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.
Economic Profit
Home Depot Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 16,839 – 15.84% × 82,289 = 3,807
The analysis of economic profit reveals a period of initial growth followed by a sustained contraction in value creation. While the company achieved a peak in economic profit in early 2022, there has been a consistent downward trajectory in the years following, driven by a widening gap between invested capital and operating returns.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a significant increase between January 2021 and January 2023, rising from 14,172 million US$ to a peak of 18,170 million US$. Following this peak, a decline occurred in 2024, after which the figure stabilized, ending at 16,839 million US$ by February 2026. This suggests that operational profitability has plateaued despite continued capital investment.
- Invested Capital
- A strong upward trend in invested capital is evident, particularly from January 2023 onwards. After a slight dip in 2022, the capital base grew from 55,111 million US$ in January 2023 to 82,289 million US$ by February 2026. This expansion indicates an aggressive deployment of resources into the business operations.
- Cost of Capital
- The cost of capital remained remarkably stable over the observed period, fluctuating within a tight range between 15.84% and 16.44%. Because this metric remained constant, the volatility in economic profit is attributable to operational performance and capital allocation rather than changes in the required rate of return.
- Economic Profit
- Economic profit peaked at 10,330 million US$ in January 2022 but has since declined annually, reaching 3,807 million US$ by February 2026. This decline is the result of the invested capital base growing at a much faster rate than NOPAT. The data indicates that the returns generated by the additional capital invested since 2023 have been insufficient to cover the 16% cost of capital, thereby eroding the total economic value added.
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Net Operating Profit after Taxes (NOPAT)
Home Depot Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net earnings.
4 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 9,578 × 4.20% = 402
5 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 2,814 × 21.00% = 591
6 Addition of after taxes interest expense to net earnings.
Net earnings and net operating profit after taxes (NOPAT) exhibited generally positive performance between 2021 and 2025, followed by a slight decline into 2026. NOPAT consistently exceeded net earnings throughout the observed period. A detailed examination of the NOPAT figures reveals specific trends worthy of note.
- NOPAT Trend (2021-2026)
- NOPAT demonstrated a consistent upward trajectory from 2021 to 2023, increasing from US$14,172 million to US$18,170 million. This represents a substantial growth of approximately 28.2% over the two-year period. A moderate decrease was then observed in 2024, with NOPAT falling to US$16,384 million. This decline was partially recovered in 2025, reaching US$16,730 million, and continued slightly into 2026, reaching US$16,839 million.
- Growth Rate Analysis
- The most significant growth in NOPAT occurred between 2021 and 2022, with an increase of approximately 28.0%. The growth rate slowed considerably between 2022 and 2023, at approximately 0.1%. The decline from 2023 to 2024 was approximately 10.4%, while the subsequent increases from 2024 to 2025 and 2025 to 2026 were relatively modest, at 2.1% and 0.6% respectively.
- Relationship to Net Earnings
- Throughout the period, NOPAT consistently exceeded net earnings. The difference between the two figures varied, but generally remained within a range of approximately US$1,000 to US$2,000 million annually. This suggests that non-operating items, such as interest expense or gains/losses on investments, have a notable impact on reported net earnings.
In summary, while NOPAT experienced strong growth in the initial years of the period, the rate of increase slowed and a slight decline occurred in 2024, followed by a modest recovery in 2025 and 2026. The consistent difference between NOPAT and net earnings indicates the importance of considering non-operating factors when assessing overall profitability.
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Cash Operating Taxes
Home Depot Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
The provision for income taxes and cash operating taxes exhibited distinct patterns over the observed six-year period. Both metrics initially increased, then demonstrated a leveling off, followed by a decline in more recent years.
- Provision for Income Taxes
- The provision for income taxes increased from US$4,112 million in 2021 to US$5,372 million in 2023, representing a compound annual growth rate of approximately 8.8%. Subsequently, the provision decreased, reaching US$4,446 million in 2026. This suggests a potential shift in taxable income or changes in applicable tax rates. The decrease from the 2023 peak to 2026 represents a decline of approximately 17.3%.
- Cash Operating Taxes
- Cash operating taxes followed a similar trajectory to the provision for income taxes. An increase was observed from US$5,040 million in 2021 to US$5,876 million in 2022, followed by a peak of US$5,622 million in 2023. A subsequent decline was noted, with cash operating taxes falling to US$4,542 million in 2026. This represents a decrease of approximately 19.2% from the 2023 value. The fluctuations in cash operating taxes may be influenced by timing differences between taxable income and accounting income, as well as changes in tax payments.
The convergence of decreasing trends in both the provision for income taxes and cash operating taxes from 2023 to 2026 warrants further investigation. Potential contributing factors could include changes in profitability, tax planning strategies, or alterations in the tax legislative environment. The relatively consistent values between the provision for income taxes and cash operating taxes suggest a limited impact from significant temporary differences.
- Relationship between Metrics
- The cash operating taxes consistently exceeded the provision for income taxes throughout the period. This difference likely reflects the impact of items such as deferred taxes and tax credits. The difference between the two metrics remained relatively stable between approximately US$900 million and US$1,200 million for most of the period, narrowing slightly in the later years.
Overall, the observed trends indicate a period of initial tax expense growth followed by a recent decline. Continued monitoring of these metrics is recommended to assess the sustainability of the downward trend and its potential impact on future financial performance.
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Invested Capital
Home Depot Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity (deficit).
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
The reported invested capital demonstrates a fluctuating pattern over the observed period. Initially, a slight decrease is noted, followed by a period of growth, and then a more substantial increase in later years. A closer examination of the components contributing to invested capital reveals further insights.
- Total Reported Debt & Leases
- Total reported debt and leases consistently increased throughout the period, rising from US$43,422 million in 2021 to US$65,350 million in 2026. The rate of increase accelerated between 2024 and 2025, and again between 2025 and 2026, suggesting a potential shift in financing strategy or increased investment in debt-funded projects.
- Stockholders’ Equity (Deficit)
- Stockholders’ equity experienced significant volatility. A deficit was recorded in 2022 at US$-1,696 million, indicating a period where liabilities exceeded assets from an equity perspective. However, equity recovered to positive values in subsequent years, culminating in US$12,813 million in 2026. This recovery suggests improved profitability, share repurchases, or other factors bolstering equity.
- Invested Capital Trend
- Invested capital decreased slightly from US$49,973 million in 2021 to US$48,299 million in 2022. A subsequent increase was observed, reaching US$55,111 million in 2023 and US$55,884 million in 2024. The most significant growth occurred between 2024 and 2026, with invested capital reaching US$72,841 million and then US$82,289 million. This substantial increase in later years is likely driven by the combined effect of rising debt and recovering stockholders’ equity.
The interplay between debt and equity significantly influences the overall trend in invested capital. While debt consistently increased, the fluctuations in stockholders’ equity introduced volatility. The substantial growth in invested capital observed in the final years of the period suggests a period of increased investment and/or financing activity.
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Cost of Capital
Home Depot Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 329,610) | 329,610) | ÷ | 391,865) | = | 0.84 | 0.84 | × | 18.24% | = | 15.34% | ||
| Debt3 | 52,677) | 52,677) | ÷ | 391,865) | = | 0.13 | 0.13 | × | 3.88% × (1 – 21.00%) | = | 0.41% | ||
| Operating lease liability4 | 9,578) | 9,578) | ÷ | 391,865) | = | 0.02 | 0.02 | × | 4.20% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 391,865) | 1.00 | 15.84% | ||||||||||
Based on: 10-K (reporting date: 2026-02-01).
1 US$ 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 | 349,054) | 349,054) | ÷ | 407,112) | = | 0.86 | 0.86 | × | 18.24% | = | 15.64% | ||
| Debt3 | 49,151) | 49,151) | ÷ | 407,112) | = | 0.12 | 0.12 | × | 3.90% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 8,907) | 8,907) | ÷ | 407,112) | = | 0.02 | 0.02 | × | 4.00% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 407,112) | 1.00 | 16.08% | ||||||||||
Based on: 10-K (reporting date: 2025-02-02).
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 | 375,585) | 375,585) | ÷ | 425,480) | = | 0.88 | 0.88 | × | 18.24% | = | 16.10% | ||
| Debt3 | 41,763) | 41,763) | ÷ | 425,480) | = | 0.10 | 0.10 | × | 3.65% × (1 – 21.00%) | = | 0.28% | ||
| Operating lease liability4 | 8,132) | 8,132) | ÷ | 425,480) | = | 0.02 | 0.02 | × | 3.70% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 425,480) | 1.00 | 16.44% | ||||||||||
Based on: 10-K (reporting date: 2024-01-28).
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 | 292,277) | 292,277) | ÷ | 341,270) | = | 0.86 | 0.86 | × | 18.24% | = | 15.62% | ||
| Debt3 | 41,822) | 41,822) | ÷ | 341,270) | = | 0.12 | 0.12 | × | 3.61% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 7,171) | 7,171) | ÷ | 341,270) | = | 0.02 | 0.02 | × | 3.20% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 341,270) | 1.00 | 16.03% | ||||||||||
Based on: 10-K (reporting date: 2023-01-29).
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 | 327,624) | 327,624) | ÷ | 377,475) | = | 0.87 | 0.87 | × | 18.24% | = | 15.83% | ||
| Debt3 | 43,668) | 43,668) | ÷ | 377,475) | = | 0.12 | 0.12 | × | 3.48% × (1 – 21.00%) | = | 0.32% | ||
| Operating lease liability4 | 6,183) | 6,183) | ÷ | 377,475) | = | 0.02 | 0.02 | × | 2.70% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 377,475) | 1.00 | 16.19% | ||||||||||
Based on: 10-K (reporting date: 2022-01-30).
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 | 315,312) | 315,312) | ÷ | 365,551) | = | 0.86 | 0.86 | × | 18.24% | = | 15.74% | ||
| Debt3 | 44,055) | 44,055) | ÷ | 365,551) | = | 0.12 | 0.12 | × | 3.68% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 6,184) | 6,184) | ÷ | 365,551) | = | 0.02 | 0.02 | × | 2.90% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 365,551) | 1.00 | 16.12% | ||||||||||
Based on: 10-K (reporting date: 2021-01-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Home Depot Inc., economic spread ratio calculation, comparison to benchmarks
| Feb 1, 2026 | Feb 2, 2025 | Jan 28, 2024 | Jan 29, 2023 | Jan 30, 2022 | Jan 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 3,807) | 5,016) | 7,195) | 9,338) | 10,330) | 6,114) | |
| Invested capital2 | 82,289) | 72,841) | 55,884) | 55,111) | 48,299) | 49,973) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 4.63% | 6.89% | 12.88% | 16.94% | 21.39% | 12.23% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | — | -1.49% | -5.13% | -10.66% | -21.61% | -1.84% | |
| Lowe’s Cos. Inc. | 7.85% | 15.91% | 18.68% | 13.68% | 21.65% | 9.20% | |
| TJX Cos. Inc. | 8.34% | 7.41% | 7.14% | 4.20% | 4.22% | -12.63% | |
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,807 ÷ 82,289 = 4.63%
4 Click competitor name to see calculations.
The financial trajectory from 2021 to 2026 indicates a period of peak value creation followed by a sustained contraction in economic efficiency. A significant divergence is observed between the growth of invested capital and the generation of economic profit, resulting in a substantial compression of the economic spread ratio over the latter half of the period.
- Economic Spread Ratio
- The ratio exhibited a sharp increase from 12.23% in 2021 to a peak of 21.39% in 2022. However, a consistent downward trend followed, with the ratio declining to 16.94% in 2023, 12.88% in 2024, and reaching a low of 4.63% by February 2026. This decline suggests a narrowing gap between the return on invested capital and the cost of capital, indicating diminishing efficiency in value generation.
- Economic Profit
- Economic profit followed a similar bell-shaped trajectory, rising from 6,114 million US$ in 2021 to a maximum of 10,330 million US$ in 2022. From that point, a steady decrease occurred, with profits falling to 9,338 million US$ in 2023, 7,195 million US$ in 2024, and continuing downward to 3,807 million US$ by 2026. The total reduction from the peak to the final period represents a contraction of approximately 63%.
- Invested Capital
- Invested capital remained relatively stable between 2021 and 2022, with a slight decrease to 48,299 million US$. Subsequent years showed a consistent upward trend, accelerating significantly after 2024. Capital deployment rose from 55,884 million US$ in 2024 to 72,841 million US$ in 2025 and finally to 82,289 million US$ in 2026. This expansion of the capital base occurred concurrently with falling economic profits, contributing directly to the erosion of the economic spread ratio.
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Economic Profit Margin
Home Depot Inc., economic profit margin calculation, comparison to benchmarks
| Feb 1, 2026 | Feb 2, 2025 | Jan 28, 2024 | Jan 29, 2023 | Jan 30, 2022 | Jan 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 3,807) | 5,016) | 7,195) | 9,338) | 10,330) | 6,114) | |
| Net sales | 164,683) | 159,514) | 152,669) | 157,403) | 151,157) | 132,110) | |
| Add: Increase (decrease) in deferred revenue | (35) | (152) | (302) | (532) | 773) | 707) | |
| Adjusted net sales | 164,648) | 159,362) | 152,367) | 156,871) | 151,930) | 132,817) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 2.31% | 3.15% | 4.72% | 5.95% | 6.80% | 4.60% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | — | -0.99% | -3.00% | -6.01% | -11.28% | -0.79% | |
| Lowe’s Cos. Inc. | 3.35% | 5.00% | 5.61% | 3.49% | 5.89% | 2.91% | |
| TJX Cos. Inc. | 3.46% | 2.97% | 2.78% | 1.72% | 1.71% | -8.79% | |
Based on: 10-K (reporting date: 2026-02-01), 10-K (reporting date: 2025-02-02), 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 3,807 ÷ 164,648 = 2.31%
3 Click competitor name to see calculations.
An analysis of the financial performance indicates a significant divergence between revenue growth and economic value creation. While adjusted net sales exhibit a general upward trajectory over the observed period, economic profit has experienced a sustained decline following a peak in 2022.
- Economic Profit Trends
- Economic profit grew substantially from US$ 6,114 million in 2021 to a peak of US$ 10,330 million in 2022. However, a consistent downward trend followed, with values decreasing to US$ 9,338 million in 2023, US$ 7,195 million in 2024, US$ 5,016 million in 2025, and reaching US$ 3,807 million by 2026.
- Adjusted Net Sales Performance
- Net sales showed overall growth, increasing from US$ 132,817 million in 2021 to US$ 164,648 million in 2026. Despite a marginal contraction in 2024 to US$ 152,367 million, the broader trend remains positive, indicating a steady expansion of the revenue base.
- Economic Profit Margin Compression
- The economic profit margin mirrored the trajectory of absolute economic profit, peaking at 6.80% in 2022 before entering a period of steady erosion. The margin declined to 5.95% in 2023, 4.72% in 2024, 3.15% in 2025, and concluded at 2.31% in 2026. This contraction indicates that the cost of capital or operational expenses have increased relative to the returns generated.
The data reveals a negative correlation between sales growth and economic profitability from 2023 through 2026. The simultaneous increase in adjusted net sales and the sharp decrease in the economic profit margin suggest that the efficiency of capital utilization has diminished, resulting in reduced value creation despite higher top-line revenue.
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