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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- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Economic Profit
GE Aerospace, 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 performance, as measured by economic profit, demonstrates a significant turnaround over the observed period. Initially, the entity experienced substantial economic losses, which diminished and ultimately transitioned into positive economic profit. This shift is attributable to improvements in net operating profit after taxes, coupled with fluctuations in the cost of capital and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a dramatic increase from a loss of US$1,820 million in 2021 to a profit of US$1,827 million in 2022. This positive trend continued, reaching a peak of US$10,514 million in 2023, before decreasing to US$7,561 million in 2024 and recovering to US$9,398 million in 2025. The substantial growth in NOPAT is a primary driver of the overall improvement in economic profit.
- Cost of Capital
- The cost of capital generally increased throughout the period, rising from 16.27% in 2021 to 21.24% in 2025. This increase in the cost of capital presents a headwind to economic profit, requiring higher NOPAT to achieve positive economic profit. The rate of increase slowed between 2024 and 2025.
- Invested Capital
- Invested capital decreased consistently from US$72,026 million in 2021 to US$37,678 million in 2024. A slight increase to US$38,668 million was observed in 2025. The reduction in invested capital, while potentially indicating improved capital efficiency, also reduces the base upon which economic profit is calculated.
- Economic Profit
- Economic profit mirrored the NOPAT trend, starting with a significant loss of US$13,542 million in 2021. Losses were reduced to US$9,287 million in 2022, and then transitioned to a profit of US$514 million in 2023. A minor loss of US$305 million was recorded in 2024, followed by a substantial profit of US$1,186 million in 2025. The positive economic profit in 2023, 2025 indicates the entity is generating returns exceeding its cost of capital.
In summary, the entity has demonstrably improved its economic performance. While the cost of capital has increased, the substantial growth in NOPAT has been sufficient to overcome this challenge and generate positive economic profit in the later years of the observed period. The decrease in invested capital may also be contributing to the improved economic profit, although its impact is less pronounced than the NOPAT improvement.
Net Operating Profit after Taxes (NOPAT)
GE Aerospace, NOPAT calculation
US$ 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 credit losses.
3 Addition of increase (decrease) in deferred income.
4 Addition of increase (decrease) in liability for product warranties.
5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to the Company.
6 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2025 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income (loss) attributable to the Company.
9 Elimination of discontinued operations.
The financial performance, as indicated by Net Income and Net Operating Profit After Taxes (NOPAT), demonstrates a significant recovery and subsequent stabilization over the observed period. A substantial shift from net loss to profitability is evident, with NOPAT exhibiting a particularly strong upward trajectory before leveling off.
- Net Income
- Net income attributable to the Company experienced a dramatic turnaround. A considerable loss of US$6,520 million in 2021 was followed by a profit of US$225 million in 2022. This positive trend continued with substantial increases in 2023 and 2024, reaching US$9,481 million and US$6,556 million respectively. A slight decrease to US$8,704 million is observed in 2025, though remaining significantly above prior year levels.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT mirrored the improvement in net income, though with differing magnitudes. A loss of US$1,820 million in 2021 transitioned to a profit of US$1,827 million in 2022. The most substantial growth occurred between 2022 and 2023, with NOPAT increasing to US$10,514 million. A decrease to US$7,561 million occurred in 2024, followed by a recovery to US$9,398 million in 2025. While the 2024 decrease is notable, the 2025 value remains considerably higher than both 2021 and 2022 figures.
The divergence between the growth rates of Net Income and NOPAT suggests potential influences from non-operating items, such as financing costs or gains/losses on asset sales, impacting the overall net income figure. The substantial increase in NOPAT from 2022 to 2023 indicates a significant improvement in core operational profitability. The leveling off of NOPAT growth in the later years suggests a maturing of operational improvements or the emergence of new challenges affecting operational performance.
Cash Operating Taxes
GE Aerospace, cash operating taxes calculation
US$ 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 provision for income taxes and cash operating taxes exhibited distinct patterns over the five-year period. The provision for income taxes fluctuated significantly, while cash operating taxes generally increased, though with some variability.
- Provision for Income Taxes
- In 2021, a benefit for income taxes of US$286 million was recorded. This was followed by a provision of US$476 million in 2022, representing a substantial shift from the prior year. The provision continued to increase significantly in 2023, reaching US$1,162 million. A slight decrease was observed in 2024, with a provision of US$962 million, before rising again to US$1,405 million in 2025. This indicates considerable volatility in the reported income tax expense.
- Cash Operating Taxes
- Cash operating taxes began at US$141 million in 2021. A marked increase occurred in 2022, with cash taxes reaching US$1,464 million. In 2023, cash operating taxes decreased to US$793 million, a substantial decline from the previous year. A subsequent increase to US$999 million was noted in 2024, and further growth was observed in 2025, with cash taxes reaching US$1,496 million. The trend suggests a general upward trajectory in cash taxes paid, despite the intermediate decrease in 2023.
The divergence between the provision for income taxes and cash operating taxes suggests potential differences between book and tax accounting treatments. The significant benefit in 2021, coupled with the subsequent increases in both measures, warrants further investigation into the underlying factors driving these changes, such as changes in tax laws, deferred tax asset realization, or shifts in taxable income.
The increase in cash operating taxes from 2021 to 2025, despite the fluctuations in the provision for income taxes, could indicate improved operational profitability or a reduction in tax-saving strategies. The decrease in cash taxes in 2023, however, interrupts this trend and requires additional scrutiny.
Invested Capital
GE Aerospace, invested capital calculation (financing approach)
US$ 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 deferred income.
5 Addition of liability for product warranties.
6 Addition of equity equivalents to shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of leasehold costs and manufacturing plant under construction.
A consistent decline in invested capital is observed over the five-year period. This reduction is driven by decreases in both total reported debt & leases and shareholders’ equity. The rate of decline appears to moderate in the final year of the observed period.
- Total Reported Debt & Leases
- Total reported debt & leases decreased from US$38,033 million in 2021 to US$21,557 million in 2025. The most significant reduction occurred between 2021 and 2023, with a decrease of US$15,096 million. The decline slowed considerably between 2023 and 2025, with an increase of US$179 million.
- Shareholders’ Equity
- Shareholders’ equity experienced a similar downward trend, falling from US$40,310 million in 2021 to US$18,677 million in 2025. The largest decrease in shareholders’ equity was noted between 2022 and 2024, amounting to US$17,024 million. The rate of decline also lessened between 2024 and 2025, with a decrease of US$665 million.
- Invested Capital
- Invested capital, calculated as the sum of total reported debt & leases and shareholders’ equity, decreased from US$72,026 million in 2021 to US$38,668 million in 2025. The most substantial decrease in invested capital occurred between 2021 and 2023, with a reduction of US$21,832 million. While still decreasing, the decline in invested capital lessened between 2024 and 2025, with an increase of US$990 million.
The concurrent declines in both debt and equity suggest a potential shift in capital structure, possibly through debt repayment, share buybacks, or dividend distributions. The stabilization of invested capital in the final year warrants further investigation to determine the underlying causes and potential implications for future performance.
Cost of Capital
GE Aerospace, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (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 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
GE Aerospace, 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 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 exhibited a notable progression over the five-year period. Initially negative, the ratio transitioned to positive territory, indicating an improving relationship between returns generated and the cost of capital employed.
- Economic Spread Ratio
- In 2021 and 2022, the economic spread ratio registered negative values of -18.80% and -13.89% respectively. This signifies that returns generated from invested capital were insufficient to cover the cost of that capital. The magnitude of the negative spread decreased from 2021 to 2022, suggesting some improvement in profitability relative to capital costs.
- A turning point occurred in 2023, with the ratio becoming positive at 1.02%. This indicates that returns exceeded the cost of capital, creating value. However, this positive spread was short-lived, as the ratio declined to -0.81% in 2024, suggesting a renewed inability to generate returns exceeding the cost of capital.
- By 2025, the economic spread ratio had rebounded significantly to 3.07%, demonstrating a substantial improvement in value creation. This represents the highest ratio value within the observed period and indicates a strong positive relationship between returns and capital costs.
The economic spread ratio’s movement mirrors the trend in economic profit. The transition from negative economic profit to positive economic profit is directly reflected in the shift from a negative to a positive economic spread ratio. The fluctuations in economic profit are amplified in the economic spread ratio, expressed as a percentage of invested capital.
Invested capital decreased consistently from 2021 to 2024, before stabilizing in 2025. This decrease in capital base, coupled with the improvement in economic profit in 2025, contributed to the substantial increase in the economic spread ratio during that year.
Economic Profit Margin
GE Aerospace, 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 | ||||||
| Sales of equipment and services | ||||||
| Add: Increase (decrease) in deferred income | ||||||
| Adjusted sales of equipment and services | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 ÷ Adjusted sales of equipment and services
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited significant fluctuation over the five-year period. Initially negative, it transitioned to positive values before experiencing another decline, ultimately concluding with a positive margin. This movement correlates with changes in economic profit and adjusted sales of equipment and services.
- Economic Profit Margin Trend
- In 2021 and 2022, the economic profit margin was negative, registering at -18.98% and -12.59% respectively. This indicates that the company’s return on capital employed was less than its cost of capital during these years. A notable improvement occurred in 2023, with the margin turning positive at 0.80%, suggesting the company began generating returns exceeding its cost of capital. However, this positive trend was short-lived, as the margin decreased to -0.87% in 2024. The final year, 2025, saw a recovery, with the economic profit margin rising to 2.80%, representing the highest value within the observed period.
- Relationship to Economic Profit
- The economic profit margin’s trajectory closely mirrors the changes in economic profit. The substantial negative economic profit values in 2021 and 2022 directly contributed to the negative margins observed in those years. The positive economic profit of US$514 million in 2023 drove the margin into positive territory. The subsequent negative economic profit of US$305 million in 2024 resulted in a negative margin, and the positive economic profit of US$1,186 million in 2025 corresponded with the highest margin value.
- Relationship to Adjusted Sales
- Adjusted sales of equipment and services decreased from US$71,356 million in 2021 to US$64,504 million in 2023, then experienced a significant drop to US$35,098 million in 2024. Sales partially recovered to US$42,332 million in 2025. While sales decreased overall, the positive economic profit margin in 2023 and 2025 suggests improved efficiency in converting sales into economic profit despite the lower sales volume. The substantial decline in sales in 2024, coupled with a negative economic profit, highlights a period of significant underperformance.
Overall, the economic profit margin demonstrates a volatile pattern, heavily influenced by both economic profit and adjusted sales. The company’s ability to generate economic profit appears to be improving, as evidenced by the trend from 2023 to 2025, but remains sensitive to fluctuations in sales volume.