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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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Price to Earnings (P/E) since 2005
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Economic Profit
Abbott Laboratories, economic profit calculation
US$ in millions
| 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 period under review demonstrates a fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) experienced initial decline, followed by recovery, while the cost of capital consistently increased before stabilizing. Invested capital showed a slight overall increase, but with interim decreases. Consequently, economic profit remained negative throughout the analyzed timeframe, though with varying magnitudes.
- NOPAT Trend
- Net operating profit after taxes decreased from US$7,014 million in 2021 to US$6,718 million in 2022. A more substantial decline was observed in 2023, falling to US$5,289 million. A modest recovery occurred in 2024, reaching US$5,543 million, followed by a significant increase to US$7,106 million in 2025. This indicates a period of profitability challenges followed by a return to stronger earnings.
- Cost of Capital Trend
- The cost of capital exhibited a consistent upward trend from 13.08% in 2021 to 13.54% in 2024. In 2025, the cost of capital decreased slightly to 13.47%, suggesting a potential stabilization after a period of increasing financing costs.
- Invested Capital Trend
- Invested capital decreased from US$62,076 million in 2021 to US$61,288 million in 2022, and further to US$59,651 million in 2023. A slight increase to US$60,086 million was noted in 2024, followed by a more pronounced increase to US$62,400 million in 2025. This suggests a period of capital reduction followed by reinvestment.
- Economic Profit Trend
- Economic profit was negative throughout the entire period. The deficit widened from US$-1,105 million in 2021 to US$-1,384 million in 2022, and further to US$-2,683 million in 2023. While the deficit decreased slightly to US$-2,595 million in 2024, it remained substantial. A notable improvement occurred in 2025, with the deficit narrowing to US$-1,296 million, coinciding with the increase in NOPAT. The persistent negative economic profit indicates that the company’s returns are not exceeding its cost of capital.
The improvement in economic profit in 2025, despite a still negative value, suggests that recent operational improvements and/or capital allocation decisions are beginning to positively influence the company’s ability to generate returns above its cost of capital. However, continued monitoring is necessary to determine if this trend will continue and ultimately lead to positive economic profit.
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
= × =
6 2025 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 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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$1,563 million, or 28.2%.
- Relationship to Net Earnings
- NOPAT closely mirrored the trend of net earnings. Both metrics decreased from 2021 to 2023, experienced a large jump in 2024, and then decreased in 2025. The difference between net earnings and NOPAT remained relatively consistent throughout the period, suggesting a stable capital structure and financing costs. The slight differences observed could be attributed to non-operating items impacting net earnings.
The substantial increase in NOPAT in 2025 warrants further investigation to determine the underlying drivers, such as revenue growth, cost reductions, or changes in operational efficiency. The dip in 2023 also merits attention to understand the factors contributing to the reduced profitability during that year.
Cash Operating Taxes
Abbott Laboratories, cash operating taxes calculation
US$ 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$1,942 million in 2025, exceeding the 2022 level. The substantial fluctuation indicates a sensitivity to factors impacting reported earnings and applicable tax rates.
The divergence between taxes on earnings and cash operating taxes is particularly pronounced in 2024. The negative taxes on earnings, contrasted with positive cash operating taxes, suggests the presence of deferred tax assets being realized, or other non-cash tax effects impacting reported earnings. Further investigation into the components of taxes on earnings is warranted to understand the drivers behind the 2024 anomaly.
- Relationship between Metrics
- In 2021, 2022, and 2023, cash operating taxes were consistently higher than taxes on earnings. This difference could be attributed to timing differences between when taxes are accrued for financial reporting purposes and when they are actually paid in cash. The 2024 and 2025 periods demonstrate a reversal of this pattern, with taxes on earnings exceeding cash operating taxes in 2025, and being significantly negative in 2024.
Invested Capital
Abbott Laboratories, invested capital calculation (financing approach)
US$ 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$324 million.
The interplay between decreasing debt and increasing shareholders’ investment suggests a strategic shift in capital structure. The company appears to be reducing its reliance on debt financing while simultaneously strengthening its equity base. The recent stabilization and slight growth in invested capital, coupled with these changes, warrants further investigation into the company’s capital allocation decisions and their impact on future performance.
Cost of Capital
Abbott Laboratories, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 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 | ||||||
| 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: 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 economic spread ratio exhibited a consistent decline from 2021 to 2023, followed by a partial recovery in the subsequent two years. This movement correlates with changes in economic profit and invested capital over the period.
- Economic Spread Ratio
- The economic spread ratio decreased from -1.78% in 2021 to -4.50% in 2023, representing a significant widening of the negative spread. This indicates a progressively larger difference between the return generated on invested capital and the cost of that capital. A subsequent improvement occurred in 2024 and 2025, with the ratio moving to -4.32% and -2.08% respectively, suggesting a narrowing of the gap, but remaining negative overall.
Economic profit consistently remained negative throughout the analyzed period. The magnitude of the negative economic profit increased from US$1,105 million in 2021 to US$2,683 million in 2023, reinforcing the deteriorating trend observed in the economic spread ratio. The negative economic profit lessened in 2024 and 2025, reaching US$1,296 million, aligning with the improvement in the economic spread ratio.
- Invested Capital
- Invested capital experienced a slight decrease from US$62,076 million in 2021 to US$59,651 million in 2023. It then showed a modest increase in 2024 to US$60,086 million, and continued to rise to US$62,400 million in 2025. While the fluctuations in invested capital are relatively small compared to the changes in economic profit, they contribute to the overall movement of the economic spread ratio.
The combined effect of decreasing invested capital in the early period and increasing negative economic profit resulted in the most substantial decline in the economic spread ratio between 2021 and 2023. The subsequent partial recovery in the economic spread ratio from 2023 to 2025 is attributable to the reduction in the magnitude of negative economic profit and a moderate increase in invested capital.
Economic Profit Margin
Abbott Laboratories, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| 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: 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 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited a consistently negative trend between 2021 and 2023, followed by a partial recovery in the subsequent two years. Economic profit itself was negative throughout the entire period, indicating the company’s returns were insufficient to cover the cost of capital.
- Economic Profit Margin Trend
- The economic profit margin decreased from -2.57% in 2021 to -6.69% in 2023, representing a substantial decline over three years. This indicates a worsening ability to generate profits exceeding the cost of capital. A subsequent improvement occurred in 2024 and 2025, with the margin reaching -6.19% and -2.92% respectively. While still negative, this suggests a positive shift in profitability relative to capital costs.
- Relationship to Net Sales
- Net sales demonstrated moderate fluctuations during the period. While sales decreased from 2021 to 2023, they recovered in 2024 and 2025, exceeding the 2021 level. However, the improvement in net sales did not fully offset the negative economic profit, as evidenced by the continued negative economic profit margin, even with increased sales in 2024 and 2025.
- Economic Profit
- Economic profit declined significantly from a loss of US$1,105 million in 2021 to a loss of US$2,683 million in 2023. The loss narrowed to US$2,595 million in 2024 and further improved to US$1,296 million in 2025. This pattern mirrors the trend observed in the economic profit margin, suggesting a correlation between overall profitability and the cost of capital.
The observed trends suggest that while the company experienced revenue fluctuations, its primary challenge during this period was generating returns that adequately covered its cost of capital. The improvement in both economic profit margin and economic profit in 2024 and 2025 indicates a potential positive shift, but continued monitoring is warranted to assess the sustainability of this trend.