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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Danaher Corp. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Earnings (P/E) since 2005
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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
= – × =
The financial data reveals several noteworthy trends over the examined periods.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a strong upward trend from 2020 through 2022, increasing from 4,986 million to 6,866 million US dollars. However, in 2023, there was a significant decline to 3,099 million US dollars, followed by a modest recovery to 3,391 million in 2024. Despite the partial rebound, the 2024 figure remains substantially below the peak observed in 2022.
- Cost of Capital
- The cost of capital exhibited a steady incremental pattern over the five-year span, rising from 11.68% in 2020 to a peak of 12.47% in 2023, and then slightly decreasing to 12.41% in 2024. This gradual increase suggests rising capital expense or perceived investment risk over time.
- Invested Capital
- Invested capital increased consistently from 67,123 million US dollars in 2020 to reach a high of 78,561 million in 2023. However, in 2024, there was a noticeable contraction to 73,131 million, indicating a possible divestiture, asset optimization, or capital reduction strategy implemented during that year.
- Economic Profit
- Economic profit remained negative throughout the entire period. While the negative amount narrowed from -2,854 million US dollars in 2020 to -2,141 million in 2021, it deteriorated again to -2,789 million in 2022. The situation worsened considerably in 2023 with a substantial increase in negative economic profit to -6,696 million, followed by a slight improvement to -5,683 million in 2024. This trend indicates persistent value destruction relative to the company’s cost of capital despite fluctuations in operational profitability and invested capital.
Overall, the data suggests the company experienced operational efficiency gains initially but faced challenges starting in 2023, reflected in declining NOPAT and increasingly negative economic profit. The steady rise and recent reduction in invested capital, coupled with a rising cost of capital, may have contributed to this outcome. The persistent negative economic profit underscores the need for strategic reassessment to improve capital utilization and operational returns.
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 a consistently negative value throughout the periods, indicating that the company has been generating losses in terms of economic profit each year. The loss initially decreased from -$2,854 million in 2020 to -$2,141 million in 2021, suggesting some improvement. However, this was followed by a deterioration to -$2,789 million in 2022, and a significant worsening to -$6,696 million in 2023. Although there was a slight recovery in 2024 with a reduction to -$5,683 million, the economic profit remains substantially negative.
- Invested Capital
- Invested capital has generally increased over the five-year span, starting at $67,123 million in 2020 and rising to a peak of $78,561 million in 2023. In 2024, there is a notable decrease to $73,131 million. Overall, invested capital shows growth until 2023, followed by a reduction in the latest year.
- Economic Spread Ratio
- The economic spread ratio follows a negative trend throughout all reported years, indicating that the company’s return on invested capital is consistently below its cost of capital. The spread improved from -4.25% in 2020 to -2.87% in 2021 but then declined to -3.56% in 2022. Thereafter, it worsened considerably to -8.52% in 2023 and slightly recovered to -7.77% in 2024, remaining at a significantly negative level.
- Summary of Trends
- The data reveal that the company has struggled to generate positive economic profit across the observed periods, with a marked deterioration beginning in 2022 and peaking in 2023. The invested capital expanded steadily until 2023, indicating increased investment or asset base, but then reduced somewhat in 2024. Despite this investment growth, the negative economic spread ratio implies the returns were insufficient to cover the cost of capital, which likely contributed to the persistent negative economic profits. The slight recovery in economic profit and economic spread in 2024 suggests potential improvements in operational efficiency or capital allocation, but the overall performance remains below desired thresholds.
Economic Profit Margin
Danaher Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
- Economic Profit
- The economic profit experienced a significant decline over the analyzed period. Starting from a negative value of -2854 million USD in 2020, the loss decreased to -2141 million USD in 2021, indicating a relative improvement. However, this improvement was short-lived as economic profit deteriorated again in 2022 to -2789 million USD, followed by a substantial decline in 2023 to -6696 million USD. In 2024, the economic profit slightly improved from the previous year but remained deeply negative at -5683 million USD. The trend indicates increasing economic losses, especially pronounced from 2022 onwards.
- Adjusted Sales
- Adjusted sales showed a general upward trend from 2020 to 2022. Sales increased from 22,895 million USD in 2020 to 29,862 million USD in 2021, and further to 31,528 million USD in 2022, reflecting strong growth during this period. However, in 2023, sales dropped sharply to 23,927 million USD and remained almost flat in 2024 at 23,692 million USD. This indicates a significant contraction in sales volume or pricing after 2022, signaling potential challenges in revenue generation.
- Economic Profit Margin
- The economic profit margin mirrors the trend seen in economic profit, starting at -12.47% in 2020 and improving to -7.17% in 2021. The margin then declined to -8.85% in 2022, followed by a steep decrease to -27.98% in 2023. In 2024, the margin improved slightly to -23.99%, though it remained significantly negative. This pattern signals diminishing profitability relative to sales, with the most severe margin deterioration occurring after 2022.
- Overall Analysis
- The company faced increasing economic losses over the five-year period despite initial sales growth in the first three years. The sharp downturn in both sales and economic profit after 2022 suggests a challenging market environment or internal operational issues impacting performance. The economic profit margin's continuing negative trajectory indicates that costs or capital charges are outpacing returns on sales, reducing overall economic value creation. Efforts to reverse the declines after 2023 show some improvement but remain insufficient to restore profitability within the observed period.