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:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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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 financial performance, as measured by economic profit, demonstrates a consistent negative trend over the five-year period. Net operating profit after taxes (NOPAT) initially increased from 2021 to 2022, but experienced a substantial decline in 2023 and remained relatively stable through 2025. Simultaneously, the cost of capital fluctuated modestly, while invested capital exhibited both increases and decreases. These factors combined to produce consistently negative economic profit values throughout the observed timeframe.
- NOPAT Trend
- Net operating profit after taxes 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. Subsequent years showed limited recovery, with values of US$3,391 million and US$3,442 million reported for 2024 and 2025, respectively. This suggests a potential weakening in core operational profitability after 2022.
- Cost of Capital
- The cost of capital experienced a slight increase from 14.71% in 2021 to 15.29% in 2022, and further to 15.48% in 2023. It then decreased slightly to 15.40% in 2024 and 15.17% in 2025. These fluctuations, while not dramatic, contribute to the overall economic profit calculation and potentially exacerbate negative economic profit when NOPAT declines.
- Invested Capital
- Invested capital increased from US$74,633 million in 2021 to US$78,342 million in 2022, and peaked at US$78,561 million in 2023. A notable decrease occurred in 2024, falling to US$73,131 million, before partially recovering to US$75,443 million in 2025. The changes in invested capital, coupled with the NOPAT trends, significantly influence the economic profit outcome.
- Economic Profit
- Economic profit remained negative throughout the period, indicating that the company’s returns are not exceeding its cost of capital. The negative economic profit worsened from US$-4,254 million in 2021 to US$-5,112 million in 2022. The largest negative value was recorded in 2023 at US$-9,062 million, reflecting the combined impact of lower NOPAT and a higher cost of capital. While the negative economic profit moderated slightly in 2024 and 2025 to US$-7,873 million and US$-8,000 million respectively, it remained substantial, suggesting continued underperformance relative to the cost of capital.
In summary, the observed trends suggest a decline in operational profitability coupled with a consistently high cost of capital relative to returns, resulting in persistent negative economic profit. The fluctuations in invested capital further contribute to this outcome.
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 consistent pattern of negative performance over the five-year period. This indicates that the company’s returns on invested capital are consistently below its cost of capital. The magnitude of this underperformance has generally increased over time, though with some fluctuation.
- Economic Spread Ratio
- The economic spread ratio began at -5.70% in 2021 and declined to -6.53% in 2022, signifying a worsening of the gap between returns and the cost of capital. A substantial decrease was observed in 2023, with the ratio reaching -11.53%, representing the lowest performance during the analyzed period. While the ratio improved slightly to -10.77% in 2024, it remained significantly negative. The ratio stabilized somewhat in 2025, registering at -10.60%, but still indicates a substantial shortfall in generating returns exceeding the cost of capital.
The trend in economic profit mirrors the economic spread ratio. Economic profit values are negative throughout the period, and their absolute value generally increases, particularly between 2021 and 2023. This suggests that the company is consistently destroying value for its investors.
- Economic Profit
- Economic profit started at a loss of US$4,254 million in 2021 and increased to a loss of US$5,112 million in 2022. The largest loss occurred in 2023, reaching US$9,062 million. A reduction in the loss was seen in 2024, with economic profit at US$7,873 million, but the loss remained substantial. The final year observed, 2025, showed a loss of US$8,000 million, indicating continued value destruction.
Invested capital remained relatively stable between 2021 and 2023, fluctuating between US$74,633 million and US$78,561 million. A decrease was noted in 2024, falling to US$73,131 million, followed by a slight increase to US$75,443 million in 2025. While invested capital does not exhibit the same downward trend as the economic spread ratio, its relative stability does not offset the declining profitability relative to capital employed.
- Invested Capital
- Invested capital showed minimal change from 2021 to 2023, ranging from US$74,633 million to US$78,561 million. A decrease of approximately 5.2% was observed in 2024, followed by a 3.0% increase in 2025. The fluctuations in invested capital appear to have a limited impact on the overall negative trend in economic spread and economic profit.
Economic Profit Margin
Danaher Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 economic profit margin, calculated as economic profit divided by adjusted sales, reveals the magnitude of this shortfall relative to revenue.
- Economic Profit Margin Trend
- The economic profit margin worsened considerably from 2021 to 2023, moving from -14.25% to -37.87%. This represents a substantial decline in profitability relative to sales. A slight improvement is then observed in 2024 and 2025, with the margin increasing to -33.23% and -32.49% respectively, though it remains significantly negative.
The decline in the economic profit margin from 2021 to 2023 coincides with a decrease in adjusted sales, while economic profit became more negative. The subsequent stabilization in the margin from 2024 to 2025 appears to be driven by a relatively stable level of adjusted sales, despite continued negative economic profit. The consistent negative economic profit suggests ongoing challenges in generating returns exceeding the company’s cost of capital.
- Magnitude of Economic Loss
- The economic profit margin consistently indicates a substantial economic loss. In 2023, for every dollar of adjusted sales, the company experienced an economic loss of approximately 37.87 cents. While this loss decreased slightly in the following two years, it remained above 32 cents per dollar of sales.
The observed trends suggest a need for further investigation into the factors driving the negative economic profit and the associated margin. Potential areas of focus include cost of capital, operational efficiency, and revenue generation strategies.