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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Johnson & Johnson pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value (EV)
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Johnson & Johnson, economic profit calculation
US$ in millions
| 12 months ended: | Dec 28, 2025 | Dec 29, 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: 2025-12-28), 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).
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 fluctuating economic performance. Net operating profit after taxes (NOPAT) experienced a significant decline from 2021 to 2023, followed by recovery and substantial growth through 2025. Invested capital generally increased over the period, with a notable surge in the final year. The cost of capital remained relatively stable, fluctuating within a narrow range. Consequently, economic profit mirrored the NOPAT trend, exhibiting volatility but ultimately achieving a strong positive result in 2025.
- NOPAT Trend
- NOPAT decreased from US$18,861 million in 2021 to US$8,905 million in 2023, representing a substantial contraction. A recovery began in 2024, with NOPAT reaching US$11,461 million, and accelerated significantly in 2025 to US$28,330 million. This indicates a period of operational challenges followed by improved profitability.
- Cost of Capital
- The cost of capital remained consistently around 8.6%, with minor fluctuations between 8.57% and 8.65% across the observed years. This stability suggests that the company’s risk profile and financing structure remained relatively consistent during the period.
- Invested Capital
- Invested capital increased from US$98,066 million in 2021 to US$113,818 million in 2022. It experienced a slight decrease in 2023 to US$99,118 million before resuming an upward trend, culminating in US$138,153 million in 2025. The largest increase occurred between 2024 and 2025, suggesting significant capital deployment in the latter year.
- Economic Profit
- Economic profit followed a similar pattern to NOPAT. It declined from US$10,451 million in 2021 to US$332 million in 2023, reflecting the decrease in NOPAT. Economic profit improved to US$2,323 million in 2024 and rose dramatically to US$16,379 million in 2025, driven by the substantial increase in NOPAT. This indicates that the company generated increasing value for its investors over the period, particularly in the final year.
Overall, the period was characterized by initial challenges in profitability, followed by a strong recovery and significant value creation in the most recent year. The consistent cost of capital and increasing invested capital suggest a strategic focus on growth and capital deployment, ultimately leading to improved economic returns.
Net Operating Profit after Taxes (NOPAT)
Johnson & Johnson, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-28), 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).
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 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense, net of portion capitalized = Adjusted interest expense, net of portion capitalized × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net earnings.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
9 Elimination of discontinued operations.
The reported Net Operating Profit After Taxes (NOPAT) demonstrates considerable fluctuation over the five-year period. While net earnings exhibit volatility, NOPAT presents a distinct pattern of decline followed by recovery.
- Overall Trend
- NOPAT decreased from US$18,861 million in 2021 to US$8,905 million in 2023, representing a substantial reduction. However, a significant recovery is then observed, with NOPAT increasing to US$11,461 million in 2024 and further to US$28,330 million in 2025. This indicates a period of operational challenges followed by improved performance.
- Year-over-Year Changes
- A decrease in NOPAT of approximately 14.8% is noted between 2021 and 2022. The most significant decline occurred between 2022 and 2023, with a decrease of roughly 44.3%. Conversely, the largest increase in NOPAT was observed between 2024 and 2025, showing a growth of approximately 147.2%. The increase from 2023 to 2024 was approximately 28.7%.
- Relationship to Net Earnings
- While both NOPAT and net earnings fluctuate, they do not move in perfect correlation. For example, net earnings decreased substantially from 2021 to 2022, while the NOPAT decrease was less pronounced. In 2023, net earnings increased significantly, but NOPAT remained comparatively low. This divergence suggests factors beyond core operational profitability are influencing net earnings, such as non-operating items or accounting adjustments.
The substantial recovery in NOPAT during 2024 and 2025 suggests successful implementation of operational improvements, cost controls, or favorable market conditions. Further investigation into the drivers behind these changes is warranted to understand the sustainability of the recent performance.
Cash Operating Taxes
Johnson & Johnson, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-28), 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).
The provision for taxes on income and cash operating taxes exhibited fluctuating behavior over the observed five-year period. A review of the figures reveals distinct patterns in both metrics, suggesting potential influences from changes in accounting practices, tax regulations, or operational performance.
- Provision for Taxes on Income
- The provision for taxes on income increased significantly from US$1,898 million in 2021 to US$3,784 million in 2022. This was followed by a substantial decrease to US$1,736 million in 2023. A moderate increase occurred in 2024, reaching US$2,621 million, before a considerable rise to US$5,777 million in 2025. This pattern indicates considerable volatility, potentially linked to one-time gains or losses, changes in tax rates, or alterations in deferred tax assets and liabilities.
- Cash Operating Taxes
- Cash operating taxes demonstrated an upward trend from US$4,010 million in 2021 to US$5,411 million in 2022, mirroring the increase observed in the provision for taxes on income. A further increase to US$5,700 million occurred in 2023, representing the highest value in the observed period. Subsequently, cash operating taxes decreased to US$4,692 million in 2024 and continued to decline to US$4,232 million in 2025. This suggests a potential decoupling from the provision for taxes on income in the later years, possibly due to timing differences in tax payments or changes in tax credits utilized.
The divergence between the provision for taxes on income and cash operating taxes is particularly noticeable in 2024 and 2025. While the provision for taxes on income increased substantially in 2025, cash operating taxes decreased. This discrepancy warrants further investigation to determine the underlying causes, such as changes in the utilization of net operating loss carryforwards, installment payments, or other tax planning strategies. The fluctuations observed in both metrics suggest a dynamic tax environment and the potential for significant impacts on future financial performance.
- Relationship between Metrics
- In 2021, 2022, and 2023, cash operating taxes were consistently higher than the provision for taxes on income. However, this relationship shifted in 2024 and 2025, with the provision for taxes on income exceeding cash operating taxes. This reversal could indicate a build-up of deferred tax liabilities or a change in the timing of tax payments relative to reported income.
Invested Capital
Johnson & Johnson, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-28), 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).
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.
The invested capital of the company exhibited a fluctuating pattern over the five-year period. Total reported debt & leases and shareholders’ equity, the components of invested capital, both demonstrated variability during this time. An initial increase in invested capital was followed by a period of decline and subsequent growth.
- Invested Capital Trend
- Invested capital increased from US$98,066 million in 2021 to US$113,818 million in 2022, representing a substantial rise. This was followed by a decrease to US$99,118 million in 2023. A further increase was observed in 2024, reaching US$106,513 million, before a significant jump to US$138,153 million in 2025. This suggests a period of expansion followed by consolidation and then renewed growth.
- Debt & Leases
- Total reported debt & leases increased from US$34,751 million in 2021 to US$40,959 million in 2022. A notable decrease occurred in 2023, with debt falling to US$30,432 million. Debt levels then rose again in 2024 to US$37,834 million, and continued to increase substantially in 2025, reaching US$49,333 million. This indicates a dynamic debt management strategy, potentially influenced by investment opportunities or financing needs.
- Shareholders’ Equity
- Shareholders’ equity showed a modest increase from US$74,023 million in 2021 to US$76,804 million in 2022. A decline was then recorded in 2023, with equity decreasing to US$68,774 million. Equity recovered somewhat in 2024, reaching US$71,490 million, and experienced a more significant increase in 2025, rising to US$81,544 million. These fluctuations may be attributable to profitability, dividend payouts, and share repurchase activities.
The substantial increase in invested capital in 2025 appears to be driven by a combination of increased debt and shareholders’ equity. The relative contributions of each component to the overall invested capital change over time, suggesting shifts in the company’s capital structure.
Cost of Capital
Johnson & Johnson, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-28).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Borrowings3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| 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 | ÷ | = | × | = | |||||||||
| 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 | ÷ | = | × | = | |||||||||
| 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
Johnson & Johnson, economic spread ratio calculation, comparison to benchmarks
| Dec 28, 2025 | Dec 29, 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. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-28), 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).
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 considerable fluctuation over the five-year period. Initial values were relatively strong, followed by a significant decline, and then a substantial recovery towards the end of the observed timeframe. A detailed examination of the economic spread ratio and its underlying components reveals key insights into the company’s performance.
- Economic Spread Ratio Trend
- The economic spread ratio began at 10.66% in 2021, indicating a strong ability to generate returns exceeding the cost of capital. A marked decrease was observed in 2022, with the ratio falling to 5.59%. This downward trend continued into 2023, reaching a low of 0.33%, suggesting a substantial reduction in the margin by which returns exceeded the cost of capital. A recovery commenced in 2024, with the ratio increasing to 2.18%, and accelerated significantly in 2025, reaching 11.86%, surpassing the initial value recorded in 2021.
- Relationship to Economic Profit
- The fluctuations in the economic spread ratio correlate with changes in economic profit. The substantial decline in economic profit from US$10,451 million in 2021 to US$332 million in 2023 aligns with the corresponding decrease in the economic spread ratio. Conversely, the significant increase in economic profit to US$16,379 million in 2025 mirrors the substantial rise in the economic spread ratio.
- Relationship to Invested Capital
- Invested capital increased from US$98,066 million in 2021 to US$113,818 million in 2022, contributing to the initial decline in the economic spread ratio as economic profit decreased more rapidly. While invested capital decreased slightly in 2023 to US$99,118 million, the economic spread ratio continued to fall due to the dramatic reduction in economic profit. The subsequent increases in both economic profit and invested capital in 2024 and 2025 resulted in a strong recovery of the economic spread ratio, with invested capital reaching US$138,153 million in 2025.
The observed pattern suggests a period of diminished profitability relative to capital employed, followed by a strong resurgence. The company’s ability to improve its economic spread ratio in recent years indicates enhanced efficiency in capital allocation and/or improved operational performance.
Economic Profit Margin
Johnson & Johnson, economic profit margin calculation, comparison to benchmarks
| Dec 28, 2025 | Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales to customers | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-28), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales to customers
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited substantial fluctuation over the five-year period. Initially strong, it experienced a significant decline before recovering to levels exceeding the initial value. This pattern is mirrored in the economic profit margin, which demonstrates a corresponding volatility.
- Economic Profit
- Economic profit began at US$10,451 million in 2021, then decreased to US$6,365 million in 2022. A dramatic reduction occurred in 2023, falling to US$332 million. A partial recovery was noted in 2024, with economic profit reaching US$2,323 million. The most substantial increase occurred between 2024 and 2025, resulting in economic profit of US$16,379 million.
- Sales to Customers
- Sales to customers showed a modest increase from US$93,775 million in 2021 to US$94,943 million in 2022. A decrease was observed in 2023, with sales falling to US$85,159 million. Sales partially recovered in 2024, reaching US$88,821 million, and continued to rise in 2025 to US$94,193 million, surpassing the 2022 level.
- Economic Profit Margin
- The economic profit margin began at 11.14% in 2021, declining to 6.70% in 2022. A substantial decrease was recorded in 2023, falling to 0.39%. The margin improved to 2.62% in 2024. A significant increase occurred in 2025, with the economic profit margin reaching 17.39%, exceeding the initial value from 2021.
The economic profit margin’s trajectory closely follows that of economic profit, indicating a strong relationship between overall profitability and sales volume. The substantial increase in both economic profit and margin in 2025 suggests improved operational efficiency or a favorable shift in the business environment. The low margin in 2023, despite relatively stable sales, indicates a period of significantly increased costs or reduced pricing power.