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.
Economic Profit
Danaher Corp., economic profit 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 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
= 3,442 – 15.32% × 75,443 = -8,118
The financial performance from 2021 to 2025 is characterized by a persistent inability to generate returns exceeding the cost of capital, resulting in negative economic profit throughout the entire period. A significant deterioration in value creation occurred in 2023, driven by a substantial contraction in operating profitability.
- Net Operating Profit After Taxes (NOPAT)
- A sharp decline in NOPAT is observed between 2022 and 2023, with values dropping from 6,866 million to 3,099 million. Although a gradual upward trend followed in 2024 and 2025, reaching 3,442 million, the operating profit remained approximately 50% lower than the levels recorded in the 2021-2022 period.
- Invested Capital and Cost of Capital
- Invested capital showed a growth trend through 2023, peaking at 78,561 million, followed by a notable reduction to 73,131 million in 2024 and a slight recovery to 75,443 million in 2025. Simultaneously, the cost of capital remained relatively stable, fluctuating narrowly between 14.86% and 15.64%, with the highest rate occurring in 2023.
- Economic Profit Trends
- Economic profit remained negative across all five years, indicating consistent shareholder value destruction. The deficit widened from -4,367 million in 2021 to a peak loss of -9,187 million in 2023, coinciding with the simultaneous drop in NOPAT and the peak in the cost of capital. While there was a marginal improvement in 2024, the economic profit ended the period at -8,118 million in 2025, reflecting a sustained gap between the earned operating profit and the required return on invested capital.
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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
= 1,278 × 4.20% = 54
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 319 × 21.00% = 67
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
= 30 × 21.00% = 6
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$1,665 million, and this difference persisted in 2024 and 2025. This suggests a growing divergence between operational profitability and overall reported earnings.
The substantial decline in NOPAT in 2023 warrants further investigation to determine the underlying causes. Potential factors could include increased operating expenses, changes in tax rates, or shifts in the company’s operational strategy. The subsequent stabilization of NOPAT in 2024 and 2025, while positive, does not fully restore it to previous levels, indicating ongoing challenges or adjustments within the business.
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Cash Operating Taxes
Danaher Corp., cash operating taxes calculation
US$ 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$501 million in 2025. This evolving difference highlights the increasing, then decreasing, impact of non-cash tax items on the overall tax expense.
Continued monitoring of both the income tax provision and cash operating taxes is recommended to assess the sustainability of these trends and their implications for future cash flows and economic value added calculations.
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Invested Capital
Danaher Corp., invested capital calculation (financing approach)
US$ 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$52,534 million in 2025. This suggests fluctuations in retained earnings and/or share issuance/repurchase activity.
The decrease in invested capital in 2024 appears to be driven primarily by the reduction in total reported debt & leases, partially offset by the decrease in stockholders’ equity. The 2025 figures suggest a partial reversal of this trend, with both debt & leases and stockholders’ equity contributing to a slight increase in invested capital.
- Relationship between Components and Invested Capital
- The fluctuations in invested capital closely mirror the combined movements of debt & leases and stockholders’ equity. While stockholders’ equity generally trended upward, the more significant declines in debt & leases in 2024 had a pronounced effect on the overall invested capital figure. The 2025 increase in both components suggests a stabilization of the capital structure.
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Cost of Capital
Danaher Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 147,926) | 147,926) | ÷ | 165,248) | = | 0.90 | 0.90 | × | 16.94% | = | 15.17% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | —) | —) | ÷ | 165,248) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 165,248) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Notes payable and long-term debt3 | 16,044) | 16,044) | ÷ | 165,248) | = | 0.10 | 0.10 | × | 1.71% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 1,278) | 1,278) | ÷ | 165,248) | = | 0.01 | 0.01 | × | 4.20% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 165,248) | 1.00 | 15.32% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 148,624) | 148,624) | ÷ | 163,376) | = | 0.91 | 0.91 | × | 16.94% | = | 15.41% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | —) | —) | ÷ | 163,376) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 163,376) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Notes payable and long-term debt3 | 13,611) | 13,611) | ÷ | 163,376) | = | 0.08 | 0.08 | × | 1.92% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 1,141) | 1,141) | ÷ | 163,376) | = | 0.01 | 0.01 | × | 4.20% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 163,376) | 1.00 | 15.56% | ||||||||||
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 | 185,406) | 185,406) | ÷ | 202,627) | = | 0.92 | 0.92 | × | 16.94% | = | 15.50% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | —) | —) | ÷ | 202,627) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 202,627) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Notes payable and long-term debt3 | 16,087) | 16,087) | ÷ | 202,627) | = | 0.08 | 0.08 | × | 1.95% × (1 – 21.00%) | = | 0.12% | ||
| Operating lease liability4 | 1,134) | 1,134) | ÷ | 202,627) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 202,627) | 1.00 | 15.64% | ||||||||||
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 | 182,224) | 182,224) | ÷ | 202,282) | = | 0.90 | 0.90 | × | 16.94% | = | 15.26% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | —) | —) | ÷ | 202,282) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | 2,333) | 2,333) | ÷ | 202,282) | = | 0.01 | 0.01 | × | 5.00% | = | 0.06% | ||
| Notes payable and long-term debt3 | 16,663) | 16,663) | ÷ | 202,282) | = | 0.08 | 0.08 | × | 1.79% × (1 – 21.00%) | = | 0.12% | ||
| Operating lease liability4 | 1,062) | 1,062) | ÷ | 202,282) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 202,282) | 1.00 | 15.45% | ||||||||||
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 | 187,701) | 187,701) | ÷ | 218,211) | = | 0.86 | 0.86 | × | 16.94% | = | 14.57% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | 3,620) | 3,620) | ÷ | 218,211) | = | 0.02 | 0.02 | × | 4.75% | = | 0.08% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | 2,990) | 2,990) | ÷ | 218,211) | = | 0.01 | 0.01 | × | 5.00% | = | 0.07% | ||
| Notes payable and long-term debt3 | 22,804) | 22,804) | ÷ | 218,211) | = | 0.10 | 0.10 | × | 1.53% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 1,096) | 1,096) | ÷ | 218,211) | = | 0.01 | 0.01 | × | 2.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 218,211) | 1.00 | 14.86% | ||||||||||
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 | (8,118) | (7,989) | (9,187) | (5,235) | (4,367) | |
| Invested capital2 | 75,443) | 73,131) | 78,561) | 78,342) | 74,633) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.76% | -10.92% | -11.69% | -6.68% | -5.85% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.73% | -2.21% | -3.92% | 5.50% | 4.88% | |
| Amgen Inc. | 6.24% | -0.54% | 2.28% | 6.80% | 6.80% | |
| Bristol-Myers Squibb Co. | 5.68% | -22.00% | 1.56% | -1.19% | 1.10% | |
| Eli Lilly & Co. | 30.15% | 14.50% | 1.43% | 8.53% | 10.20% | |
| Gilead Sciences Inc. | 12.62% | -10.46% | 2.86% | -0.26% | 6.76% | |
| Johnson & Johnson | 11.56% | 1.89% | 0.04% | 5.30% | 10.36% | |
| Merck & Co. Inc. | 10.51% | 13.38% | -8.92% | 11.26% | 11.43% | |
| Pfizer Inc. | -3.69% | -3.37% | -9.48% | 17.97% | 11.14% | |
| Regeneron Pharmaceuticals Inc. | 13.82% | 16.64% | 13.44% | 18.81% | 62.56% | |
| Thermo Fisher Scientific Inc. | -7.50% | -8.30% | -8.77% | -7.02% | -5.00% | |
| Vertex Pharmaceuticals Inc. | 20.81% | -22.84% | 11.11% | 13.86% | 15.07% | |
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 × -8,118 ÷ 75,443 = -10.76%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 indicates a sustained period of negative economic value creation. A consistent failure to generate returns above the cost of capital is evident, as reflected in the persistent negative values for both economic profit and the economic spread ratio throughout the observed period.
- Economic Profit Trends
- Economic profit demonstrated a downward trajectory, intensifying from negative 4,367 million USD in 2021 to a peak deficit of 9,187 million USD in 2023. Although a moderate correction occurred in 2024, the figure remained deeply negative, ending 2025 at 8,118 million USD. This trend suggests a widening gap between actual earnings and the required return on capital.
- Invested Capital Dynamics
- Invested capital remained relatively stable, fluctuating within a range of 73,131 million USD to 78,561 million USD. The capital base peaked in 2023, coinciding with the lowest point of economic profit, before experiencing a slight contraction in 2024 and a minor recovery in 2025. The stability of the invested capital suggests that the deterioration in economic profit is not a result of aggressive capital expansion, but rather a decline in the efficiency of those assets.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects a significant erosion of value, moving from negative 5.85% in 2021 to a trough of negative 11.69% in 2023. While the ratio improved slightly to negative 10.92% in 2024 and negative 10.76% in 2025, it remains substantially negative. This indicates that the return on invested capital is consistently and significantly lower than the weighted average cost of capital, resulting in a continuous destruction of shareholder value over the five-year horizon.
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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 | (8,118) | (7,989) | (9,187) | (5,235) | (4,367) | |
| Sales | 24,568) | 23,875) | 23,890) | 31,471) | 29,453) | |
| Add: Increase (decrease) in contract liabilities | 53) | (183) | 37) | 57) | 409) | |
| Adjusted sales | 24,621) | 23,692) | 23,927) | 31,528) | 29,862) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -32.97% | -33.72% | -38.40% | -16.61% | -14.62% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.73% | -2.72% | -4.93% | 7.78% | 8.32% | |
| Amgen Inc. | 10.41% | -1.07% | 5.92% | 10.89% | 11.26% | |
| Bristol-Myers Squibb Co. | 6.98% | -28.53% | 2.35% | -1.85% | 1.91% | |
| Eli Lilly & Co. | 22.95% | 11.52% | 1.23% | 7.26% | 9.40% | |
| Gilead Sciences Inc. | 18.68% | -16.21% | 4.87% | -0.45% | 11.96% | |
| Johnson & Johnson | 16.95% | 2.26% | 0.04% | 6.35% | 10.84% | |
| Merck & Co. Inc. | 15.83% | 16.56% | -10.39% | 14.04% | 16.59% | |
| Pfizer Inc. | -8.24% | -7.18% | -24.67% | 19.67% | 11.89% | |
| Regeneron Pharmaceuticals Inc. | 12.76% | 14.59% | 12.26% | 18.94% | 42.30% | |
| Thermo Fisher Scientific Inc. | -15.85% | -15.89% | -17.51% | -12.94% | -10.17% | |
| Vertex Pharmaceuticals Inc. | 18.35% | -18.75% | 14.90% | 20.45% | 18.67% | |
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 × -8,118 ÷ 24,621 = -32.97%
3 Click competitor name to see calculations.
The analysis of economic value added metrics reveals a sustained period of negative economic profit from 2021 through 2025. A significant intensification of these losses occurred in 2023, followed by a period of relative stabilization at a substantially lower level of economic performance.
- Economic Profit Trajectory
- Economic profit remained negative throughout the observed period, exhibiting a downward trend that peaked in 2023 with a deficit of -9,187 million USD. While the loss narrowed slightly to -7,989 million USD in 2024, it expanded again to -8,118 million USD by the end of 2025, indicating a persistent inability to generate returns above the cost of capital.
- Adjusted Sales Performance
- Adjusted sales experienced initial growth, rising from 29,862 million USD in 2021 to a peak of 31,528 million USD in 2022. This was followed by a sharp contraction in 2023, where sales fell to 23,927 million USD. The subsequent two years showed a plateau in revenue, with a marginal increase to 24,621 million USD by December 31, 2025.
- Economic Profit Margin Dynamics
- The economic profit margin deteriorated sharply, moving from -14.62% in 2021 to a trough of -38.40% in 2023. This decline reflects the compounding effect of decreasing adjusted sales and increasing economic losses. Although the margin improved slightly in 2024 and 2025, reaching -32.97%, it remains significantly lower than the 2021 starting point, signaling a sustained erosion of economic efficiency.
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