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.
Economic Profit
Eli Lilly & Co., economic profit 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 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
= 19,711 – 9.59% × 49,610 = 14,955
The financial trajectory between 2021 and 2025 is characterized by an initial period of contraction in value creation followed by an exponential surge in economic profit. A critical pivot occurred in 2023, marking the transition from declining operational returns to a phase of aggressive growth.
- Net Operating Profit After Taxes (NOPAT)
- A downward trend was observed from 2021 to 2023, with NOPAT falling from 5,065 million USD to 3,228 million USD. However, a sharp reversal followed, with values climbing to 8,605 million USD in 2024 and reaching 19,711 million USD by 2025, indicating a significant expansion in operational profitability.
- Invested Capital and Cost of Capital
- Invested capital showed a slight dip in 2022 before entering a consistent growth phase, rising from 24,287 million USD to 49,610 million USD by 2025. This increase in capital deployment occurred alongside a stable cost of capital, which remained relatively constant, fluctuating within a narrow range between 9.20% and 9.59%.
- Economic Profit Performance
- Economic profit experienced a substantial decline, reaching a minimum of 417 million USD in 2023, indicating that the return on invested capital was nearly equal to the cost of capital. This trough was followed by a rapid acceleration, with economic profit increasing to 5,185 million USD in 2024 and surging to 14,955 million USD in 2025, reflecting a massive increase in value creation.
The relationship between the expanding invested capital and the subsequent explosion in NOPAT suggests that capital expenditures and investments made leading up to 2023 yielded highly efficient returns in the subsequent two years. Because the cost of capital remained stable, the growth in economic profit is attributable to operational scaling and improved profitability margins rather than a reduction in the cost of financing.
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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
= 1,362 × 4.70% = 64
5 2025 Calculation
Tax benefit of interest expense on borrowings = Adjusted interest expense on borrowings × Statutory income tax rate
= 959 × 21.00% = 201
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$20,640 million. The difference between net income and NOPAT suggests that factors beyond core operations, such as financing costs or non-operating income, played an increasingly significant role in determining overall net income, particularly in 2024 and 2025.
The substantial increase in NOPAT from 2023 to 2025 suggests improved operational efficiency, increased sales volume, or a combination of both. Further investigation would be required to determine the specific drivers of this improvement. The divergence between net income and NOPAT trends warrants further scrutiny to understand the impact of non-operating items on overall profitability.
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Cash Operating Taxes
Eli Lilly & Co., cash operating taxes calculation
US$ 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$6,999 million in 2025. This represents a nearly five-fold increase over the 2021 level.
- Relationship between Income Taxes and Cash Operating Taxes
- While both metrics increase, cash operating taxes consistently exceed income taxes throughout the observed period. The difference between the two widens over time, suggesting increasing tax payments beyond the reported income tax expense. This divergence could be attributable to various factors, including timing differences between accounting and cash tax liabilities, changes in tax regulations, or the utilization of tax loss carryforwards. The substantial growth in cash operating taxes, particularly in the later years, warrants further investigation to understand the underlying drivers and potential implications for future cash flows.
The observed trends suggest a growing tax burden for the company. The significant increase in cash operating taxes, exceeding the growth in reported income taxes, indicates a potential shift in the company’s tax profile and requires further scrutiny.
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Invested Capital
Eli Lilly & Co., invested capital calculation (financing approach)
US$ 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$26,535 million respectively. This suggests increasing internal funding sources alongside the growing debt levels.
The combined effect of increasing debt and shareholders’ equity resulted in the overall upward trend in invested capital from 2022 onwards. The rate of increase in invested capital accelerated in the later years, driven primarily by the substantial growth in both debt and equity financing.
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Cost of Capital
Eli Lilly & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 979,460) | 979,460) | ÷ | 1,020,621) | = | 0.96 | 0.96 | × | 9.80% | = | 9.41% | ||
| Debt3 | 39,799) | 39,799) | ÷ | 1,020,621) | = | 0.04 | 0.04 | × | 5.58% × (1 – 21.00%) | = | 0.17% | ||
| Operating lease liability4 | 1,362) | 1,362) | ÷ | 1,020,621) | = | 0.00 | 0.00 | × | 4.70% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 1,020,621) | 1.00 | 9.59% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 822,111) | 822,111) | ÷ | 853,826) | = | 0.96 | 0.96 | × | 9.80% | = | 9.44% | ||
| Debt3 | 30,568) | 30,568) | ÷ | 853,826) | = | 0.04 | 0.04 | × | 3.87% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 1,147) | 1,147) | ÷ | 853,826) | = | 0.00 | 0.00 | × | 4.60% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 853,826) | 1.00 | 9.56% | ||||||||||
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 | 708,737) | 708,737) | ÷ | 733,230) | = | 0.97 | 0.97 | × | 9.80% | = | 9.48% | ||
| Debt3 | 23,388) | 23,388) | ÷ | 733,230) | = | 0.03 | 0.03 | × | 3.58% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 1,105) | 1,105) | ÷ | 733,230) | = | 0.00 | 0.00 | × | 4.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 733,230) | 1.00 | 9.57% | ||||||||||
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 | 312,714) | 312,714) | ÷ | 327,263) | = | 0.96 | 0.96 | × | 9.80% | = | 9.37% | ||
| Debt3 | 13,821) | 13,821) | ÷ | 327,263) | = | 0.04 | 0.04 | × | 2.69% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 728) | 728) | ÷ | 327,263) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 327,263) | 1.00 | 9.47% | ||||||||||
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 | 226,954) | 226,954) | ÷ | 245,797) | = | 0.92 | 0.92 | × | 9.80% | = | 9.05% | ||
| Debt3 | 18,158) | 18,158) | ÷ | 245,797) | = | 0.07 | 0.07 | × | 2.44% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 686) | 686) | ÷ | 245,797) | = | 0.00 | 0.00 | × | 3.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 245,797) | 1.00 | 9.20% | ||||||||||
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 | 14,955) | 5,185) | 417) | 2,069) | 2,661) | |
| Invested capital2 | 49,610) | 35,786) | 29,370) | 24,287) | 26,117) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 30.14% | 14.49% | 1.42% | 8.52% | 10.19% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | 0.72% | -2.22% | -3.93% | 5.49% | 4.87% | |
| Amgen Inc. | 6.25% | -0.54% | 2.28% | 6.80% | 6.80% | |
| Bristol-Myers Squibb Co. | 5.66% | -22.01% | 1.55% | -1.21% | 1.09% | |
| Danaher Corp. | -10.71% | -10.87% | -11.64% | -6.63% | -5.80% | |
| Gilead Sciences Inc. | 12.61% | -10.47% | 2.85% | -0.27% | 6.76% | |
| Johnson & Johnson | 11.55% | 1.88% | 0.03% | 5.29% | 10.35% | |
| Merck & Co. Inc. | 10.49% | 13.36% | -8.94% | 11.24% | 11.41% | |
| Pfizer Inc. | -3.69% | -3.37% | -9.48% | 17.97% | 11.14% | |
| Regeneron Pharmaceuticals Inc. | 13.82% | 16.64% | 13.44% | 18.80% | 62.56% | |
| Thermo Fisher Scientific Inc. | -7.45% | -8.25% | -8.72% | -6.97% | -4.95% | |
| Vertex Pharmaceuticals Inc. | 20.79% | -22.86% | 11.09% | 13.84% | 15.05% | |
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 × 14,955 ÷ 49,610 = 30.14%
4 Click competitor name to see calculations.
The financial performance from 2021 through 2025 is characterized by a period of contraction in value creation followed by an aggressive expansion in economic efficiency. The trajectory indicates a significant transition from a capital-intensive phase with diminished returns to a period of high-yield economic profitability.
- Economic Profit Trends
- Economic profit exhibited a marked decline between 2021 and 2023, falling from US$ 2,661 million to a low of US$ 417 million. This downward trend reversed sharply in 2024, with profit increasing to US$ 5,185 million, and continuing a steep upward trajectory to reach US$ 14,955 million by December 31, 2025.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2021 and 2022 before entering a phase of consistent growth. From a baseline of US$ 24,287 million in 2022, the capital base expanded to US$ 49,610 million by 2025. This indicates a substantial increase in the resources deployed to generate economic value.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a severe compression, dropping from 10.19% in 2021 to a minimum of 1.42% in 2023, suggesting that returns on invested capital closely approached the cost of capital during this period. A strong recovery followed, with the ratio ascending to 14.49% in 2024 and peaking at 30.14% in 2025. This rapid expansion demonstrates that the growth in economic profit significantly outpaced the growth in invested capital, resulting in heightened capital efficiency.
Overall, the data reflects a V-shaped recovery in economic value added. The period ending in 2025 shows a transformation in the business model's ability to generate returns well above its cost of capital, as evidenced by the tripling of the economic spread ratio between 2023 and 2025.
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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 | 14,955) | 5,185) | 417) | 2,069) | 2,661) | |
| Revenue | 65,179) | 45,043) | 34,124) | 28,541) | 28,318) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 22.94% | 11.51% | 1.22% | 7.25% | 9.40% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | 0.72% | -2.73% | -4.94% | 7.77% | 8.31% | |
| Amgen Inc. | 10.42% | -1.06% | 5.93% | 10.90% | 11.26% | |
| Bristol-Myers Squibb Co. | 6.96% | -28.55% | 2.33% | -1.87% | 1.88% | |
| Danaher Corp. | -32.81% | -33.56% | -38.22% | -16.48% | -14.50% | |
| Gilead Sciences Inc. | 18.67% | -16.23% | 4.86% | -0.46% | 11.95% | |
| Johnson & Johnson | 16.94% | 2.25% | 0.03% | 6.34% | 10.83% | |
| Merck & Co. Inc. | 15.81% | 16.54% | -10.41% | 14.02% | 16.57% | |
| Pfizer Inc. | -8.24% | -7.17% | -24.66% | 19.67% | 11.89% | |
| Regeneron Pharmaceuticals Inc. | 12.76% | 14.59% | 12.26% | 18.93% | 42.30% | |
| Thermo Fisher Scientific Inc. | -15.75% | -15.79% | -17.42% | -12.85% | -10.07% | |
| Vertex Pharmaceuticals Inc. | 18.34% | -18.76% | 14.88% | 20.42% | 18.65% | |
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 × 14,955 ÷ 65,179 = 22.94%
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 exhibits a distinct V-shaped recovery in economic value creation, characterized by a significant contraction in 2023 followed by an aggressive expansion phase. While revenue maintained a consistent upward trend, the economic profit and its corresponding margin experienced substantial volatility, indicating a period of capital intensive investment or temporary margin compression before achieving significant scale.
- Revenue Growth Trends
- Revenue demonstrates a steady increase over the analyzed period, progressing from 28,318 million US$ in 2021 to 65,179 million US$ by 2025. The growth was relatively stagnant between 2021 and 2022, but accelerated sharply starting in 2023, with the most substantial absolute increase occurring between 2024 and 2025.
- Economic Profit Volatility
- Economic profit experienced a precipitous decline from 2,661 million US$ in 2021 to a trough of 417 million US$ in 2023. This represents a significant reduction in value created above the cost of capital. However, a rapid reversal is observed in 2024, with economic profit surging to 5,185 million US$, and continuing an exponential climb to 14,955 million US$ by the end of 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit. The margin compressed from 9.40% in 2021 to a minimum of 1.22% in 2023, suggesting that during this period, the returns on capital were only marginally higher than the cost of capital. Post-2023, the margin expanded rapidly, reaching 11.51% in 2024 and doubling to 22.94% in 2025. This indicates that the growth in revenue from 2024 onwards has been accompanied by highly efficient capital utilization and disproportionately higher returns relative to the capital employed.
Overall, the transition from 2023 to 2025 marks a shift from a low-efficiency state to a period of high economic value generation. The divergence between the steady rise in revenue and the exponential growth in economic profit margin suggests that the company successfully leveraged its scale to significantly enhance its economic profitability.
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