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: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Aggregate Accruals
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Economic Profit
Eli Lilly & Co., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) and invested capital both experienced volatility, impacting the overall economic profit generated. A significant increase in economic profit is observed in the most recent year, following a period of decline and stabilization.
- NOPAT Trend
- Net operating profit after taxes decreased from US$6,357,340 thousand in 2020 to US$3,090,452 thousand in 2023. However, a substantial recovery occurred in 2024, with NOPAT rising to US$8,466,038 thousand. This indicates a potential turnaround in operational profitability.
- Cost of Capital Trend
- The cost of capital exhibited a gradual increasing trend from 9.14% in 2020 to 9.60% in 2023, before decreasing slightly to 9.59% in 2024. This suggests a rising cost of funding throughout most of the period, potentially due to changing market conditions or increased risk perception, followed by a minor stabilization.
- Invested Capital Trend
- Invested capital increased from US$24,557,100 thousand in 2020 to US$26,139,800 thousand in 2021, then decreased to US$24,302,500 thousand in 2022. A subsequent increase was observed in 2023, reaching US$29,384,700 thousand, and continued upward in 2024 to US$35,800,600 thousand. This suggests strategic capital allocation and potential expansion initiatives.
- Economic Profit Trend
- Economic profit mirrored the NOPAT trend, declining from US$4,111,801 thousand in 2020 to US$268,211 thousand in 2023. The significant increase in NOPAT in 2024 resulted in a corresponding increase in economic profit to US$5,033,997 thousand. This demonstrates a strong correlation between operational profitability and economic value creation.
The substantial increase in both NOPAT and economic profit in 2024 is a noteworthy development. Further investigation into the drivers behind this improvement would be beneficial. The earlier period of declining economic profit, despite increasing invested capital, suggests potential inefficiencies in capital utilization or a challenging operating environment. The slight decrease in the cost of capital in 2024 may have also contributed to the improved economic profit.
Net Operating Profit after Taxes (NOPAT)
Eli Lilly & Co., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) over the five-year period ending in 2024.
- Net Income
-
Net income displayed a downward trend from 2020 to 2023, decreasing from 6,193,700 thousand US dollars in 2020 to 5,240,400 thousand US dollars in 2023. However, in 2024, net income surged significantly to 10,590,000 thousand US dollars, almost doubling the previous year’s figure. This sharp increase suggests an exceptional improvement in profitability during the final reported year.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibited a consistent decline throughout the period from 2020 through 2023, beginning at 6,357,340 thousand US dollars in 2020 and dropping steadily to 3,090,452 thousand US dollars in 2023. This represents a reduction of more than 50% over these years. However, in 2024, NOPAT rebounded strongly, rising to 8,466,038 thousand US dollars, indicating a considerable recovery in operating profitability after taxes.
- Overall Insights
-
The downward trend in both net income and NOPAT from 2020 to 2023 may reflect operational challenges or increased costs impacting profitability. The significant rebound in 2024 for both metrics suggests a positive turnaround, possibly as a result of improved operational efficiency, cost management, or increased revenues. The divergence in magnitude between net income and NOPAT in 2024, with net income showing a larger increase, may imply changes in non-operating factors, tax strategies, or extraordinary items affecting the net income figure.
Cash Operating Taxes
Eli Lilly & Co., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
- Income Taxes
- The amount of income taxes showed a declining trend from 2020 to 2022, decreasing from approximately 1,036,200 thousand USD in 2020 to 561,600 thousand USD in 2022. This represents almost a halving over this period. However, starting in 2023, there was a significant increase in income taxes, rising sharply to about 1,314,200 thousand USD and continuing upward to 2,090,400 thousand USD in 2024. This reversal suggests a change in taxable income or tax strategy leading to a more than threefold increase from the 2022 low.
- Cash Operating Taxes
- Cash operating taxes exhibited a consistent year-over-year increase across the entire period. Beginning at roughly 1,244,662 thousand USD in 2020, the amount rose to 1,446,213 thousand USD in 2021. This upward trend accelerated considerably starting in 2022, with cash operating taxes reaching 2,811,147 thousand USD, then 3,731,159 thousand USD in 2023, and finally 4,911,605 thousand USD in 2024. The steady and strong growth in this metric indicates increasing operational tax expenses, potentially reflecting higher operating profits or changes in tax regulations impacting cash tax outflows.
- Summary of Trends
- Overall, while income taxes initially declined before a sharp increase in later years, cash operating taxes steadily increased every year with accelerating growth. This divergence suggests that while reporting or accrual-based tax expenses (income taxes) fluctuated, the actual cash tax payments consistently rose, implying increasing operational profitability or other factors driving higher taxation cash flows. The pronounced rise from 2022 onwards in both categories signals a significant change in the tax or operational landscape during this more recent period.
Invested Capital
Eli Lilly & Co., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 LIFO reserve. See details »
5 Addition of equity equivalents to total Eli Lilly and Company shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of investments.
The financial data over the five-year period reveals notable trends regarding the company’s debt levels, equity, and invested capital.
- Total reported debt & leases
- This figure remained relatively stable from 2020 through 2022, fluctuating slightly around 17 billion US dollars. However, there was a significant increase starting in 2023, rising sharply to approximately 26.3 billion and further increasing to around 34.8 billion by the end of 2024. This upward trajectory indicates a substantial rise in debt and lease obligations in the most recent years.
- Total Eli Lilly and Company shareholders’ equity
- Shareholders’ equity showed a consistent upward trend throughout the period. It increased from about 5.6 billion in 2020 to nearly 9.0 billion in 2021, followed by further growth to approximately 10.6 billion in 2022. Although there was only a modest increase in 2023, equity rose notably again in 2024 to approximately 14.2 billion. This pattern reflects overall strengthening in the company’s equity base over the period.
- Invested capital
- Invested capital exhibited some volatility but generally increased over the five-year span. After a rise from about 24.6 billion in 2020 to 26.1 billion in 2021, it declined to 24.3 billion in 2022, suggesting some contraction or divestment activities. Subsequently, invested capital expanded significantly in the last two years, reaching approximately 29.4 billion in 2023 and 35.8 billion in 2024. This uptrend indicates increased allocation of resources, possibly for growth or expansion purposes.
In summary, the company’s financial structure demonstrates a rising reliance on debt from 2023 onward, accompanied by steady gains in shareholders’ equity. The invested capital reflects initial contraction followed by substantial growth, consistent with strategic investments or asset acquisitions. The combined trends suggest an aggressive capital deployment strategy supported by increased leverage and equity growth.
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: 2024-12-31).
1 US$ in thousands
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 thousands
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 thousands
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 thousands
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: 2020-12-31).
1 US$ in thousands
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, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited considerable fluctuation between 2020 and 2024. Initial values were relatively high, declining significantly before recovering to a level comparable to the initial period. This suggests evolving profitability relative to capital employed.
- Economic Spread Ratio Trend
- In 2020, the economic spread ratio stood at 16.74%. A consistent decline followed, reaching a low of 0.91% in 2023. A substantial increase was then observed in 2024, with the ratio rising to 14.06%. This pattern indicates a period of diminishing returns on invested capital, followed by a recent improvement in the relationship between economic profit and invested capital.
The economic spread ratio’s decline from 2020 to 2023 coincided with increases in invested capital, particularly notable between 2022 and 2024. While economic profit decreased during much of this period, the 2024 figures show a significant rebound in economic profit alongside continued growth in invested capital, driving the ratio’s recovery.
- Relationship to Economic Profit and Invested Capital
- The economic spread ratio’s movement is directly influenced by changes in both economic profit and invested capital. The decrease in the ratio from 2020 to 2023 suggests that, despite positive economic profit, the growth in invested capital outpaced the growth in profit. The 2024 increase indicates a more favorable balance, with economic profit growing at a rate sufficient to improve the spread relative to the larger capital base.
The substantial increase in invested capital in 2024 warrants further investigation to determine the nature of these investments and their expected returns. The recovery in the economic spread ratio in 2024 is a positive signal, but sustained performance will depend on continued profitability relative to the growing capital base.
Economic Profit Margin
Eli Lilly & Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited considerable fluctuation between 2020 and 2024. Initially strong, it declined significantly before recovering substantially in the most recent year. Revenue demonstrated a consistent upward trajectory throughout the period, though the rate of growth varied. The economic profit margin, calculated as economic profit relative to revenue, mirrored the profit trend, experiencing a marked decrease followed by a recovery.
- Economic Profit
- Economic profit began at US$4.11 billion in 2020, then decreased to US$2.63 billion in 2021 and further to US$2.01 billion in 2022. A substantial decline occurred in 2023, falling to US$0.27 billion. However, a significant recovery was observed in 2024, with economic profit reaching US$5.03 billion. This indicates a volatile period with a strong rebound in the latest year.
- Revenue
- Revenue increased from US$24.54 billion in 2020 to US$28.32 billion in 2021, representing a growth rate of approximately 15.4%. Further growth occurred in 2022, reaching US$28.54 billion. A more substantial increase was seen in 2023, with revenue rising to US$34.12 billion. The most significant growth occurred between 2023 and 2024, with revenue reaching US$45.04 billion, indicating accelerating revenue expansion.
- Economic Profit Margin
- The economic profit margin began at 16.76% in 2020, indicating a strong ability to generate profit relative to revenue. This margin decreased to 9.28% in 2021 and continued to decline to 7.05% in 2022. The margin experienced a dramatic reduction in 2023, falling to 0.79%. A substantial recovery was observed in 2024, with the margin increasing to 11.18%, though remaining below the 2020 level. The margin’s fluctuations suggest a changing relationship between profitability and revenue generation.
The divergence between revenue growth and economic profit margin suggests that while revenue increased consistently, the efficiency with which that revenue translated into economic profit varied considerably. The substantial recovery in both economic profit and the economic profit margin in 2024 is a positive indicator, but the prior declines warrant further investigation to understand the underlying drivers.