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
Johnson & Johnson, economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 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
= 11,461 – 9.29% × 106,513 = 1,563
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows fluctuations over the five-year period. It increased significantly from 13,736 million USD in 2020 to 18,861 million USD in 2021, indicating an improvement in operating performance. However, it declined to 16,117 million USD in 2022 and dropped further to 8,905 million USD in 2023. In 2024, there was a partial recovery to 11,461 million USD. Overall, the trend suggests volatility with a notable dip in 2023 followed by some recovery the following year.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating slightly between 9.23% and 9.37%. This suggests that the company’s risk profile and capital costs were consistent without significant changes impacting its weighted average cost of capital.
- Invested Capital
- Invested capital started at 98,344 million USD in 2020 and saw a slight decrease in 2021 to 98,066 million USD. In 2022, it rose sharply to 113,818 million USD, followed by a decline to 99,118 million USD in 2023. In 2024, invested capital increased again to 106,513 million USD. This pattern indicates some variability in capital deployment, with a peak in 2022 before settling at a moderately higher level than the initial years.
- Economic Profit
- Economic profit exhibited a strong positive peak in 2021 at 9,745 million USD after rising from 4,661 million USD in 2020. Subsequently, it dropped sharply to 5,553 million USD in 2022, then turned negative in 2023 (-387 million USD), reflecting an economic loss during that year. In 2024, economic profit recovered to a positive figure of 1,563 million USD, though well below earlier highs. The pattern suggests that profitability above cost of capital was strongest in 2021, weakened thereafter, and only partially recovered in the last year assessed.
Net Operating Profit after Taxes (NOPAT)
Johnson & Johnson, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 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 for doubtful accounts.
3 Addition of increase (decrease) in equity equivalents to net earnings.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,200 × 3.48% = 42
5 2024 Calculation
Tax benefit of interest expense, net of portion capitalized = Adjusted interest expense, net of portion capitalized × Statutory income tax rate
= 797 × 21.00% = 167
6 Addition of after taxes interest expense to net earnings.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 1,332 × 21.00% = 280
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
The financial data reveals significant fluctuations across the analyzed periods in key profitability indicators. Net earnings demonstrated an overall volatile pattern, with a marked increase from 14,714 million US dollars in 2020 to a peak of 35,153 million in 2023, followed by a sharp decline to 14,066 million in 2024. This trend suggests periods of substantial profit growth interrupted by a sudden reduction in the latest year.
Similarly, Net Operating Profit After Taxes (NOPAT) followed a comparable trend but with less pronounced peaks and troughs. Starting at 13,736 million US dollars in 2020, NOPAT increased steadily to 18,861 million in 2021, then decreased to 16,117 million in 2022, sharply dropped to 8,905 million in 2023, and slightly recovered to 11,461 million in 2024. The dip in 2023 is noteworthy, indicating operational challenges or increased costs impacting profitability before partial recovery.
- Net Earnings Trend
- Initial steady growth followed by a significant peak in 2023 and subsequent sharp decline in 2024.
- NOPAT Trend
- General growth with moderate fluctuations until 2022, a steep decrease in 2023, and a modest rebound in 2024.
- Comparison between Net Earnings and NOPAT
- Net earnings portray higher volatility, while NOPAT reflects more stability but still impacted by operational difficulties in 2023.
- Implications
- The 2023 period represents a critical year where operational profitability suffered a significant setback, potentially due to external factors or internal inefficiencies. The rebound in NOPAT in 2024, although positive, remains below earlier highs, suggesting ongoing challenges.
Cash Operating Taxes
Johnson & Johnson, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 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).
- Provision for taxes on income
- The provision for taxes on income demonstrates notable variability over the five-year period. It started at 1,783 million US dollars at the end of 2020, increased moderately to 1,898 million in 2021, and then saw a considerable surge to 3,784 million in 2022. This sharp increase was followed by a significant decline to 1,736 million in 2023. In 2024, it rebounded to 2,621 million, indicating some recovery but remaining below the 2022 peak. This pattern suggests fluctuations in taxable income or changes in tax regulations affecting the provision amounts.
- Cash operating taxes
- Cash operating taxes show a consistent upward trend from 2020 to 2023, starting at 2,949 million US dollars and rising steadily through the years to reach a peak of 5,700 million in 2023. However, in 2024, cash operating taxes decreased to 4,692 million, representing a reduction compared to the previous year but still above the earlier years. This pattern highlights increasing tax cash outflows over time with a slight moderation in the most recent year, which could reflect changes in cash tax payments or timing differences.
Invested Capital
Johnson & Johnson, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 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 equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of current marketable securities.
- Total reported debt & leases
- The total reported debt and leases demonstrated variability over the five-year period. Starting at 36,366 million USD in 2020, the figure decreased moderately to 34,751 million USD in 2021, indicating a reduction in debt obligations. However, a significant increase occurred in 2022, rising sharply to 40,959 million USD. This was followed by a notable reduction to 30,432 million USD in 2023, representing the lowest level in the period observed. In 2024, there was a rebound to 37,834 million USD, suggesting some re-leveraging or new debt acquisitions towards the end of the period.
- Shareholders’ equity
- Shareholders' equity showed a general upward trend with some fluctuations. It increased substantially from 63,278 million USD in 2020 to 74,023 million USD in 2021. The equity continued to grow but at a slower pace, reaching 76,804 million USD in 2022. In 2023, there was a decline to 68,774 million USD, indicating a possible payout, loss, or other equity-reducing activity during that year. Nevertheless, equity rebounded slightly to 71,490 million USD in 2024, suggesting partial recovery or capital retention.
- Invested capital
- Invested capital showed mixed trends across the same timeframe. It started at 98,344 million USD in 2020 and remained almost flat in 2021 at 98,066 million USD. In 2022, a significant rise to 113,818 million USD was recorded, representing a peak in capital investment. This was followed by a considerable decrease to 99,118 million USD in 2023, approaching the earlier levels of 2020 and 2021. The invested capital increased again in 2024 to 106,513 million USD, reflecting renewed capital deployment or asset acquisition activities.
- Overall Analysis
- The financial data reveals a pattern of volatility in debt and invested capital, while equity generally increased but with some retrenchment in the middle of the period. The fluctuations in total reported debt & leases and invested capital suggest dynamic capital structure management and investment strategy adjustments over the five years. The trends imply that the company might have been actively balancing between leveraging for growth and deleveraging to maintain financial stability. The changes in shareholders’ equity reflect underlying operational results and capital transactions during this period, with a temporary decline offset by subsequent recovery.
Cost of Capital
Johnson & Johnson, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 378,598) | 378,598) | ÷ | 414,432) | = | 0.91 | 0.91 | × | 9.91% | = | 9.06% | ||
| Borrowings3 | 34,634) | 34,634) | ÷ | 414,432) | = | 0.08 | 0.08 | × | 3.48% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 1,200) | 1,200) | ÷ | 414,432) | = | 0.00 | 0.00 | × | 3.48% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 414,432) | 1.00 | 9.29% | ||||||||||
Based on: 10-K (reporting date: 2024-12-29).
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 | 377,093) | 377,093) | ÷ | 406,525) | = | 0.93 | 0.93 | × | 9.91% | = | 9.20% | ||
| Borrowings3 | 28,332) | 28,332) | ÷ | 406,525) | = | 0.07 | 0.07 | × | 3.14% × (1 – 21.00%) | = | 0.17% | ||
| Operating lease liability4 | 1,100) | 1,100) | ÷ | 406,525) | = | 0.00 | 0.00 | × | 3.14% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 406,525) | 1.00 | 9.37% | ||||||||||
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 | 412,102) | 412,102) | ÷ | 451,461) | = | 0.91 | 0.91 | × | 9.91% | = | 9.05% | ||
| Borrowings3 | 38,059) | 38,059) | ÷ | 451,461) | = | 0.08 | 0.08 | × | 3.38% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 1,300) | 1,300) | ÷ | 451,461) | = | 0.00 | 0.00 | × | 3.38% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 451,461) | 1.00 | 9.28% | ||||||||||
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 | 436,958) | 436,958) | ÷ | 474,909) | = | 0.92 | 0.92 | × | 9.91% | = | 9.12% | ||
| Borrowings3 | 36,951) | 36,951) | ÷ | 474,909) | = | 0.08 | 0.08 | × | 2.76% × (1 – 21.00%) | = | 0.17% | ||
| Operating lease liability4 | 1,000) | 1,000) | ÷ | 474,909) | = | 0.00 | 0.00 | × | 2.76% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 474,909) | 1.00 | 9.29% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 425,504) | 425,504) | ÷ | 467,270) | = | 0.91 | 0.91 | × | 9.91% | = | 9.03% | ||
| Borrowings3 | 40,666) | 40,666) | ÷ | 467,270) | = | 0.09 | 0.09 | × | 2.85% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 1,100) | 1,100) | ÷ | 467,270) | = | 0.00 | 0.00 | × | 2.85% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 467,270) | 1.00 | 9.23% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Johnson & Johnson, economic spread ratio calculation, comparison to benchmarks
| Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,563) | (387) | 5,553) | 9,745) | 4,661) | |
| Invested capital2 | 106,513) | 99,118) | 113,818) | 98,066) | 98,344) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 1.47% | -0.39% | 4.88% | 9.94% | 4.74% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | -2.97% | -4.69% | 4.75% | 4.20% | -3.58% | |
| Amgen Inc. | -0.07% | 2.73% | 7.30% | 7.29% | 11.61% | |
| Bristol-Myers Squibb Co. | -22.36% | 1.20% | -1.60% | 0.72% | -14.79% | |
| Danaher Corp. | -7.81% | -8.57% | -3.60% | -2.91% | -4.29% | |
| Eli Lilly & Co. | 15.07% | 1.93% | 9.28% | 11.02% | 17.70% | |
| Gilead Sciences Inc. | -7.77% | 5.36% | 2.31% | 9.03% | -4.04% | |
| Merck & Co. Inc. | 13.33% | -8.97% | 11.21% | 11.38% | 4.23% | |
| Pfizer Inc. | -3.49% | -9.58% | 17.84% | 11.02% | -3.64% | |
| Regeneron Pharmaceuticals Inc. | 21.16% | 17.99% | 23.35% | 67.04% | 38.54% | |
| Thermo Fisher Scientific Inc. | -4.62% | -5.12% | -3.34% | -1.47% | -0.52% | |
| Vertex Pharmaceuticals Inc. | -22.69% | 11.26% | 14.01% | 15.22% | 28.49% | |
Based on: 10-K (reporting date: 2024-12-29), 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 × 1,563 ÷ 106,513 = 1.47%
4 Click competitor name to see calculations.
The financial analysis over the five-year period reveals fluctuations in key performance indicators reflecting the company's economic profitability and capital utilization.
- Economic Profit
- The economic profit shows a volatile pattern, beginning with a positive value of 4661 million US dollars in 2020, sharply increasing to 9745 million in 2021, followed by a notable decline to 5553 million in 2022. The year 2023 witnessed a negative economic profit of -387 million, indicating a loss in value creation. A partial recovery is observed in 2024, with economic profit rebounding to 1563 million, yet it remains well below the peak seen in 2021.
- Invested Capital
- The invested capital remained relatively stable between 2020 and 2021, slightly decreasing from 98344 million to 98066 million US dollars. However, there is a significant increase in 2022 to 113818 million, suggesting expansion or higher capital investment. This was followed by a contraction in 2023 to 99118 million, and a moderate increase to 106513 million in 2024. The variability indicates dynamic capital management possibly aligned with business strategy adjustments or asset base changes.
- Economic Spread Ratio
- The economic spread ratio, which indicates the return on invested capital relative to its cost, mirrors the trends seen in economic profit. Starting at 4.74% in 2020, it peaks at 9.94% in 2021, corroborating the strong economic profit observed that year. The ratio declines sharply to 4.88% in 2022 and further into negative territory at -0.39% in 2023, reflecting an erosion in value creation efficiency. A recovery to 1.47% in 2024 suggests improvement but a still modest spread over capital costs compared to earlier years.
Overall, the data reflects a peak in economic profitability and efficiency in 2021, followed by a substantial downturn in 2023, indicative of operational or market challenges. The partial recovery in 2024 signals a cautious improvement, though the company faces ongoing pressures to restore and enhance economic value generation relative to its invested capital.
Economic Profit Margin
Johnson & Johnson, economic profit margin calculation, comparison to benchmarks
| Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 1,563) | (387) | 5,553) | 9,745) | 4,661) | |
| Sales to customers | 88,821) | 85,159) | 94,943) | 93,775) | 82,584) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 1.76% | -0.45% | 5.85% | 10.39% | 5.64% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | -3.65% | -5.89% | 6.73% | 7.16% | -8.10% | |
| Amgen Inc. | -0.14% | 7.10% | 11.70% | 12.07% | 18.57% | |
| Bristol-Myers Squibb Co. | -29.00% | 1.80% | -2.49% | 1.25% | -31.35% | |
| Danaher Corp. | -24.12% | -28.13% | -8.95% | -7.27% | -12.59% | |
| Eli Lilly & Co. | 11.98% | 1.66% | 7.90% | 10.17% | 17.71% | |
| Gilead Sciences Inc. | -12.04% | 9.11% | 3.91% | 15.97% | -8.34% | |
| Merck & Co. Inc. | 16.50% | -10.44% | 13.99% | 16.53% | 5.03% | |
| Pfizer Inc. | -7.46% | -24.92% | 19.53% | 11.76% | -8.87% | |
| Regeneron Pharmaceuticals Inc. | 18.55% | 16.41% | 23.50% | 45.33% | 37.55% | |
| Thermo Fisher Scientific Inc. | -8.84% | -10.22% | -6.16% | -2.99% | -0.98% | |
| Vertex Pharmaceuticals Inc. | -18.63% | 15.11% | 20.67% | 18.86% | 37.39% | |
Based on: 10-K (reporting date: 2024-12-29), 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 ÷ Sales to customers
= 100 × 1,563 ÷ 88,821 = 1.76%
3 Click competitor name to see calculations.
- Sales to Customers
- The sales to customers demonstrate fluctuations over the analyzed periods. Starting at approximately $82.6 billion in 2020, there was a noticeable increase to about $93.8 billion in 2021, indicating strong growth. In 2022, sales showed a marginal rise reaching nearly $94.9 billion. However, in 2023, a significant decline occurred, dropping sales to approximately $85.2 billion. The following year, 2024, saw a partial recovery with sales increasing to around $88.8 billion.
- Economic Profit
- The economic profit trend is more volatile compared to sales. It started at $4.7 billion in 2020 and then saw a substantial jump to roughly $9.7 billion in 2021. Subsequently, economic profit decreased sharply to around $5.6 billion in 2022. In 2023, the company experienced negative economic profit of approximately -$0.4 billion, reflecting a loss in value creation during that period. In 2024, there was a recovery with a positive economic profit of about $1.6 billion, though still below earlier peak levels.
- Economic Profit Margin
- The economic profit margin follows a pattern similar to economic profit but expressed as a percentage of sales. It rose notably from 5.64% in 2020 to 10.39% in 2021, indicating improved profitability relative to sales. The margin then declined to 5.85% in 2022, correlating with falling economic profit. In 2023, the margin turned negative at -0.45%, coinciding with the economic profit loss. By 2024, the margin recovered to 1.76%, signifying some return to profitability but remaining well below the high point observed in 2021.
- Overall Insights
- The data reflects a period of initial growth in sales and profitability culminating in 2021, followed by a downturn in subsequent years. The dip in both economic profit and margin in 2023 suggests operational challenges or increased costs that outweighed revenue generation. The partial recovery in 2024 implies efforts toward stabilization and improved performance, but profitability has yet to return to prior peak levels. The fluctuations in economic profit and margin relative to sales highlight the importance of managing costs and efficiency alongside revenue growth.