the period was characterized by an intensification of value destruction peaking in 2023, followed by a corrective trend. The recovery in 2025 suggests an improvement in operational efficiency, although the entity has not yet reached the threshold of economic profitability.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Abbott Laboratories, NOPAT calculation
US$ in millions
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 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 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,207 × 3.90% = 47
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 540 × 21.00% = 113
7 Addition of after taxes interest expense to net earnings.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 308 × 21.00% = 65
9 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited fluctuations over the five-year period. While generally tracking with net earnings, distinct patterns emerge upon closer examination. Initial declines were followed by a significant increase and then a subsequent decrease.
- Overall Trend
- NOPAT began at US$7,014 million in 2021 and decreased to US$5,289 million in 2023. A substantial increase was then observed in 2024, reaching US$5,543 million, followed by a further increase to US$7,106 million in 2025. This indicates a period of profitability challenges followed by recovery and growth.
- Year-over-Year Changes
- From 2021 to 2022, NOPAT decreased by US$296 million, representing a roughly 4.2% decline. The decrease from 2022 to 2023 was more pronounced, with a reduction of US$429 million, or approximately 6.4%. However, 2024 saw an increase of US$254 million, a 4.6% rise. The largest year-over-year change occurred between 2024 and 2025, with NOPAT increasing by US$1,563 million, or 28.2%.
- Relationship to Net Earnings
- NOPAT closely mirrored the trend of net earnings. Both metrics decreased from 2021 to 2023, experienced a large jump in 2024, and then decreased in 2025. The difference between net earnings and NOPAT remained relatively consistent throughout the period, suggesting a stable capital structure and financing costs. The slight differences observed could be attributed to non-operating items impacting net earnings.
The substantial increase in NOPAT in 2025 warrants further investigation to determine the underlying drivers, such as revenue growth, cost reductions, or changes in operational efficiency. The dip in 2023 also merits attention to understand the factors contributing to the reduced profitability during that year.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cash Operating Taxes
Abbott Laboratories, cash operating taxes calculation
US$ in millions
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 reported values for taxes on earnings and cash operating taxes exhibit distinct patterns over the five-year period. Cash operating taxes demonstrate relative stability, while taxes on earnings fluctuate significantly, including a substantial negative value in 2024.
- Cash Operating Taxes
- Cash operating taxes increased from US$1,759 million in 2021 to US$2,118 million in 2022, representing a growth of approximately 20.4%. A subsequent decrease to US$1,463 million was observed in 2023. Values then rose to US$1,626 million in 2024 and concluded at US$1,550 million in 2025. Overall, the trend suggests a moderate level of volatility around the US$1,600 million mark, with no consistent upward or downward trajectory.
- Taxes on Earnings
- Taxes on earnings began at US$1,140 million in 2021 and increased to US$1,373 million in 2022. A decline to US$941 million followed in 2023. The most notable change occurred in 2024, with a reported negative value of -US$6,389 million. This suggests a significant tax benefit or accounting adjustment occurred during that year. The value recovered to US$1,942 million in 2025, exceeding the 2022 level. The substantial fluctuation indicates a sensitivity to factors impacting reported earnings and applicable tax rates.
The divergence between taxes on earnings and cash operating taxes is particularly pronounced in 2024. The negative taxes on earnings, contrasted with positive cash operating taxes, suggests the presence of deferred tax assets being realized, or other non-cash tax effects impacting reported earnings. Further investigation into the components of taxes on earnings is warranted to understand the drivers behind the 2024 anomaly.
- Relationship between Metrics
- In 2021, 2022, and 2023, cash operating taxes were consistently higher than taxes on earnings. This difference could be attributed to timing differences between when taxes are accrued for financial reporting purposes and when they are actually paid in cash. The 2024 and 2025 periods demonstrate a reversal of this pattern, with taxes on earnings exceeding cash operating taxes in 2025, and being significantly negative in 2024.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Invested Capital
Abbott Laboratories, invested capital calculation (financing approach)
US$ in millions
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 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.
The composition of invested capital demonstrates notable shifts over the five-year period. Total reported debt & leases consistently decreased, while total shareholders’ investment generally increased. These movements have influenced the overall trend in invested capital.
- Total Reported Debt & Leases
- A clear downward trend is observed in total reported debt & leases, decreasing from US$19,251 million in 2021 to US$14,136 million in 2025. The largest single-year decrease occurred between 2021 and 2022, with a reduction of US$1,305 million. Subsequent annual decreases were more moderate, suggesting a consistent, but slowing, debt reduction strategy.
- Total Abbott Shareholders’ Investment
- Total shareholders’ investment exhibited an overall increasing trend, rising from US$35,802 million in 2021 to US$52,130 million in 2025. A significant increase is apparent between 2023 and 2024, with an addition of US$8,961 million. This suggests substantial equity financing or retained earnings accumulation during that period. The increase from 2024 to 2025, while still positive, was smaller at US$4,466 million.
- Invested Capital
- Invested capital initially decreased from US$62,076 million in 2021 to US$59,651 million in 2023, reflecting the greater reduction in debt compared to the increase in shareholders’ investment. However, it stabilized and slightly increased in 2024 to US$60,086 million, and continued to rise to US$62,400 million in 2025. This stabilization and subsequent increase indicate a shift towards utilizing more capital, potentially for growth initiatives, despite the continued reduction in debt. The overall change in invested capital from 2021 to 2025 was a modest increase of US$324 million.
The interplay between decreasing debt and increasing shareholders’ investment suggests a strategic shift in capital structure. The company appears to be reducing its reliance on debt financing while simultaneously strengthening its equity base. The recent stabilization and slight growth in invested capital, coupled with these changes, warrants further investigation into the company’s capital allocation decisions and their impact on future performance.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
Abbott Laboratories, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 194,985) | 194,985) | ÷ | 208,964) | = | 0.93 | 0.93 | × | 14.48% | = | 13.51% | ||
| Long-term debt, including current maturities3 | 12,772) | 12,772) | ÷ | 208,964) | = | 0.06 | 0.06 | × | 3.83% × (1 – 21.00%) | = | 0.18% | ||
| Operating lease liability4 | 1,207) | 1,207) | ÷ | 208,964) | = | 0.01 | 0.01 | × | 3.90% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 208,964) | 1.00 | 13.72% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 233,995) | 233,995) | ÷ | 248,855) | = | 0.94 | 0.94 | × | 14.48% | = | 13.62% | ||
| Long-term debt, including current maturities3 | 13,710) | 13,710) | ÷ | 248,855) | = | 0.06 | 0.06 | × | 3.82% × (1 – 21.00%) | = | 0.17% | ||
| Operating lease liability4 | 1,150) | 1,150) | ÷ | 248,855) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 248,855) | 1.00 | 13.80% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 197,828) | 197,828) | ÷ | 213,791) | = | 0.93 | 0.93 | × | 14.48% | = | 13.40% | ||
| Long-term debt, including current maturities3 | 14,769) | 14,769) | ÷ | 213,791) | = | 0.07 | 0.07 | × | 3.63% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 1,194) | 1,194) | ÷ | 213,791) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 213,791) | 1.00 | 13.62% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 185,508) | 185,508) | ÷ | 202,994) | = | 0.91 | 0.91 | × | 14.48% | = | 13.24% | ||
| Long-term debt, including current maturities3 | 16,313) | 16,313) | ÷ | 202,994) | = | 0.08 | 0.08 | × | 3.43% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 1,173) | 1,173) | ÷ | 202,994) | = | 0.01 | 0.01 | × | 2.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 202,994) | 1.00 | 13.47% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 205,957) | 205,957) | ÷ | 228,310) | = | 0.90 | 0.90 | × | 14.48% | = | 13.07% | ||
| Long-term debt, including current maturities3 | 21,152) | 21,152) | ÷ | 228,310) | = | 0.09 | 0.09 | × | 3.36% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 1,201) | 1,201) | ÷ | 228,310) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 228,310) | 1.00 | 13.32% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Abbott Laboratories, 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 millions) | ||||||
| Economic profit1 | (1,453) | (2,748) | (2,832) | (1,535) | (1,256) | |
| Invested capital2 | 62,400) | 60,086) | 59,651) | 61,288) | 62,076) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.33% | -4.57% | -4.75% | -2.51% | -2.02% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Elevance Health Inc. | -1.08% | -0.68% | -1.03% | 0.01% | 1.33% | |
| Intuitive Surgical Inc. | 1.16% | 3.74% | -2.71% | -2.99% | 12.62% | |
| Medtronic PLC | -4.80% | -6.60% | -6.38% | -5.14% | -6.78% | |
| UnitedHealth Group Inc. | -1.14% | -0.04% | 4.85% | 3.88% | 3.74% | |
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 × -1,453 ÷ 62,400 = -2.33%
4 Click competitor name to see calculations.
The analysis of economic value added reveals a period of consistent value destruction from 2021 through 2025, although a recovery trend emerged in the final two years of the period. Economic profit remained negative throughout the duration, indicating that the returns generated were insufficient to cover the cost of capital.
- Economic Profit Trends
- Economic profit exhibited a deepening deficit between 2021 and 2023, moving from -1,256 million US$ to a peak loss of -2,832 million US$. Following this trough, losses narrowed to -2,748 million US$ in 2024 and improved significantly to -1,453 million US$ by the end of 2025.
- Invested Capital Stability
- Invested capital remained relatively stable with minor fluctuations. A slight contraction was observed from 2021 to 2023, with capital decreasing from 62,076 million US$ to 59,651 million US$. This was followed by a gradual expansion, reaching 62,400 million US$ by December 31, 2025.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the period, confirming that the return on invested capital stayed below the cost of capital. The ratio deteriorated from -2.02% in 2021 to a low of -4.75% in 2023. A recovery trend followed, with the ratio improving to -4.57% in 2024 and returning to -2.33% in 2025, suggesting a narrowing gap between actual returns and the required rate of return.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Economic Profit Margin
Abbott Laboratories, 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 millions) | ||||||
| Economic profit1 | (1,453) | (2,748) | (2,832) | (1,535) | (1,256) | |
| Net sales | 44,328) | 41,950) | 40,109) | 43,653) | 43,075) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -3.28% | -6.55% | -7.06% | -3.52% | -2.92% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Elevance Health Inc. | -0.44% | -0.30% | -0.42% | 0.00% | 0.62% | |
| Intuitive Surgical Inc. | 1.31% | 3.48% | -2.70% | -2.58% | 9.93% | |
| Medtronic PLC | -10.08% | -13.98% | -14.41% | -11.28% | -16.28% | |
| UnitedHealth Group Inc. | -0.51% | -0.02% | 2.41% | 1.99% | 1.83% | |
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 ÷ Net sales
= 100 × -1,453 ÷ 44,328 = -3.28%
3 Click competitor name to see calculations.
The analysis of economic value added over the five-year period reveals a consistent trend of negative economic profit, indicating that the entity's operating returns were insufficient to cover its cost of capital. A period of significant value erosion peaked in 2023, followed by a corrective trend leading into 2025.
- Economic Profit Trajectory
- Economic profit remained negative throughout the observation period, starting at -1,256 million USD in 2021 and deteriorating to a peak deficit of -2,832 million USD by 2023. From 2024 onward, a recovery phase is evident, with the deficit narrowing to -1,453 million USD by the end of 2025, returning close to the 2021 baseline.
- Net Sales Performance
- Net sales exhibited moderate volatility, reaching a period high of 44,328 million USD in 2025. A notable contraction occurred in 2023, where sales decreased to 40,109 million USD from a 2022 level of 43,653 million USD. This revenue dip directly coincided with the most significant expansion of the economic profit deficit.
- Economic Profit Margin Dynamics
- The economic profit margin mirrors the trajectory of absolute economic profit, remaining negative across all reported years. The margin deteriorated from -2.92% in 2021 to a trough of -7.06% in 2023. The subsequent improvement to -3.28% by 2025 suggests a gradual enhancement in the relationship between operating performance and the cost of capital.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?