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
Danaher 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 period under review demonstrates a consistent pattern of negative economic profit. Net operating profit after taxes (NOPAT) exhibited an initial increase from 2021 to 2022, followed by a substantial decline in 2023, with modest recovery in subsequent years. Simultaneously, the cost of capital remained relatively stable, fluctuating within a narrow range. Invested capital showed an increase through 2023, then decreased in 2024 before a slight increase in 2025. These factors combined to produce consistently negative economic profit values throughout the analyzed timeframe.
- NOPAT Trend
- NOPAT increased from US$6,722 million in 2021 to US$6,866 million in 2022, representing a modest growth. However, a significant decrease was observed in 2023, with NOPAT falling to US$3,099 million. A slight recovery occurred in 2024 and 2025, reaching US$3,391 million and US$3,442 million respectively, but remained substantially below the 2021 and 2022 levels.
- Cost of Capital
- The cost of capital experienced a gradual increase from 14.72% in 2021 to 15.49% in 2023. It then decreased slightly to 15.42% in 2024 and further to 15.18% in 2025. The fluctuations were relatively small, suggesting a stable capital market environment during the period.
- Invested Capital
- Invested capital increased from US$74,633 million in 2021 to US$78,342 million in 2022 and continued to rise to US$78,561 million in 2023. A notable decrease was observed in 2024, falling to US$73,131 million, followed by a modest increase to US$75,443 million in 2025. This suggests potential capital reallocation or divestitures in 2024.
- Economic Profit
- Economic profit was negative throughout the entire period. The negative economic profit widened from US$-4,263 million in 2021 to US$-5,122 million in 2022. The largest negative value was recorded in 2023 at US$-9,072 million, coinciding with the lowest NOPAT and highest invested capital. While the negative economic profit lessened slightly in 2024 (US$-7,882 million) and 2025 (US$-8,009 million), it remained substantial, indicating that the company’s returns are not covering its cost of capital.
The consistent negative economic profit suggests that the company is not generating sufficient returns on its invested capital to cover its cost of capital. The decline in NOPAT in 2023 significantly exacerbated this issue, despite a subsequent partial recovery. The fluctuations in invested capital may be a contributing factor, but the primary driver appears to be the relatively stable cost of capital combined with the lower NOPAT figures.
Net Operating Profit after Taxes (NOPAT)
Danaher 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 for doubtful accounts.
3 Addition of increase (decrease) in contract liabilities.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net earnings.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
Net operating profit after taxes (NOPAT) exhibited a fluctuating pattern over the five-year period. While initially stable, NOPAT experienced a significant decline in later years. A comparison with net earnings reveals some divergence in performance.
- NOPAT Trend
- In 2021, NOPAT stood at US$6,722 million. It increased modestly to US$6,866 million in 2022, representing a growth of approximately 2.1%. However, 2023 witnessed a substantial decrease, with NOPAT falling to US$3,099 million. This represents a decline of roughly 55.3% from the prior year. A partial recovery was observed in 2024, with NOPAT reaching US$3,391 million, and continued modestly into 2025 at US$3,442 million. The 2024 and 2025 figures, while improved from 2023, remain considerably below the levels recorded in 2021 and 2022.
- Relationship to Net Earnings
- Net earnings followed a different trajectory. While NOPAT peaked in 2022, net earnings peaked earlier in 2021. Net earnings decreased more consistently than NOPAT, falling from US$6,433 million in 2021 to US$3,614 million in 2025. In 2021, NOPAT exceeded net earnings by US$289 million. By 2023, net earnings surpassed NOPAT by US$1,665 million, and this difference persisted in 2024 and 2025. This suggests a growing divergence between operational profitability and overall reported earnings.
The substantial decline in NOPAT in 2023 warrants further investigation to determine the underlying causes. Potential factors could include increased operating expenses, changes in tax rates, or shifts in the company’s operational strategy. The subsequent stabilization of NOPAT in 2024 and 2025, while positive, does not fully restore it to previous levels, indicating ongoing challenges or adjustments within the business.
Cash Operating Taxes
Danaher Corp., cash operating taxes calculation
US$ 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 income tax provision and cash operating taxes exhibited distinct trends between 2021 and 2025. The income tax provision consistently decreased over the five-year period, while cash operating taxes demonstrated a more volatile pattern.
- Income Tax Provision
- The income tax provision decreased from US$1,251 million in 2021 to US$633 million in 2025. This represents a cumulative decline of approximately 49.4%. The decrease was relatively steady year-over-year, suggesting a consistent reduction in reported tax liabilities.
- Cash Operating Taxes
- Cash operating taxes increased from US$1,534 million in 2021 to US$2,032 million in 2023, representing a growth of approximately 32.5%. However, a significant decrease was observed in 2024, falling to US$1,274 million, followed by a further reduction to US$1,134 million in 2025. This indicates a substantial fluctuation in actual cash outflows for taxes, diverging from the trend in the income tax provision.
The divergence between the income tax provision and cash operating taxes suggests potential timing differences related to deferred tax assets or liabilities, tax credits utilized, or changes in tax laws impacting cash payments. The increase in cash operating taxes through 2023, followed by a sharp decline, warrants further investigation to understand the underlying drivers. The decreasing income tax provision may reflect changes in profitability, tax planning strategies, or adjustments to tax rates.
- Relationship between Items
- In 2021, cash operating taxes exceeded the income tax provision by US$283 million. This difference widened in 2022 to US$601 million and further increased to US$1,209 million in 2023. However, the gap narrowed considerably in 2024 to US$527 million and continued to decrease to US$501 million in 2025. This evolving difference highlights the increasing, then decreasing, impact of non-cash tax items on the overall tax expense.
Continued monitoring of both the income tax provision and cash operating taxes is recommended to assess the sustainability of these trends and their implications for future cash flows and economic value added calculations.
Invested Capital
Danaher Corp., invested capital calculation (financing approach)
US$ 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 contract liabilities.
5 Addition of equity equivalents to total Danaher stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of investments.
The invested capital of the company exhibited an initial increase followed by a subsequent decline and stabilization over the five-year period. Total reported debt & leases and total stockholders’ equity both contribute to the overall invested capital figure, though their individual trends differ.
- Invested Capital Trend
- Invested capital increased from US$74,633 million in 2021 to US$78,342 million in 2022, representing a growth of approximately 4.9%. A further, albeit marginal, increase was observed in 2023, reaching US$78,561 million. However, 2024 saw a decrease to US$73,131 million, a decline of roughly 7.1%. Invested capital then showed a modest recovery in 2025, rising to US$75,443 million.
- Debt & Leases
- Total reported debt & leases demonstrated a consistent downward trend from 2021 to 2024. Beginning at US$23,272 million, it decreased to US$17,146 million by the end of 2024. An increase was noted in 2025, with debt & leases reaching US$19,696 million, potentially indicating renewed borrowing or a change in financing strategy.
- Stockholders’ Equity
- Total Danaher stockholders’ equity generally increased throughout the period. From US$45,167 million in 2021, it rose to US$53,486 million in 2023. A decrease was observed in 2024, falling to US$49,543 million, before recovering somewhat to US$52,534 million in 2025. This suggests fluctuations in retained earnings and/or share issuance/repurchase activity.
The decrease in invested capital in 2024 appears to be driven primarily by the reduction in total reported debt & leases, partially offset by the decrease in stockholders’ equity. The 2025 figures suggest a partial reversal of this trend, with both debt & leases and stockholders’ equity contributing to a slight increase in invested capital.
- Relationship between Components and Invested Capital
- The fluctuations in invested capital closely mirror the combined movements of debt & leases and stockholders’ equity. While stockholders’ equity generally trended upward, the more significant declines in debt & leases in 2024 had a pronounced effect on the overall invested capital figure. The 2025 increase in both components suggests a stabilization of the capital structure.
Cost of Capital
Danaher Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable 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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable 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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable 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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable 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 Notes payable and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Danaher 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
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 economic spread ratio demonstrates a consistently negative trend over the five-year period. Economic profit consistently registers as negative, indicating the company’s returns are less than its cost of capital. Invested capital fluctuates, but remains substantial throughout the period.
- Economic Spread Ratio
- The economic spread ratio declined from -5.71% in 2021 to -11.55% in 2023, representing a significant deterioration in the difference between return on invested capital and the cost of capital. A slight improvement is observed in 2024 and 2025, with the ratio moving to -10.78% and -10.62% respectively, but it remains considerably lower than the 2021 level. This suggests a sustained period of value destruction, with a modest stabilization in the most recent two years.
- Economic Profit
- Economic profit exhibits a negative trajectory, increasing in absolute value from a loss of US$4,263 million in 2021 to a loss of US$9,072 million in 2023. While the loss decreased to US$7,882 million in 2024 and US$8,009 million in 2025, it remains substantial and confirms the underperformance relative to capital costs. The increasing magnitude of the negative economic profit directly contributes to the declining economic spread ratio.
- Invested Capital
- Invested capital increased from US$74,633 million in 2021 to US$78,342 million in 2022, and then to US$78,561 million in 2023. A decrease is then noted in 2024, falling to US$73,131 million, before a slight recovery to US$75,443 million in 2025. The fluctuations in invested capital, while present, do not appear to fully explain the worsening economic spread ratio, as the ratio declines even during periods of increasing invested capital.
Overall, the analysis indicates a consistent pattern of generating returns below the cost of capital. While the rate of decline in the economic spread ratio appears to have slowed in the latest two years, the company continues to experience negative economic profit and a negative economic spread.
Economic Profit Margin
Danaher Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales | ||||||
| Add: Increase (decrease) in contract liabilities | ||||||
| Adjusted sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
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 ÷ Adjusted sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin demonstrates a consistently negative trend over the five-year period. Economic profit itself is negative throughout the observed timeframe, indicating the company’s returns are insufficient to cover its cost of capital. The magnitude of the negative economic profit increases significantly between 2021 and 2023, before showing a slight moderation in the subsequent two years.
- Economic Profit Margin Trend
- The economic profit margin declined from -14.28% in 2021 to -16.25% in 2022, representing a worsening of profitability relative to sales. A substantial decrease is then observed in 2023, with the margin reaching -37.91%. While the margin improved slightly in 2024 to -33.27% and further to -32.53% in 2025, it remains significantly lower than the 2021 level.
Adjusted sales exhibit fluctuations during the period. Sales increased from 2021 to 2022, but then decreased considerably in 2023. Sales remained relatively stable between 2023 and 2024, with a modest increase observed in 2025. Despite the sales fluctuations, the consistently negative economic profit margin suggests that sales growth alone has not been sufficient to generate positive economic returns.
- Relationship between Sales and Economic Profit Margin
- The decline in adjusted sales in 2023 coincided with the largest drop in the economic profit margin, suggesting a strong correlation between revenue and the ability to generate economic profit. However, the stabilization of sales in 2024 and a slight increase in 2025 did not translate into a substantial improvement in the economic profit margin, indicating that factors beyond revenue, such as cost of capital or operational efficiency, are significantly impacting economic profitability.
The persistent negative economic profit margin across all observed years warrants further investigation into the underlying drivers of this performance. A detailed analysis of the cost of capital, operational expenses, and asset utilization would be necessary to identify areas for improvement and strategies to enhance economic profitability.