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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Caterpillar Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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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 demonstrated a significant upward trend over the examined period. Starting at 3,373 million USD, it more than doubled by the end of 2021, reaching 6,986 million USD. In the following years, there was steady growth, with NOPAT achieving 10,452 million USD by the end of 2024, indicating strong operational efficiency and profitability improvements.
- Cost of Capital
- The cost of capital showed a gradual increase over the same period. Beginning at 12.45% in 2020, it slightly decreased in 2021 to 12.27% but then climbed steadily to reach 13.73% by 2024. This trend suggests a rising expense of funding or increased perceived risk over time, which could impact investment and financing decisions.
- Invested Capital
- Invested capital remained relatively stable with minor fluctuations. It started at 54,026 million USD in 2020, experienced a slight increase and decrease in subsequent years, and eventually rose to 57,519 million USD by the end of 2024. This marginal growth points to measured investment in capital assets or operations without aggressive expansion.
- Economic Profit
- The economic profit experienced a notable recovery and growth trend. Initially, it was negative at -3,354 million USD in 2020, reflecting value destruction or insufficient returns relative to the cost of capital. By 2021, it turned positive at 172 million USD, showing early signs of value creation. Despite a slight decrease in 2022, economic profit surged substantially in 2023 and 2024 to 2,402 million USD and 2,555 million USD respectively, emphasizing enhanced value generation over and above the invested capital cost.
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 showed a significant improvement over the five-year period. Starting with a substantial negative value in 2020, it moved into positive territory in 2021 and experienced a steady increase thereafter. Notably, there was a sharp rise in 2023, with the figure more than tenfold higher than the 2022 value, and a further moderate increase in 2024. This trend suggests enhanced profitability and value creation in recent years.
- Invested Capital
- The invested capital remained relatively stable throughout the period, fluctuating slightly but showing a general trend of gradual increase. The values hovered just above 54 billion dollars in the earlier years and rose incrementally to approximately 57.5 billion dollars by the end of 2024. This indicates steady capital investment underpinning company operations without significant volatility.
- Economic Spread Ratio
- The economic spread ratio mirrored the trends in economic profit. Starting at a negative level in 2020, indicating unfavorable returns relative to the cost of capital, it turned positive in 2021 albeit marginally. From 2022 onwards, the ratio steadily increased, reflecting improved efficiency in generating returns above capital costs. The marked increase in 2023 and slight further growth in 2024 highlight a strengthening financial position and operational effectiveness.
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.
- Economic Profit
- The economic profit displays a significant improvement over the time period analyzed. In 2020, the company recorded a substantial loss of 3,354 million US dollars. This turned positive in 2021 with a modest profit of 172 million US dollars, followed by a slight decrease to 89 million in 2022. A strong upward trend is evident from 2023 onwards, with the economic profit rising sharply to 2,402 million and further increasing to 2,555 million US dollars in 2024. This indicates a marked enhancement in overall profitability and value creation.
- Sales of Machinery, Energy & Transportation
- There was consistent growth in sales from 2020 through 2023, starting at 39,022 million US dollars and increasing each year to reach a peak of 63,869 million in 2023. However, in 2024, sales declined slightly to 61,363 million US dollars. Despite this one-year decrease, the general trajectory over the period is upward, reflecting expansion in sales activities within these segments.
- Economic Profit Margin
- The economic profit margin moved from a negative margin of -8.59% in 2020 to positive territory in 2021 at 0.36%. It remained modestly positive but low at 0.16% in 2022 before showing significant improvement to 3.76% in 2023 and further increasing to 4.16% in 2024. This pattern suggests enhanced operational efficiency or pricing power, leading to higher returns relative to sales.
- Overall Analysis
- The data reflects a turnaround from a loss-making position in 2020 to sustained profitability by 2021, with rapid growth in economic profit and profit margins thereafter. Sales growth has been robust though experienced a slight decline in the most recent year analyzed. The improvements in economic profit margin suggest that profit gains are not solely due to increased sales volume but also to improved cost management or product mix. These trends collectively indicate strengthening financial performance and improved value creation over the five-year period.