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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Eli Lilly & Co. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Analysis of Revenues
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Economic Profit
Eli Lilly & Co., 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 trajectory from 2021 to 2025 reveals a significant transition from a period of contracting profitability to a phase of rapid economic value creation. A notable U-shaped trend is observed in operating returns, where an initial decline in performance was followed by exponential growth in the final two years of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a steady decline from 5,065 million in 2021 to a low of 3,228 million in 2023. This downward trend was abruptly reversed in 2024, as NOPAT rose to 8,605 million, followed by a substantial surge to 19,711 million by the end of 2025. This suggests a dramatic increase in operational profitability and earning capacity toward the end of the analyzed timeframe.
- Invested Capital and Cost of Capital
- Invested capital showed a slight decrease in 2022 but transitioned into a phase of aggressive expansion starting in 2023, growing from 29,370 million to 49,610 million by 2025. Throughout this expansion, the cost of capital remained remarkably stable, fluctuating within a narrow range between 8.93% and 9.30%. This stability indicates that the increase in invested capital was not accompanied by a significant increase in the weighted average cost of funding or the perceived risk profile.
- Economic Profit Analysis
- Economic profit mirrored the volatility of NOPAT, falling from 2,733 million in 2021 to a critical low of 501 million in 2023. This decline indicates that the operating returns were barely covering the cost of capital during that period. However, the subsequent growth was explosive, with economic profit rising to 5,288 million in 2024 and reaching 15,097 million in 2025. The fact that economic profit grew more rapidly than the invested capital base confirms a significant increase in the efficiency of capital deployment and the creation of substantial shareholder value.
Net Operating Profit after Taxes (NOPAT)
Eli Lilly & Co., 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 LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense on borrowings = Adjusted interest expense on borrowings × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
Net income and net operating profit after taxes (NOPAT) exhibited distinct trends over the five-year period. While net income generally increased, NOPAT demonstrated a more complex pattern of fluctuation.
- NOPAT Trend
- NOPAT decreased from US$5,065 million in 2021 to US$3,228 million in 2023, representing a substantial decline over two years. This downward trend reversed in 2024, with NOPAT increasing significantly to US$8,605 million. The most substantial growth occurred between 2024 and 2025, with NOPAT reaching US$19,711 million. This indicates a considerable improvement in core operational profitability in the latter part of the period.
- Relationship between Net Income and NOPAT
- Although both metrics generally moved in the same direction, the magnitude of change differed. Net income increased from US$5,582 million in 2021 to US$6,245 million in 2022, then decreased to US$5,240 million in 2023, before experiencing substantial growth in 2024 and 2025, reaching US$20,640 million. The difference between net income and NOPAT suggests that factors beyond core operations, such as financing costs or non-operating income, played an increasingly significant role in determining overall net income, particularly in 2024 and 2025.
The substantial increase in NOPAT from 2023 to 2025 suggests improved operational efficiency, increased sales volume, or a combination of both. Further investigation would be required to determine the specific drivers of this improvement. The divergence between net income and NOPAT trends warrants further scrutiny to understand the impact of non-operating items on overall profitability.
Cash Operating Taxes
Eli Lilly & Co., cash operating taxes calculation
US$ 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).
A significant increase in both income taxes and cash operating taxes is observed over the five-year period. While income taxes demonstrate substantial growth, cash operating taxes exhibit a more pronounced and consistent upward trajectory.
- Income Taxes
- Income taxes remained relatively stable between 2021 and 2022, fluctuating between US$562 million and US$574 million. A substantial increase is then noted in 2023, reaching US$1,314 million, followed by further increases to US$2,090 million in 2024 and US$5,091 million in 2025. This represents a nearly nine-fold increase over the 2021 level.
- Cash Operating Taxes
- Cash operating taxes demonstrate a consistent upward trend throughout the period. Beginning at US$1,452 million in 2021, they more than doubled to US$2,822 million in 2022. Continued growth is evident in subsequent years, reaching US$3,767 million in 2023, US$4,949 million in 2024, and US$6,999 million in 2025. This represents a nearly five-fold increase over the 2021 level.
- Relationship between Income Taxes and Cash Operating Taxes
- While both metrics increase, cash operating taxes consistently exceed income taxes throughout the observed period. The difference between the two widens over time, suggesting increasing tax payments beyond the reported income tax expense. This divergence could be attributable to various factors, including timing differences between accounting and cash tax liabilities, changes in tax regulations, or the utilization of tax loss carryforwards. The substantial growth in cash operating taxes, particularly in the later years, warrants further investigation to understand the underlying drivers and potential implications for future cash flows.
The observed trends suggest a growing tax burden for the company. The significant increase in cash operating taxes, exceeding the growth in reported income taxes, indicates a potential shift in the company’s tax profile and requires further scrutiny.
Invested Capital
Eli Lilly & Co., invested capital calculation (financing approach)
US$ 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 LIFO reserve. See details »
4 Addition of equity equivalents to total Eli Lilly and Company shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of marketable securities.
The reported invested capital exhibited a fluctuating pattern over the five-year period. Total reported debt & leases and total shareholders’ equity both contributed to the overall invested capital figure, with notable changes observed in both components.
- Invested Capital Trend
- Invested capital decreased from US$26,117 million in 2021 to US$24,287 million in 2022, representing a decline of approximately 6.7%. Subsequently, invested capital increased to US$29,370 million in 2023, US$35,786 million in 2024, and further to US$49,610 million in 2025. This indicates a substantial growth trend in invested capital from 2022 through 2025.
- Debt & Leases
- Total reported debt & leases decreased from US$17,570 million in 2021 to US$16,967 million in 2022. However, beginning in 2023, a consistent and significant increase in debt & leases is observed, rising to US$26,330 million, US$34,791 million, and ultimately US$43,865 million in 2025. This represents a considerable reliance on debt financing over the latter part of the analyzed period.
- Shareholders’ Equity
- Total shareholders’ equity demonstrated an initial increase from US$8,979 million in 2021 to US$10,650 million in 2022, and a slight increase to US$10,772 million in 2023. A more pronounced growth in shareholders’ equity is then evident in 2024 and 2025, reaching US$14,192 million and US$26,535 million respectively. This suggests increasing internal funding sources alongside the growing debt levels.
The combined effect of increasing debt and shareholders’ equity resulted in the overall upward trend in invested capital from 2022 onwards. The rate of increase in invested capital accelerated in the later years, driven primarily by the substantial growth in both debt and equity financing.
Cost of Capital
Eli Lilly & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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
Eli Lilly & Co., 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. | ||||||
| Danaher Corp. | ||||||
| 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 financial trajectory from 2021 to 2025 is characterized by a significant transition from a period of declining economic profitability to a phase of aggressive value creation. While the initial years showed a contraction in the spread between returns and the cost of capital, the latter period demonstrates an exponential increase in both absolute economic profit and the efficiency of invested capital.
- Economic Profit Trends
- A downward trend is observed from 2021 to 2023, with economic profit decreasing from 2,733 million USD to a low of 501 million USD. However, this trend reversed sharply in 2024 and 2025, reaching 15,097 million USD by the end of the period. This represents a substantial recovery and a significant scaling of value generation beyond the required return on capital.
- Invested Capital Expansion
- Invested capital remained relatively stable between 2021 and 2022, before entering a period of consistent growth. Capital employment increased from 24,287 million USD in 2022 to 49,610 million USD by 2025. The acceleration in capital investment aligns with the subsequent surge in economic profit, suggesting a strategic deployment of resources that yielded high marginal returns.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibited extreme volatility, dropping from 10.47% in 2021 to a critical low of 1.71% in 2023. This contraction indicates a period where the return on invested capital barely exceeded the cost of capital. Following 2023, the ratio expanded rapidly to 14.78% in 2024 and peaked at 30.43% in 2025, signaling a dramatic improvement in capital efficiency and a widening gap between operational returns and the cost of capital.
Economic Profit Margin
Eli Lilly & Co., 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 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| 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 ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory between 2021 and 2025 reveals a period of initial contraction in value creation followed by a phase of exponential growth. While revenue demonstrated a consistent upward trend throughout the period, economic profit experienced a significant decline reaching a nadir in 2023 before recovering sharply to reach record highs by 2025.
- Revenue Growth
- A sustained increase in revenue is observed, rising from 28,318 million USD in 2021 to 65,179 million USD in 2025. The growth rate accelerated notably after 2023, with the most significant jump occurring between 2024 and 2025, where revenue increased by approximately 44% in a single year.
- Economic Profit Fluctuations
- Economic profit exhibited a U-shaped pattern. After starting at 2,733 million USD in 2021, it declined for two consecutive years, dropping to 501 million USD in 2023. This indicates a period where the return on capital closely approached the cost of capital. However, a rapid reversal occurred in 2024, with economic profit surging to 5,288 million USD and further escalating to 15,097 million USD by 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of absolute economic profit. The margin contracted from 9.65% in 2021 to a low of 1.47% in 2023, suggesting diminished efficiency in generating value above the cost of capital. Subsequently, the margin expanded aggressively, reaching 11.74% in 2024 and 23.16% in 2025. This sharp expansion indicates that the increase in revenue was accompanied by significant operational leverage and a substantial increase in the efficiency of value creation.