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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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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a consistent upward trend across the five-year period. Starting from $3,373 million in 2020, it more than doubled by 2021 to $6,986 million, then increased at a slower pace in 2022 to $7,348 million. Significant growth resumed in 2023, reaching $10,002 million, and continued to rise in 2024 to $10,452 million. This indicates a strong improvement in operational efficiency and profitability over the years.
- Cost of Capital
- The cost of capital fluctuated slightly but showed a general upward movement over the period. It started at 12.45% in 2020, dipped marginally to 12.26% in 2021, then increased to 13.24% in 2022. The upward trend continued in 2023 and 2024, peaking at 13.72%. The rising cost of capital might reflect increased market risk perceptions or changes in the company’s capital structure.
- Invested Capital
- Invested capital displayed relative stability with minor fluctuations. It increased from $54,026 million in 2020 to $55,552 million in 2021, then slightly decreased to $54,801 million in 2022. It rose again steadily to $55,518 million in 2023 and further to $57,519 million in 2024, signifying measured growth in the capital base supporting the company's operations.
- Economic Profit
- Economic profit exhibited significant improvement over the reviewed years. The company experienced a negative economic profit of -$3,351 million in 2020, which indicates that the net operating profit did not cover the cost of capital at that time. By 2021, the economic profit turned slightly positive to $175 million, then flattened in 2022 to $92 million. However, 2023 saw a robust increase to $2,406 million, with continued growth to $2,559 million in 2024. This sharp recovery suggests enhanced value creation and more profitable utilization of invested capital.
Net Operating Profit after Taxes (NOPAT)
Caterpillar Inc., NOPAT calculation
US$ 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.
- Economic Profit
- The economic profit demonstrated a significant turnaround over the observed periods. Initially, there was a substantial negative value of -3,351 million US dollars, indicating a considerable economic loss. However, this loss was turned into a modest positive economic profit by the end of 2021, reaching 175 million US dollars. Thereafter, despite a slight decline in 2022 to 92 million US dollars, the economic profit surged markedly in the subsequent years, reaching 2,406 million US dollars in 2023 and further increasing to 2,559 million US dollars in 2024. This trend reflects a strong improvement in the company’s ability to generate economic profit over time.
- Invested Capital
- Invested capital showed a relatively stable to modestly increasing trend throughout the five years. Starting at 54,026 million US dollars at the end of 2020, it experienced a slight rise to 55,552 million in 2021, followed by a marginal decrease to 54,801 million in 2022. From 2022 onwards, invested capital gradually increased, reaching 55,518 million in 2023 and 57,519 million in 2024. This pattern suggests a cautious approach to capital investment, with moderate increments aligning with the company’s operational needs.
- Economic Spread Ratio
- The economic spread ratio followed a pattern that mirrors the trend in economic profit. Initially, the ratio was negative at -6.2% in 2020, indicating that the returns generated were below the cost of capital. In 2021 and 2022, the ratio improved but remained low at 0.32% and 0.17%, respectively, suggesting minimal to no economic value creation during these years. A significant positive shift took place in 2023, with the ratio increasing sharply to 4.33%, and this positive momentum continued into 2024 with a slight increase to 4.45%. The improving spread ratio indicates enhanced profitability relative to capital costs.
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 financial data reveals distinct trends over the five-year period ending December 31, 2024. Analysis focuses primarily on economic profit, sales, and economic profit margin within the machinery, energy, and transportation segments.
- Economic Profit
- Economic profit demonstrates a significant recovery and growth trajectory. Initially, in 2020, there is a negative economic profit of -$3,351 million, indicating losses relative to the cost of capital. However, by 2021, the company turned profitable with a modest economic profit of $175 million. The following year, 2022, shows a slight decline to $92 million, suggesting a temporary setback or adjustment phase. Subsequently, a strong upward trend emerges, with economic profit increasing dramatically to $2,406 million in 2023 and further to $2,559 million in 2024. This pattern reflects improved operational efficiency, cost control, or profitable revenue growth in recent years.
- Sales of Machinery, Energy & Transportation
- Sales figures reveal a steady increase from $39,022 million in 2020 to a peak of $63,869 million in 2023, an overall growth of approximately 64%. This consistent rise indicates expanding market demand or successful sales efforts. However, a slight decline to $61,363 million is seen in 2024, which may suggest market saturation, increased competition, or other external factors affecting sales volume.
- Economic Profit Margin
- The economic profit margin follows a trend consistent with economic profit figures. Starting at a negative margin of -8.59% in 2020, the margin crosses into positive territory by 2021 at 0.36%, with a minor drop to 0.16% in 2022. Subsequent years experience a substantial increase to 3.77% in 2023 and 4.17% in 2024, reflecting enhanced profitability relative to sales revenue. This improvement suggests better cost management, higher operational leverage, or product mix optimization.
In summary, the data indicate a turnaround from economic losses to strong profitability, supported by expanding sales and improving profit margins. Despite a minor sales decline in the final year, the overall financial performance exhibits positive momentum with robust economic profit gains and enhanced value creation.