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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Elevance Health Inc. pages available for free this week:
- Balance Sheet: Assets
- Cash Flow Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Total Asset Turnover since 2005
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Economic Profit
Elevance Health Inc., 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 period under review demonstrates a shifting financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) initially decreased from 2021 to 2023, before exhibiting a recovery in 2024, followed by a slight decline in 2025. Simultaneously, the cost of capital fluctuated, while invested capital consistently increased throughout the observed timeframe.
- Economic Profit Trend
- Economic profit experienced a substantial decline from US$1,074 million in 2021 to US$246 million in 2022. This trend continued into negative territory in 2023, reaching -US$467 million. While improving slightly to -US$274 million in 2024, economic profit further deteriorated to -US$625 million in 2025. This indicates a growing disparity between returns generated and the cost of capital employed.
- NOPAT Performance
- NOPAT decreased from US$7,193 million in 2021 to US$6,415 million in 2023, representing a contraction in operating profitability. A subsequent increase to US$7,015 million in 2024 suggests a partial recovery in operational efficiency or revenue generation. However, NOPAT decreased again to US$6,650 million in 2025, indicating that the positive momentum was not sustained.
- Cost of Capital Dynamics
- The cost of capital rose from 9.58% in 2021 to 9.88% in 2023, potentially reflecting changes in market interest rates or perceived risk. A decrease to 9.31% in 2024 and further to 9.00% in 2025 suggests a stabilization or slight improvement in financing conditions. Despite this decline, the cost of capital remained a significant factor influencing economic profit.
- Invested Capital Growth
- Invested capital consistently increased throughout the period, rising from US$63,876 million in 2021 to US$80,815 million in 2025. This expansion in capital employed, coupled with the fluctuations in NOPAT and cost of capital, significantly impacted the overall economic profit performance. The increasing capital base did not translate into proportional gains in economic profit.
In summary, the observed trends indicate a weakening economic profit position despite growth in invested capital. The interplay between declining NOPAT in the initial years, a relatively stable to decreasing cost of capital, and increasing capital employed resulted in a consistent erosion of economic profit, culminating in a substantial negative economic profit by 2025.
Net Operating Profit after Taxes (NOPAT)
Elevance Health Inc., NOPAT calculation
US$ 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 equity equivalents to shareholders’ net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expenses = Adjusted interest expenses × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to shareholders’ net income.
Analysis of the presented financial information reveals trends in both shareholders’ net income and net operating profit after taxes (NOPAT) over a five-year period. While shareholders’ net income demonstrates a consistent, albeit gradual, decline, NOPAT exhibits more fluctuation.
- Shareholders’ Net Income
- Shareholders’ net income decreased steadily from US$6,104 million in 2021 to US$5,662 million in 2025. This represents a cumulative decrease of approximately 7.9% over the five-year period. The annual declines were relatively consistent, ranging from approximately 0.7% to 2.2% year-over-year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a more varied trajectory. It decreased from US$7,193 million in 2021 to US$6,415 million in 2023, representing a decline of approximately 10.8%. However, NOPAT then increased significantly to US$7,015 million in 2024, before decreasing again to US$6,650 million in 2025. The increase in 2024 suggests a potential improvement in operational efficiency or a favorable shift in the business environment during that year. The subsequent decrease in 2025 partially offsets the gains made in 2024.
The divergence between the trends in shareholders’ net income and NOPAT is noteworthy. While net income consistently declined, NOPAT demonstrated volatility, including a substantial increase in 2024. This suggests that factors beyond core operational profitability, such as changes in financing costs, non-operating income/expenses, or tax rates, may be influencing shareholders’ net income. Further investigation into these areas would be beneficial to understand the drivers behind the observed trends.
- Relationship between NOPAT and Net Income
- In 2021, NOPAT exceeded shareholders’ net income by US$1,089 million. This difference narrowed in 2022 to US$816 million, and further to US$502 million in 2023. In 2024, NOPAT exceeded net income by US$1,035 million, and in 2025, the difference was US$988 million. The fluctuating difference between these two metrics indicates changes in the proportion of earnings attributable to shareholders versus operational performance.
Overall, the financial information indicates a weakening trend in shareholders’ net income coupled with fluctuating operational profitability as measured by NOPAT. The increase in NOPAT in 2024 is a positive sign, but the subsequent decline in 2025 warrants further scrutiny.
Cash Operating Taxes
Elevance Health Inc., cash operating taxes calculation
US$ 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 reported income tax expense and cash operating taxes exhibit distinct patterns over the five-year period. While income tax expense generally remains relatively stable, cash operating taxes demonstrate more significant fluctuations.
- Income Tax Expense
- Income tax expense decreased from US$1,830 million in 2021 to US$1,750 million in 2022, followed by a further slight decrease to US$1,724 million in 2023. A subsequent increase is observed in 2024, reaching US$1,933 million, before a substantial decline to US$1,049 million in 2025. This suggests potential impacts from changes in tax regulations, accounting adjustments, or profitability levels.
- Cash Operating Taxes
- Cash operating taxes increased from US$1,823 million in 2021 to US$1,931 million in 2022. A notable increase occurred in 2023, with cash operating taxes reaching US$2,637 million, followed by a slight decrease to US$2,550 million in 2024. A significant decrease is then observed in 2025, with cash operating taxes falling to US$1,627 million. This pattern indicates a greater sensitivity to underlying business operations and potentially timing differences between reported income tax expense and actual cash outflows for taxes.
The divergence between income tax expense and cash operating taxes is particularly pronounced in 2023, 2024, and 2025. This difference could be attributed to factors such as deferred tax assets or liabilities, changes in tax credits utilized, or variations in the timing of tax payments relative to reported income. The substantial decrease in both income tax expense and cash operating taxes in 2025 warrants further investigation to understand the underlying drivers.
- Relationship between Metrics
- In 2021 and 2022, cash operating taxes closely mirrored income tax expense. However, from 2023 onwards, a growing disparity emerges. This suggests that non-cash tax items are becoming increasingly influential in the overall tax profile. The largest difference is seen in 2025, where cash operating taxes are significantly lower than income tax expense.
Invested Capital
Elevance Health Inc., invested capital calculation (financing approach)
US$ 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 equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
The invested capital of the organization demonstrates a consistent upward trend over the five-year period. Total reported debt & leases and shareholders’ equity both contribute to this increase, with invested capital representing the sum of these two components.
- Total Reported Debt & Leases
- Total reported debt & leases increased from US$24,028 million in 2021 to US$32,706 million in 2025. The rate of increase accelerated between 2022 and 2024, growing by US$6,074 million, significantly larger than the increase observed between 2021 and 2022 (US$1,018 million). The increase from 2024 to 2025 was more moderate, at US$663 million.
- Shareholders’ Equity
- Shareholders’ equity also exhibited growth throughout the period, rising from US$36,060 million in 2021 to US$43,882 million in 2025. The growth was relatively consistent year-over-year, with increases ranging from US$247 million to US$2,509 million annually. The largest single-year increase occurred between 2022 and 2023.
- Invested Capital
- As a result of the increases in both debt & leases and shareholders’ equity, invested capital grew from US$63,876 million in 2021 to US$80,815 million in 2025. The growth rate of invested capital mirrors the trends in its components, with a notable acceleration between 2023 and 2024, increasing by US$8,572 million. The increase from 2024 to 2025 was US$2,564 million, representing a deceleration in growth.
The consistent growth in invested capital suggests ongoing investment in the organization’s operations and expansion. The increasing reliance on debt financing, particularly between 2022 and 2024, warrants further investigation to assess the associated financial risk and the effectiveness of capital allocation.
Cost of Capital
Elevance Health Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| 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 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Elevance Health Inc., 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 | ||||||
| Abbott Laboratories | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 declining trend over the five-year period. Initially positive, the ratio transitions to negative values, indicating a diminishing ability to generate returns exceeding the cost of capital.
- Economic Spread Ratio
- In 2021, the economic spread ratio stood at 1.68%, representing a substantial spread between returns and the cost of capital. This ratio experienced a significant decrease in 2022, falling to 0.37%.
- The trend continued downward, with the ratio becoming negative in 2023 at -0.67% and remaining negative in subsequent years, reaching -0.35% in 2024 and further declining to -0.77% in 2025.
- This consistent decline suggests increasing pressure on profitability relative to the capital employed.
Economic profit mirrors the trend observed in the economic spread ratio. A substantial profit of US$1,074 million in 2021 decreased significantly to US$246 million in 2022. The following years show increasingly negative economic profit, reaching -US$467 million in 2023, -US$274 million in 2024, and -US$625 million in 2025.
- Invested Capital
- Invested capital consistently increased throughout the period, rising from US$63,876 million in 2021 to US$80,815 million in 2025. This growth in invested capital occurred concurrently with the decline in economic profit and the economic spread ratio.
- The increasing invested capital, coupled with decreasing economic profit, likely contributed to the negative economic spread ratio observed in later years.
The combined trends suggest that while the company continues to invest capital, its ability to generate returns on that capital has diminished over time. The negative economic spread ratio in 2023, 2024, and 2025 indicates that the cost of capital exceeds the returns generated, potentially signaling a need for strategic review and improved capital allocation.
Economic Profit Margin
Elevance Health Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Operating revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 ÷ Operating revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin demonstrates a clear declining trend over the five-year period. Initially positive, it transitioned to negative values, with the magnitude of the negative margin increasing over time. This suggests a diminishing ability to generate returns exceeding the cost of capital.
- Economic Profit
- Economic profit began at US$1,074 million in 2021, representing a substantial positive value. However, it experienced a significant decrease to US$246 million in 2022. This downward trajectory continued, resulting in a loss of US$467 million in 2023. While the loss moderated slightly to US$274 million in 2024, it further deteriorated to US$625 million in 2025. This indicates a consistent erosion of value creation.
- Operating Revenue
- Operating revenue exhibited consistent growth throughout the period. From US$136,943 million in 2021, it increased to US$155,660 million in 2022, US$170,209 million in 2023, US$175,204 million in 2024, and reached US$197,584 million in 2025. Despite this revenue growth, the company’s ability to translate revenue into economic profit declined.
- Economic Profit Margin
- The economic profit margin started at 0.78% in 2021, indicating a relatively small but positive return on revenue. It decreased substantially to 0.16% in 2022, signaling a reduced capacity to generate economic profit from each dollar of revenue. The margin then became negative in 2023, reaching -0.27%. This negative trend persisted, with the margin worsening to -0.16% in 2024 and further declining to -0.32% in 2025. The increasing negativity suggests that the cost of capital is consistently exceeding the returns generated from operations, even with growing revenue.
The divergence between increasing operating revenue and decreasing economic profit margin warrants further investigation. Factors contributing to this trend could include rising costs, increased capital investment, or a decline in operational efficiency. The sustained negative economic profit margin in the later years suggests a potential need for strategic adjustments to improve profitability and value creation.