Economic Value Added (EVA)
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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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Chevron Corp. pages available for free this week:
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Aggregate Accruals
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Economic Profit
Chevron Corp., 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 analysis of economic profit reveals a period of significant volatility and a general trend of economic value destruction, with a singular exception in 2022. The results indicate a failure to consistently generate returns above the cost of capital, culminating in a substantial deficit by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- A sharp peak is observed in 2022, where NOPAT reached 41,794 million US$, more than doubling the 2021 figure. Following this surge, profits returned to a baseline of approximately 19,000 to 20,000 million US$ during 2023 and 2024, before experiencing a significant decline to 13,042 million US$ in 2025.
- Cost and Scale of Invested Capital
- The cost of capital remained relatively stable throughout the five-year period, fluctuating within a narrow range between 12.37% and 12.89%. Invested capital exhibited steady growth from 193,606 million US$ in 2021 to a plateau of approximately 212,000 million US$ between 2022 and 2023. A substantial expansion in the capital base occurred in 2025, with invested capital rising sharply to 274,202 million US$.
- Economic Profit Trends
- Positive economic profit was recorded only in 2022, totaling 14,428 million US$, driven by the exceptional increase in NOPAT. In all other years, economic profit remained negative. The deficit widened severely in 2025, reaching -21,610 million US$. This decline is attributed to the simultaneous occurrence of the lowest NOPAT in the period and the highest level of invested capital, which intensified the gap between operating returns and the required cost of capital.
Net Operating Profit after Taxes (NOPAT)
Chevron Corp., NOPAT calculation
US$ 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.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in accrued severance liability.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Chevron Corporation.
6 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2025 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to Chevron Corporation.
Net income attributable to Chevron Corporation and Net Operating Profit After Taxes (NOPAT) exhibited significant fluctuations between 2021 and 2025. NOPAT demonstrated a substantial increase in 2022, followed by a decline in subsequent years, while net income mirrored this pattern, albeit with differing magnitudes.
- NOPAT Trend
- NOPAT increased markedly from US$19,443 million in 2021 to US$41,794 million in 2022, representing a growth of over 115%. This was followed by a decrease to US$19,473 million in 2023, nearly returning to the 2021 level. A slight increase to US$20,090 million occurred in 2024, but NOPAT then decreased again in 2025, reaching US$13,042 million. This final value represents a substantial decline from the 2022 peak and is the lowest value observed within the analyzed period.
- Net Income Trend
- Net income attributable to Chevron Corporation showed a similar pattern of volatility. It rose significantly from US$15,625 million in 2021 to US$35,465 million in 2022, a more than doubling of the prior year’s result. A substantial decrease was then observed in 2023, with net income falling to US$21,369 million. Further declines occurred in 2024 (US$17,661 million) and 2025 (US$12,299 million), resulting in a final value that is lower than the 2021 level.
- Relationship between NOPAT and Net Income
- While both metrics moved in the same direction over the period, the magnitude of change differed. The increase from 2021 to 2022 was more pronounced for NOPAT than for net income. Conversely, the declines from 2022 to 2025 were relatively more significant for net income. This suggests that factors impacting net income beyond core operating profitability, such as non-operating items or tax provisions, may have played a more substantial role in the latter part of the period.
The observed trends indicate a period of high profitability in 2022, followed by a consistent decline in both NOPAT and net income. The decrease in NOPAT from 2022 to 2025 warrants further investigation to determine the underlying drivers, such as changes in revenue, operating costs, or tax rates.
Cash Operating Taxes
Chevron Corp., cash operating taxes calculation
US$ 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 income tax expense and cash operating taxes exhibit significant fluctuations over the five-year period. A substantial increase in both metrics is observed between 2021 and 2022, followed by a decrease in 2023, and a moderate increase in 2024 before declining again in 2025.
- Income Tax Expense
- Income tax expense increased markedly from US$5,950 million in 2021 to US$14,066 million in 2022. This represents a more than 136% increase. A subsequent decrease to US$8,173 million occurred in 2023, followed by a rise to US$9,757 million in 2024. The final year, 2025, saw a further reduction to US$7,258 million. The volatility suggests a strong correlation with underlying profitability and potentially changes in applicable tax rates or tax planning strategies.
- Cash Operating Taxes
- Cash operating taxes mirrored the trend of income tax expense. An increase from US$5,416 million in 2021 to US$12,067 million in 2022 was observed, representing a 123% increase. A decrease to US$7,986 million followed in 2023, with a subsequent increase to US$8,681 million in 2024. Finally, cash operating taxes decreased to US$6,579 million in 2025. The close alignment between cash operating taxes and income tax expense indicates that the company’s actual cash outflows for taxes are closely tied to its reported taxable income.
The difference between income tax expense and cash operating taxes, while generally small, suggests the presence of deferred tax items or other non-cash tax effects. The consistency of this difference across the period indicates a stable approach to tax accounting. The fluctuations in both measures highlight the sensitivity of the company’s tax burden to changes in earnings and external tax factors.
Invested Capital
Chevron Corp., invested capital calculation (financing approach)
US$ 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 LIFO reserve. See details »
5 Addition of accrued severance liability.
6 Addition of equity equivalents to total Chevron Corporation stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
The invested capital of the corporation exhibited an overall increasing trend between 2021 and 2025, though with some fluctuation. Total reported debt & leases and total stockholders’ equity both contribute to the calculation of invested capital, and their individual movements influence the overall trend.
- Invested Capital Trend
- Invested capital began at US$193,606 million in 2021, increasing to US$212,342 million in 2022. It remained relatively stable in 2023 at US$212,337 million before decreasing slightly to US$208,395 million in 2024. A significant increase was then observed in 2025, reaching US$274,202 million.
- Debt & Leases
- Total reported debt & leases decreased from US$34,872 million in 2021 to US$27,370 million in 2022, continuing to US$26,070 million in 2023. An increase was noted in 2024, rising to US$29,611 million, followed by a substantial increase to US$46,743 million in 2025. This represents the largest single-year increase in this metric over the observed period.
- Stockholders’ Equity
- Total stockholders’ equity increased from US$139,067 million in 2021 to US$159,282 million in 2022, and further to US$160,957 million in 2023. A decrease was observed in 2024, falling to US$152,318 million, before rising significantly to US$186,450 million in 2025.
The substantial increase in invested capital in 2025 appears to be driven by concurrent increases in both debt & leases and stockholders’ equity. The decrease in invested capital from 2023 to 2024 is attributable to a decrease in stockholders’ equity, partially offset by a slight increase in debt & leases. The earlier increases in invested capital from 2021 to 2023 were supported by increases in both components, though stockholders’ equity contributed more significantly to the growth.
Cost of Capital
Chevron Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Chevron Corp., 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 | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 analysis of economic value generation reveals a period of significant volatility, characterized by a general inability to consistently exceed the cost of capital. While a notable peak in value creation occurred in 2022, the subsequent years show a return to negative economic profit, culminating in a substantial decline by the end of 2025.
- Economic Profit Trends
- Economic profit exhibited sharp fluctuations, moving from a deficit of US$ 4,502 million in 2021 to a surplus of US$ 14,428 million in 2022. However, this gain was not sustained, as losses returned in 2023 and 2024. A severe deterioration is observed in 2025, where economic profit fell to its lowest point in the analyzed period, reaching negative US$ 21,610 million.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2021 and 2024, fluctuating between US$ 193,606 million and US$ 212,342 million. A significant expansion occurred in 2025, with invested capital rising sharply to US$ 274,202 million. This increase in the capital base coincided with the most substantial decline in economic profit, suggesting that the additional capital deployed did not yield immediate returns exceeding the cost of capital.
- Economic Spread Ratio Performance
- The economic spread ratio mirrors the volatility of economic profit, remaining negative for four of the five years analyzed. The ratio peaked at 6.79% in 2022, indicating a period of efficient value creation. This was followed by negative spreads of -3.71% in 2023 and -3.09% in 2024. The ratio reached a critical low of -7.88% in 2025, reflecting a widening gap between the return on invested capital and the company's cost of capital.
Economic Profit Margin
Chevron Corp., 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 | ||||||
| Sales and other operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
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 ÷ Sales and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility, characterized by a singular instance of value generation followed by a progressive trend toward value destruction. The correlation between operating revenues and economic profit indicates that the ability to exceed the cost of capital is heavily dependent on high-revenue cycles.
- Revenue Performance
- Operating revenues experienced a sharp increase from 155,606 million USD in 2021 to a peak of 235,717 million USD in 2022. However, a consistent downward trajectory followed, with revenues declining to 196,913 million USD in 2023, 193,414 million USD in 2024, and reaching a five-year low of 184,432 million USD by the end of 2025.
- Economic Profit Trends
- Economic profit shifted from a negative position of 4,502 million USD in 2021 to a positive peak of 14,428 million USD in 2022, marking the only period in the analyzed timeframe where the company generated returns above its cost of capital. This trend reversed sharply in 2023, returning to a deficit of 7,868 million USD. While there was a slight improvement in 2024 to a deficit of 6,434 million USD, the 2025 period showed a severe decline, with economic profit falling to negative 21,610 million USD.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit. The margin rose from -2.89% in 2021 to 6.12% in 2022, confirming the temporary achievement of economic value added. Subsequent years show a return to negative margins, with a marginal recovery from -4.00% in 2023 to -3.33% in 2024. The period ending December 31, 2025, shows a substantial deterioration in efficiency, with the margin dropping to -11.72%, suggesting that the gap between operating returns and the cost of capital widened significantly.