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 – 15.29% × 75,443 = -8,090
The analysis of economic value added reveals a consistent trend of negative economic profit throughout the observed period from 2021 to 2025. The company has failed to generate returns exceeding its cost of capital, indicating that the operational returns are insufficient to cover the opportunity cost of the invested capital.
- Net Operating Profit After Taxes (NOPAT)
- A significant contraction in profitability is evident between 2022 and 2023, where NOPAT decreased from 6,866 million US$ to 3,099 million US$. Although a gradual recovery trend is observed from 2023 through 2025, ending at 3,442 million US$, the figures remain substantially lower than the levels recorded in the first two years of the period.
- Cost of Capital
- The cost of capital exhibits relative stability, fluctuating within a narrow range between 14.82% and 15.60%. A slight upward trend peaked in 2023 at 15.60%, followed by a marginal decline to 15.29% by 2025, suggesting a consistent risk profile and funding cost environment.
- Invested Capital
- Invested capital grew steadily from 74,633 million US$ in 2021 to a peak of 78,561 million US$ in 2023. A subsequent reduction occurred in 2024 to 73,131 million US$, followed by a moderate increase to 75,443 million US$ in 2025, indicating a period of capital reallocation or consolidation after the 2023 peak.
- Economic Profit
- Economic profit remained negative throughout the entire duration, with a marked deterioration in 2023, reaching a deficit of 9,157 million US$. This decline correlates with the sharp drop in NOPAT and the peak in invested capital. While the deficit slightly narrowed in 2024, it remained heavily negative at 8,090 million US$ by 2025, confirming a sustained inability to create economic value over the five-year horizon.
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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$52,534 million in 2025. This suggests fluctuations in retained earnings and/or share issuance/repurchase activity.
The decrease in invested capital in 2024 appears to be driven primarily by the reduction in total reported debt & leases, partially offset by the decrease in stockholders’ equity. The 2025 figures suggest a partial reversal of this trend, with both debt & leases and stockholders’ equity contributing to a slight increase in invested capital.
- Relationship between Components and Invested Capital
- The fluctuations in invested capital closely mirror the combined movements of debt & leases and stockholders’ equity. While stockholders’ equity generally trended upward, the more significant declines in debt & leases in 2024 had a pronounced effect on the overall invested capital figure. The 2025 increase in both components suggests a stabilization of the capital structure.
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Cost of Capital
Danaher Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 147,926) | 147,926) | ÷ | 165,248) | = | 0.90 | 0.90 | × | 16.90% | = | 15.13% | ||
| 4.75% Mandatory Convertible Preferred Stock, Series A | —) | —) | ÷ | 165,248) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| 5.00% Mandatory Convertible Preferred Stock, Series B | —) | —) | ÷ | 165,248) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Notes payable and long-term debt3 | 16,044) | 16,044) | ÷ | 165,248) | = | 0.10 | 0.10 | × | 1.71% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 1,278) | 1,278) | ÷ | 165,248) | = | 0.01 | 0.01 | × | 4.20% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 165,248) | 1.00 | 15.29% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 16.90% | = | 15.37% | ||
| 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 | 15.52% | ||||||||||
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 | × | 16.90% | = | 15.46% | ||
| 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 | 15.60% | ||||||||||
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 | × | 16.90% | = | 15.22% | ||
| 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 | 15.41% | ||||||||||
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 | × | 16.90% | = | 14.54% | ||
| 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 | 14.82% | ||||||||||
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 | (8,090) | (7,962) | (9,157) | (5,206) | (4,340) | |
| Invested capital2 | 75,443) | 73,131) | 78,561) | 78,342) | 74,633) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.72% | -10.89% | -11.66% | -6.65% | -5.82% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.54% | -2.40% | -4.11% | 5.32% | 4.71% | |
| Amgen Inc. | 6.11% | -0.67% | 2.15% | 6.66% | 6.66% | |
| Bristol-Myers Squibb Co. | 5.48% | -22.18% | 1.38% | -1.40% | 0.91% | |
| Eli Lilly & Co. | 29.94% | 14.28% | 1.21% | 8.31% | 9.99% | |
| Gilead Sciences Inc. | 12.42% | -10.66% | 2.68% | -0.45% | 6.60% | |
| Johnson & Johnson | 11.34% | 1.67% | -0.18% | 5.09% | 10.15% | |
| Merck & Co. Inc. | 10.27% | 13.14% | -9.17% | 11.01% | 11.20% | |
| Pfizer Inc. | -3.81% | -3.50% | -9.60% | 17.82% | 10.99% | |
| Regeneron Pharmaceuticals Inc. | 13.62% | 16.44% | 13.24% | 18.61% | 62.36% | |
| Thermo Fisher Scientific Inc. | -7.47% | -8.27% | -8.74% | -6.99% | -4.97% | |
| Vertex Pharmaceuticals Inc. | 20.56% | -23.09% | 10.85% | 13.60% | 14.81% | |
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 × -8,090 ÷ 75,443 = -10.72%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation reveals a consistent trend of value destruction from 2021 through 2025. The negative trajectory of economic profit indicates that the returns generated on invested capital have remained insufficient to cover the cost of that capital throughout the analyzed period.
- Economic Profit Trends
- A significant decline in economic profit is observed between 2021 and 2023, during which the deficit expanded from -4,340 million US$ to -9,157 million US$. Although a marginal recovery occurred in 2024, the figure remained deeply negative at -7,962 million US$, concluding the period at -8,090 million US$ in 2025. This pattern indicates a sustained inability to generate surplus value over the cost of capital.
- Invested Capital Dynamics
- Invested capital remained relatively stable, with a peak of 78,561 million US$ in 2023. A notable contraction to 73,131 million US$ occurred in 2024, followed by a slight increase to 75,443 million US$ in 2025. The relative stability of the capital base suggests that the fluctuations in economic profit are primarily driven by changes in operational returns or the cost of capital rather than significant changes in the scale of investment.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the five-year period, confirming that the return on invested capital consistently trailed the weighted average cost of capital. The spread widened sharply from -5.82% in 2021 to a low of -11.66% in 2023. While the ratio showed slight improvement in 2024 (-10.89%) and 2025 (-10.72%), it remains substantially below the break-even point, reflecting a persistent gap in value creation efficiency.
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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 | (8,090) | (7,962) | (9,157) | (5,206) | (4,340) | |
| 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 | -32.86% | -33.60% | -38.27% | -16.51% | -14.53% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.54% | -2.95% | -5.16% | 7.52% | 8.04% | |
| Amgen Inc. | 10.18% | -1.32% | 5.60% | 10.67% | 11.04% | |
| Bristol-Myers Squibb Co. | 6.74% | -28.77% | 2.07% | -2.18% | 1.57% | |
| Eli Lilly & Co. | 22.79% | 11.35% | 1.04% | 7.07% | 9.22% | |
| Gilead Sciences Inc. | 18.38% | -16.51% | 4.56% | -0.76% | 11.67% | |
| Johnson & Johnson | 16.64% | 2.01% | -0.21% | 6.10% | 10.61% | |
| Merck & Co. Inc. | 15.48% | 16.26% | -10.67% | 13.73% | 16.26% | |
| Pfizer Inc. | -8.52% | -7.44% | -24.97% | 19.50% | 11.73% | |
| Regeneron Pharmaceuticals Inc. | 12.58% | 14.42% | 12.08% | 18.73% | 42.17% | |
| Thermo Fisher Scientific Inc. | -15.79% | -15.83% | -17.45% | -12.89% | -10.11% | |
| Vertex Pharmaceuticals Inc. | 18.13% | -18.96% | 14.56% | 20.07% | 18.36% | |
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 × -8,090 ÷ 24,621 = -32.86%
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by persistent negative economic profit and a significant shift in revenue scale, resulting in a deteriorated economic profit margin.
- Economic Profit Trend
- Economic profit remained negative throughout the analyzed period, showing a marked increase in deficits. The loss expanded from -4,340 million USD in 2021 to a peak deficit of -9,157 million USD in 2023. In the subsequent two years, the deficit stabilized, ending at -8,090 million USD in 2025.
- Adjusted Sales Performance
- Adjusted sales experienced an initial increase, rising from 29,862 million USD in 2021 to 31,528 million USD in 2022. This was followed by a sharp contraction in 2023, where sales fell to 23,927 million USD. Revenue levels remained relatively stagnant in 2024 before showing a slight recovery to 24,621 million USD by 2025.
- Economic Profit Margin Analysis
- The economic profit margin exhibited a severe downward trend, moving from -14.53% in 2021 to its lowest point of -38.27% in 2023. This deterioration aligns with the simultaneous increase in economic profit deficits and the decline in adjusted sales. While the margin improved slightly in 2024 and 2025, it remained deeply negative, concluding the period at -32.86%.
The correlation between the sharp decline in adjusted sales and the peak deficit in economic profit suggests a significant reduction in value creation relative to the cost of capital during the 2023 fiscal year. Despite a marginal stabilization in both sales and margins toward 2025, the organization continues to operate with a substantial negative economic profit margin.
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