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:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Aggregate Accruals
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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 period demonstrates significant fluctuations in economic profit, driven by changes in net operating profit after taxes (NOPAT) and invested capital. While the cost of capital remained relatively stable, the interplay between profitability and capital employed resulted in a varied performance profile.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a decline from 2021 to 2023, decreasing from US$5,065 million to US$3,228 million. However, a substantial recovery occurred in 2024, with NOPAT reaching US$8,605 million, followed by a further increase to US$19,711 million in 2025. This indicates a strengthening of operational profitability in the latter years of the observed period.
- Cost of Capital
- The cost of capital exhibited a modest increase from 8.88% in 2021 to 9.25% in 2025. This increase, while present, was gradual and did not appear to be a primary driver of the observed changes in economic profit. The cost of capital remained within a narrow range of approximately 9% throughout most of the period.
- Invested Capital
- Invested capital followed an upward trajectory, increasing from US$26,117 million in 2021 to US$49,610 million in 2025. The increase was not linear, with a slight decrease observed between 2021 and 2022. The substantial growth in invested capital in 2024 and 2025 suggests significant capital deployment activities.
- Economic Profit
- Economic profit mirrored the trends in NOPAT, declining from US$2,745 million in 2021 to US$515 million in 2023. The significant increase in NOPAT in 2024 and 2025 translated into a corresponding rise in economic profit, reaching US$15,120 million in 2025. This demonstrates a strong correlation between operational profitability and the generation of economic value. The period between 2021 and 2023 shows a clear erosion of economic profit, while the subsequent years demonstrate a robust recovery and expansion.
In summary, the observed period was characterized by an initial decline in economic profit, followed by a substantial recovery and growth. This performance was primarily driven by fluctuations in NOPAT, with a relatively stable cost of capital and increasing levels of invested capital. The significant increase in economic profit in the final two years suggests successful capital allocation and improved operational efficiency.
Net Operating Profit after Taxes (NOPAT)
Eli Lilly & Co., NOPAT calculation
US$ 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 economic spread ratio demonstrates a fluctuating pattern over the five-year period. Initial values indicate a relatively strong economic spread, which subsequently declined before experiencing substantial growth.
- Economic Spread Ratio Trend
- In 2021, the economic spread ratio stood at 10.51%. A decrease was observed in 2022, with the ratio falling to 8.85%. This downward trend continued into 2023, reaching a low of 1.75%. However, a significant reversal occurred in 2024, as the ratio increased to 14.82%. This positive momentum accelerated in 2025, with the economic spread ratio reaching 30.48%.
The economic spread ratio’s movement correlates with changes in economic profit and invested capital. While invested capital generally increased over the period, the most dramatic increases in the economic spread ratio coincided with substantial growth in economic profit, particularly between 2023 and 2025.
- Relationship to Economic Profit
- The economic spread ratio’s low point in 2023 aligns with the lowest economic profit value during the observed period. Conversely, the highest economic spread ratio in 2025 corresponds with the highest economic profit. This suggests a strong relationship between the company’s ability to generate economic profit and its economic spread.
- Relationship to Invested Capital
- Invested capital increased consistently throughout the period. However, the economic spread ratio did not consistently follow this trend. The substantial increase in the ratio in 2024 and 2025 indicates that the company became more efficient in utilizing its invested capital to generate economic profit, despite the continued investment.
The substantial increase in the economic spread ratio in the later years suggests improved profitability relative to invested capital, potentially indicating enhanced operational efficiency or successful strategic initiatives.
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 economic profit exhibited considerable fluctuation over the five-year period. Initial values demonstrated strong profitability, followed by a period of decline, and then substantial growth. Revenue consistently increased throughout the period, though the rate of growth accelerated in later years. The economic profit margin reflects these trends, showing a corresponding pattern of decrease and subsequent increase.
- Economic Profit
- Economic profit began at US$2,745 million in 2021, decreased to US$2,149 million in 2022, and experienced a significant drop to US$515 million in 2023. A substantial recovery occurred in 2024, with economic profit reaching US$5,305 million, and continued to rise dramatically to US$15,120 million in 2025. This indicates improving efficiency in capital allocation and profitability in later periods.
- Revenue
- Revenue increased from US$28,318 million in 2021 to US$28,541 million in 2022, representing modest growth. The rate of revenue growth accelerated in 2023, reaching US$34,124 million, and continued to increase significantly to US$45,043 million in 2024 and US$65,179 million in 2025. This suggests expanding market share or increased demand for products.
- Economic Profit Margin
- The economic profit margin decreased from 9.69% in 2021 to 7.53% in 2022, mirroring the decline in economic profit. It reached a low of 1.51% in 2023, reflecting the substantial decrease in economic profit relative to revenue. The margin then increased significantly to 11.78% in 2024 and further to 23.20% in 2025, indicating improved profitability and efficient capital utilization as revenue growth outpaced the growth of capital employed. The substantial increase in the margin in the final two years suggests a significant improvement in the company’s ability to generate profit from its revenue.
The correlation between economic profit and economic profit margin is evident. The substantial growth in both metrics in 2024 and 2025 suggests a positive shift in the company’s financial performance and operational efficiency.