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:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Analysis of Revenues
- Analysis of Debt
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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 demonstrates a pronounced upward trend over the five-year period. Starting from $3,373 million in 2020, it more than doubled to $6,986 million in 2021, followed by moderate increases in 2022 and 2023, reaching $7,348 million and $10,002 million respectively. The figure continued to rise in 2024, albeit at a slower pace, achieving $10,452 million. This consistent growth indicates improving profitability and operational efficiency over time.
- Cost of Capital
- The cost of capital exhibited some fluctuations throughout the timeframe. Beginning at 12.44% in 2020, it slightly decreased to 12.26% in 2021. However, it saw an upward trend thereafter, increasing to 13.24% in 2022 and continuing to rise through 2023 and 2024, reaching 13.68% and 13.72%, respectively. The increasing cost of capital in recent years could suggest elevated risks or changing market conditions affecting funding costs.
- Invested Capital
- Invested capital remained relatively stable with minor fluctuations. It started at $54,026 million in 2020, increased slightly to $55,552 million in 2021, then dipped marginally to $54,801 million in 2022. The amount rose again modestly in 2023 to $55,518 million and continued its upward trajectory to $57,519 million in 2024. Overall, invested capital shows steady investment levels with slight incremental growth.
- Economic Profit
- The economic profit experienced a significant recovery and improvement over the period. It was deeply negative at -$3,349 million in 2020, reflecting that the company did not cover its cost of capital that year. In 2021, economic profit turned positive, albeit marginally, at $177 million, and slightly decreased to $94 million in 2022. A notable jump occurred in 2023, when economic profit surged to $2,408 million, followed by further growth to $2,561 million in 2024. This trend indicates that returns generated by the company increasingly surpassed its cost of capital, reflecting enhanced value creation.
Net Operating Profit after Taxes (NOPAT)
Caterpillar Inc., NOPAT calculation
US$ 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 shows a significant improvement over the examined period. Starting with a substantial loss of -$3,349 million in 2020, the company shifted to a positive economic profit of $177 million in 2021. This positive trend persisted, although with a slight dip to $94 million in 2022, then rising sharply to $2,408 million in 2023, and further increasing to $2,561 million in 2024. This indicates a strong recovery and enhancement in value generation over the five-year span.
- Invested Capital
- The invested capital remained relatively stable with a slight upward tendency. From $54,026 million in 2020, it increased moderately to $55,552 million in 2021, followed by a minor decline to $54,801 million in 2022. Subsequently, it rose again to $55,518 million in 2023 and further to $57,519 million in 2024. This steady capital base suggests consistent reinvestment with cautious expansion.
- Economic Spread Ratio
- The economic spread ratio demonstrated a pronounced turnaround from negative to positive territory. In 2020, the ratio was significantly negative at -6.2%, reflecting poor returns relative to invested capital. It improved to a marginal positive 0.32% in 2021 but decreased slightly to 0.17% in 2022. From 2023 onwards, it increased markedly to 4.34% and 4.45% in 2024, indicating improved efficiency in generating returns above the cost of capital.
Economic Profit Margin
Caterpillar Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 demonstrates a significant improvement over the observed periods. Initially, in 2020, the company experienced a substantial economic loss of -3349 million US dollars. However, from 2021 onwards, the company managed to achieve positive economic profit values, starting modestly with 177 million US dollars in 2021 and 94 million in 2022, indicating some volatility. A notable surge occurred in 2023, with economic profit rising sharply to 2408 million US dollars, followed by a further increase to 2561 million in 2024. This trend suggests a substantial enhancement in value creation and operational performance over the five-year period.
- Sales of Machinery, Energy & Transportation
- Sales in this segment showed consistent growth from 2020 through 2023, starting at 39,022 million US dollars in 2020 and increasing each year to reach 63,869 million US dollars in 2023. However, in 2024, there was a slight decline to 61,363 million US dollars. Despite the small drop in the final year, the overall trend across the five-year span indicates robust expansion in sales volume, highlighting strong demand or enhanced market penetration within this sector.
- Economic Profit Margin
- The economic profit margin reflects the company's transition from negative to positive profitability. In 2020, the margin was significantly negative at -8.58%, aligning with the negative economic profit. By 2021 and 2022, the margin improved to marginally positive figures of 0.37% and 0.17%, respectively, suggesting initial stages of profitability. The years 2023 and 2024 show a more pronounced increase, reaching 3.77% and 4.17%, respectively, indicating improved efficiency and profitability relative to sales. This upward trend in margin corroborates the positive trajectory observed in economic profit.