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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Danaher Corp. pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Danaher Corp., 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)
- NOPAT increased significantly from 4986 million US$ in 2020 to a peak of 6866 million US$ in 2022, indicating an improving core profitability during this period. However, in 2023, it sharply declined to 3099 million US$, followed by a modest recovery to 3391 million US$ in 2024. This suggests a notable downturn in operational performance after 2022, with only a partial rebound by the end of 2024.
- Cost of Capital
- The cost of capital showed a gradual upward trend from 11.59% in 2020 to 12.37% in 2023, with a slight decrease to 12.31% in 2024. This steady increase implies increasing financing or risk costs over the period, which can adversely affect investment decisions and valuation.
- Invested Capital
- Invested capital grew steadily from 67123 million US$ in 2020 to 78561 million US$ in 2023, reflecting ongoing investments or asset accumulation. However, there was a decline to 73131 million US$ in 2024, indicating possible divestitures, asset sales, or reduced capital expenditures in that year.
- Economic Profit
- Economic profit was negative throughout the entire period, reflecting that the returns generated did not exceed the company's cost of capital. The loss narrowed somewhat from -2796 million US$ in 2020 to -2075 million US$ in 2021 but worsened again to -2717 million US$ in 2022. Thereafter, it deteriorated sharply, reaching -6621 million US$ in 2023 and improving slightly to -5615 million US$ in 2024. This declining trend in economic profit, especially the large deficits in 2023 and 2024, suggests that the company struggled to generate value above its capital costs during these years.
- Overall Trends and Insights
- The data reflects an initial phase of improving profitability and increasing invested capital, but this performance reversed sharply starting in 2023. Despite significant investments, the company failed to realize economic profits, with substantial value destruction evident especially in the last two years analyzed. The rising cost of capital adds pressure on returns, contributing to the negative economic profit outcomes. The partial recovery in NOPAT and slight improvement in economic profit in 2024 may indicate early signs of stabilization, but the continued negative economic profit underscores ongoing challenges in value creation.
Net Operating Profit after Taxes (NOPAT)
Danaher Corp., 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 allowance for doubtful accounts.
3 Addition of increase (decrease) in contract liabilities.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 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 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.
10 Elimination of discontinued operations.
- Net Earnings
-
The net earnings demonstrate a significant upward trend from 2020 to 2022, increasing from 3,646 million US dollars in 2020 to a peak of 7,209 million US dollars in 2022. This represents nearly a doubling over the two-year period, indicating strong profitability growth.
However, there is a notable decline starting in 2023, with net earnings decreasing to 4,764 million US dollars, followed by a further decline to 3,899 million US dollars in 2024. This reversal suggests challenges impacting profitability or potential one-time events reducing net income in the latter periods.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibits an increasing trend from 2020 through 2022, rising from 4,986 million US dollars in 2020 to 6,866 million US dollars in 2022. This indicates improving operating performance and effective tax management in this period.
Contrary to net earnings, there is a sharp decline in NOPAT in 2023 to 3,099 million US dollars, reflecting a substantial decrease in operating profitability. However, in 2024, NOPAT slightly recovers to 3,391 million US dollars, suggesting a partial operational improvement compared to the previous year.
- Overall Trends and Insights
-
Both net earnings and NOPAT show robust growth from 2020 to 2022, indicating a period of strong financial performance. The decline starting in 2023 is pronounced for both metrics, although net earnings remain relatively higher than NOPAT in both 2023 and 2024. This divergence may point toward increased non-operating income or variations in tax expense or extraordinary items impacting net earnings differently.
The partial rebound in NOPAT in 2024, combined with the continuing decline in net earnings, suggests operational improvements are underway, but other factors are continuing to suppress overall profitability. Overall, the data reflects a challenging environment in the most recent years following a period of solid growth.
Cash Operating Taxes
Danaher Corp., 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 reflects the tax-related expenses of the company over a five-year period. There are two primary tax metrics provided: Income tax provision and Cash operating taxes, both measured in millions of US dollars.
- Income Tax Provision
- This metric experienced a notable increase from 849 million USD in 2020 to a peak of 1,251 million USD in 2021. After this peak, the provision declined to 1,083 million USD in 2022 and continued to decrease steadily through 2023 and 2024, reaching 747 million USD. This pattern suggests a reduction in tax liabilities or changes in taxable income and accounting estimates after 2021.
- Cash Operating Taxes
- Cash operating taxes started at 380 million USD in 2020, then surged significantly to 1,534 million USD in 2021 and further increased to reach 1,684 million USD in 2022. The upward trend continued in 2023, peaking at 2,032 million USD. However, in 2024, there was a substantial decline to 1,274 million USD. This indicates an initial escalation in cash tax payments over the 2021-2023 period, followed by a marked reduction in the most recent year.
Comparing both tax measures reveals a divergence in their trends, especially after 2021. While the income tax provision decreased steadily from 2021 onwards, cash operating taxes rose sharply for three years before declining in the final year. This divergence could point to timing differences in tax payments versus accrued tax expenses, changes in deferred tax assets or liabilities, or adjustments in tax planning strategies. The significant fluctuations in cash operating taxes imply periods of higher actual tax cash outflows, which may have liquidity implications.
Overall, the data suggests the company experienced fluctuating tax obligations, with peak tax provisions in 2021 and peak cash taxes in 2023, followed by declines in both in 2024. The contrasting movements between provision and cash taxes highlight the complexity of the company's tax situation over these years, warranting further examination of underlying causes such as tax policy changes, profitability shifts, or one-time tax events.
Invested Capital
Danaher Corp., 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 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.
- Total reported debt & leases
-
There is a consistent downward trend in total reported debt and leases over the five-year period. The debt decreased from US$22,178 million in 2020 to US$17,146 million in 2024, reflecting a reduction of approximately 22.6%. This suggests a progressive deleveraging strategy or improved debt management, potentially reducing financial risk and interest expenses.
- Total Danaher stockholders’ equity
-
Stockholders’ equity shows an overall upward trend from US$39,766 million in 2020 to a peak of US$53,486 million in 2023. However, a decline is observed in 2024, dropping to US$49,543 million. The initial continuous growth may indicate profitable operations, retained earnings accumulation, or equity issuance. The decrease in 2024 could be due to dividends, share buybacks, or losses, warranting further investigation.
- Invested capital
-
Invested capital steadily increased from US$67,123 million in 2020 to US$78,561 million in 2023, suggesting ongoing investment in assets or operations. In 2024, it declined to US$73,131 million. The upward movement aligns with growth or expansion strategies, while the recent decrease could signal asset disposals, reduced investment activity, or operational optimization.
- Summary
-
The financial data indicates that the company has been actively managing its capital structure by decreasing debt levels while increasing equity and invested capital in the initial years. The modest reduction in equity and invested capital in the final year could imply a strategic shift or response to market conditions. Overall, the trends suggest enhanced financial stability with cautious reinvestment, although the 2024 changes merit additional scrutiny to understand underlying causes.
Cost of Capital
Danaher Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 4.75% Mandatory Convertible Preferred Stock, Series A | ÷ | = | × | = | |||||||||
| 5.00% Mandatory Convertible Preferred Stock, Series B | ÷ | = | × | = | |||||||||
| Notes payable and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ 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 »
| 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: 2020-12-31).
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, 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 | ||||||
| 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: 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 significant fluctuations over the analyzed period. Starting at a negative value of -2796 million US dollars in 2020, it improved slightly in 2021 to -2075 million. However, this was followed by a decline to -2717 million in 2022. A sharp deterioration occurred in 2023, with economic profit plunging to -6621 million, before showing some recovery in 2024 to -5615 million. Despite this partial rebound, the economic profit remained substantially negative throughout the period, indicating ongoing challenges in generating value above the cost of capital.
- Invested Capital
- Invested capital exhibited an increasing trend from 67123 million US dollars in 2020 to a peak of 78561 million in 2023. This represents a steady accumulation of capital resources over the four years. However, in 2024, there was a noticeable decline to 73131 million, signaling either divestitures, asset disposals, or reduced investments. This reduction after years of growth may reflect strategic adjustments or responses to operational challenges.
- Economic Spread Ratio
- The economic spread ratio, reflecting the difference between return on invested capital and cost of capital, remained negative throughout the period, indicating that the returns did not cover the capital costs. The ratio improved slightly from -4.17% in 2020 to -2.78% in 2021 but worsened again to -3.47% in 2022. A significant decline is evident in 2023, dropping steeply to -8.43%, closely paralleling the sharp drop in economic profit. In 2024, there was slight improvement to -7.68%, yet the spread remained well below zero, signifying sustained inability to generate economic value consistently.
- Overall Analysis
- The data reveals a pattern of persistent negative economic profit coupled with an economic spread that consistently remains below zero, indicating ongoing value destruction relative to the company's cost of capital. The peak in invested capital in 2023, despite worsening economic profit and spread, suggests increased capital commitments that did not yield proportional returns. The subsequent reduction in invested capital in 2024 may represent corrective measures in response to poor economic performance. The negative trends in economic metrics warrant close attention to operational efficiency and capital allocation to improve future financial outcomes.
Economic Profit Margin
Danaher Corp., 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 | ||||||
| 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: 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 ÷ Adjusted sales
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Sales
- Adjusted sales demonstrated an overall upward trend from 2020 to 2022, increasing from $22,895 million to $31,528 million. However, there was a notable decline in sales in the subsequent years, falling to $23,927 million in 2023 and slightly decreasing further to $23,692 million in 2024. This indicates a peak in sales performance in 2022 followed by a sharp contraction over the next two periods.
- Economic Profit
- Economic profit remained negative throughout the five-year period, signaling persistent losses in terms of economic value generated. The losses decreased from -$2,796 million in 2020 to -$2,075 million in 2021, indicating some improvement. However, economic profit worsened again in 2022 at -$2,717 million before significantly deteriorating in 2023 to -$6,621 million. In 2024, there was a slight recovery to -$5,615 million but the level of economic loss remained substantially higher compared to earlier years.
- Economic Profit Margin
- The economic profit margin followed a similar pattern to economic profit, remaining negative and reflecting losses relative to sales. The margin improved from -12.21% in 2020 to -6.95% in 2021, showing better relative efficiency. The margin then declined to -8.62% in 2022, followed by a sharp decrease to -27.67% in 2023, indicating much larger losses relative to sales. In 2024, the margin improved slightly to -23.7% but continued to reflect substantial economic inefficiency.
- Overall Analysis
- The three key financial metrics collectively indicate a period of growth in sales followed by a marked contraction. Despite the initial improvement in economic profit and margin in 2021, there was a reversal with both metrics deteriorating significantly in 2023. The data suggests challenges in maintaining profitability and economic value despite relatively high sales levels in earlier years. The sharp increase in economic losses in 2023 points to rising costs or diminishing returns that were not offset by sales revenue. While 2024 shows a modest rebound in economic profit and margin, the company continues to experience substantial economic losses relative to sales.