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.
Paying user area
Try for free
Caterpillar Inc. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Caterpillar Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Caterpillar Inc., economic profit calculation
US$ 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
= – × =
The period demonstrates a significant shift in economic profit performance. Initially, the company experienced an economic loss, which transitioned to positive economic profit in subsequent years. This improvement correlates with changes in net operating profit after taxes, cost of capital, and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a substantial increase from 2020 to 2021, nearly doubling. Growth continued, albeit at a slower pace, through 2024. This consistent rise in NOPAT is a primary driver of the overall improvement in economic profit.
- Cost of Capital
- The cost of capital generally increased over the period, from 12.64% in 2020 to 13.95% in 2024. While increasing, the cost of capital increases did not outpace the growth in NOPAT, contributing to the positive trend in economic profit.
- Invested Capital
- Invested capital remained relatively stable between 2020 and 2022, with a slight decrease observed in 2022. It then increased in 2023 and 2024, reaching 57,519 US$ millions. The increase in invested capital in the later years, coupled with rising NOPAT, further supported the growth in economic profit.
- Economic Profit
- Economic profit was negative in 2020, at -3,458 US$ millions. A significant turnaround occurred in 2021, with economic profit reaching 65 US$ millions. This positive trend continued, with economic profit increasing to 2,283 US$ millions in 2023 and further to 2,431 US$ millions in 2024. The progression indicates increasing value creation for investors.
In summary, the company transitioned from destroying value to generating economic profit. This improvement is attributable to strong growth in NOPAT, managed increases in the cost of capital, and a moderate increase in invested capital. The trend suggests enhanced operational efficiency and effective capital allocation.
Net Operating Profit after Taxes (NOPAT)
Caterpillar 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 LIFO reserve. See details »
3 Addition of increase (decrease) in product warranty liability.
4 Addition of increase (decrease) in equity equivalents to profit attributable to common stockholders.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense excluding Financial Products = Adjusted interest expense excluding Financial Products × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to profit attributable to common stockholders.
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.
- Profit attributable to common stockholders
- The profit attributable to common stockholders shows a consistent upward trend over the five-year period. It increased from 2,998 million US dollars in 2020 to 6,489 million US dollars in 2021, almost doubling. This growth continued at a slower pace in 2022 to 6,705 million US dollars. In 2023, a significant rise is observed, reaching 10,335 million US dollars, followed by a marginal increase to 10,792 million US dollars in 2024. Overall, the data reflects steady profitability improvements with a notable surge in 2023.
- Net operating profit after taxes (NOPAT)
- The NOPAT figures mirror the upward trajectory seen in the profit attributable to common stockholders. Starting at 3,373 million US dollars in 2020, NOPAT increased markedly to 6,986 million US dollars in 2021 and continued to ascend moderately to 7,348 million US dollars in 2022. A pronounced jump occurred in 2023, rising to 10,002 million US dollars, and then a slight increase to 10,452 million US dollars in 2024. This progression suggests improved operational efficiency and profitability over the observed timeframe.
- Overall trends and insights
- Both profit attributable to common stockholders and NOPAT demonstrated strong growth across the five years, with substantial increases between 2020 and 2021, followed by steady growth and a significant jump in 2023. The similar patterns in both metrics indicate that the company’s profitability improvements are supported by enhanced operational performance and effective cost management. The slight moderation in growth from 2023 to 2024 may reflect market maturation or strategic investments. The data points to a company successfully expanding its profit base while maintaining operational efficiency.
Cash Operating Taxes
Caterpillar 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).
The financial data reveals significant trends in the tax-related expenses over the years examined. Both provision for income taxes and cash operating taxes have experienced substantial increases, indicating a rising tax burden or improved profitability subject to taxation.
- Provision for income taxes
- The provision for income taxes increased steadily from 1,006 million US dollars at the end of 2020 to a peak of 2,781 million US dollars in 2023. However, there was a slight decrease to 2,629 million US dollars in 2024. This upward trend over four years suggests either higher taxable income or changes in tax rates or regulations, with a minor reduction in the final year, which may indicate a decrease in taxable income or effective tax rate adjustments.
- Cash operating taxes
- Cash operating taxes show a similar upward pattern, rising from 1,167 million US dollars in 2020 to 3,380 million US dollars in 2023, followed by a modest decline to 3,260 million US dollars in 2024. The increases over the years are consistent with the provision for income taxes trend, reflecting increased cash outflows related to taxation. The slight drop in 2024 echoes the provision for income taxes decrease, possibly indicating improved tax planning or changes in operational results affecting taxable cash flows.
Overall, the data portrays a progressive rise in tax-related expenses, peaking in 2023, with a marginal reduction in 2024. This pattern might suggest the company's operational growth and profitability have increased during the period, leading to higher tax liabilities, and a recent moderation in tax expenses that might warrant further analysis to understand the underlying causes.
Invested Capital
Caterpillar 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 LIFO reserve. See details »
4 Addition of product warranty liability.
5 Addition of equity equivalents to equity attributable to common shareholders.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-process.
8 Subtraction of investments in debt and equity securities.
The financial data over the five-year period exhibits some notable trends in the company's capital structure and balance sheet composition.
- Total reported debt & leases
- The total reported debt and leases have remained relatively stable, fluctuating slightly but showing an overall modest increase from US$37,783 million in 2020 to US$39,011 million in 2024. This indicates a consistent approach to leverage with no significant spikes or reductions in borrowings.
- Equity attributable to common shareholders
- Equity attributable to common shareholders increased from US$15,331 million in 2020 to US$19,491 million in 2024, displaying steady growth with a notable jump between 2022 and 2023 from US$15,869 million to US$19,494 million. This rise suggests an improvement in shareholder value, possibly due to retained earnings or capital contributions.
- Invested capital
- Invested capital shows a consistent upward trend, moving from US$54,026 million in 2020 to US$57,519 million in 2024. Although there was a slight dip in 2022, overall invested capital increased steadily, reflecting ongoing capital investments or asset expansions aligned with the company’s growth or operational needs.
Overall, the data reflects a stable debt position combined with growing equity and invested capital. This pattern may indicate a balanced financial strategy, maintaining leverage while enhancing the equity base and investment in assets over time.
Cost of Capital
Caterpillar Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term 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 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term 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 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term 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 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term 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 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Caterpillar 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 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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.
The economic spread ratio exhibited significant fluctuations between 2020 and 2024. Initially negative, the ratio transitioned to positive territory before stabilizing in the latter years of the observed period. This movement correlates with changes in economic profit and invested capital.
- Economic Spread Ratio
- In 2020, the economic spread ratio was -6.40%, indicating that the company’s return on invested capital was less than its cost of capital. A substantial improvement was noted in 2021, with the ratio increasing to 0.12%, suggesting a near-equilibrium between returns and costs. However, the ratio decreased again in 2022 to -0.05%, representing a slight underperformance. A marked positive shift occurred in 2023 and 2024, with the ratio reaching 4.11% and 4.23% respectively. This indicates a consistent and increasing ability to generate returns exceeding the cost of capital during these years.
The economic spread ratio’s positive trend in 2023 and 2024 aligns with the positive economic profit reported for those years. The invested capital remained relatively stable, with a slight increase observed between 2023 and 2024. This suggests that the improved economic spread ratio is primarily driven by increased economic profit rather than significant changes in the capital employed.
- Relationship to Economic Profit
- The negative economic spread ratios in 2020 and 2022 directly correspond with the negative economic profit reported for those years. Conversely, the positive economic spread ratios in 2021, 2023, and 2024 align with the positive economic profit values. This strong correlation highlights the direct relationship between the company’s ability to generate economic profit and its economic spread.
Overall, the trend suggests a strengthening financial performance, with the company increasingly demonstrating its capacity to generate value for its investors as measured by the economic spread ratio.
Economic Profit Margin
Caterpillar 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 | ||||||
| Sales of Machinery, Energy & Transportation | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 ÷ Sales of Machinery, Energy & Transportation
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation between 2020 and 2024. Initially negative, the margin transitioned to positive territory before stabilizing in recent periods. A detailed examination of the trends reveals key insights into the company’s profitability from an economic value perspective.
- Economic Profit Margin Trend
- In 2020, the economic profit margin stood at -8.86%, indicating that the company’s economic profit was negative, meaning returns did not cover the cost of capital. A substantial improvement occurred in 2021, with the margin rising to 0.13%, signifying a near break-even point in economic profit. However, this positive momentum was short-lived, as the margin decreased to -0.04% in 2022, returning to a slight economic loss. The years 2023 and 2024 witnessed consistent growth, with the economic profit margin reaching 3.57% and 3.96% respectively. This demonstrates a strengthening ability to generate returns exceeding the cost of capital.
- Relationship to Sales
- Sales of Machinery, Energy & Transportation increased consistently from 2020 to 2023, growing from US$39,022 million to US$63,869 million. While sales experienced a slight decrease in 2024 to US$61,363 million, the economic profit margin continued to improve. This suggests that the improvement in economic profit margin in 2024 was driven by factors beyond sales volume, such as improved operational efficiency or cost management, rather than simply increased revenue.
The progression from negative to positive economic profit margins, coupled with the sustained improvement in recent years, suggests a positive trend in the company’s ability to create value for its investors. The decoupling of sales and margin improvement in the latest period warrants further investigation to understand the underlying drivers of profitability.