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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2005
- Analysis of Revenues
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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 a decline, near-breakeven performance, and then a strong increase.
- 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 8.5% to 8.6% throughout the period. In 2021 and 2022 it was 8.55% and 8.54% respectively. It increased to 8.62% in 2023 and 2025, and returned to 8.55% in 2024. This stability suggests consistent financing conditions and a relatively unchanged risk profile.
- 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 increasing again to US$106,513 million in 2024. A significant increase was observed in 2025, reaching US$138,153 million. This suggests ongoing investment activity, with a substantial capital deployment in the final year.
- Economic Profit
- Economic profit followed the trend of NOPAT, declining from US$10,476 million in 2021 to US$358 million in 2023. It improved to US$2,351 million in 2024 and rose dramatically to US$16,415 million in 2025. This indicates that the entity generated economic value consistently, although the magnitude of that value varied considerably over the period. The substantial increase in 2025 suggests a significant improvement in value creation.
The observed patterns suggest a business that navigated a period of reduced profitability before experiencing a strong resurgence. The increase in invested capital, particularly in 2025, appears to have been accompanied by a corresponding increase in economic profit, indicating efficient capital allocation during that year.
Net Operating Profit after Taxes (NOPAT)
Johnson & Johnson, NOPAT calculation
US$ 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 strong, followed by a significant decline, and then a recovery culminating in a substantial increase in the most recent year.
- Economic Spread Ratio Trend
- In 2021, the economic spread ratio stood at 10.68%. This figure decreased substantially to 5.62% in 2022, representing a decline of approximately 47.3%. A more pronounced decrease occurred in 2023, with the ratio falling to 0.36%, a reduction of over 93% from the 2021 level. A modest recovery was observed in 2024, as the ratio increased to 2.21%. However, the most significant change occurred between 2024 and 2025, with the ratio rising sharply to 11.88%, exceeding the 2021 value by over 11%.
The economic spread ratio’s movement appears closely linked to the performance of economic profit. The substantial declines in the ratio in 2022 and 2023 coincide with significant reductions in economic profit. Conversely, the recovery in the ratio in 2024 and the strong increase in 2025 align with the increasing economic profit figures.
- Invested Capital Relationship
- Invested capital generally increased over the period, rising from US$98,066 million in 2021 to US$138,153 million in 2025. However, the economic spread ratio did not consistently follow this trend. The increase in invested capital in 2022 did not prevent a decline in the economic spread ratio. This suggests that increases in invested capital alone do not guarantee a corresponding increase in the economic spread ratio; profitability, as reflected in economic profit, is a critical factor.
The substantial increase in the economic spread ratio in 2025, coupled with the highest economic profit value over the period, indicates a significant improvement in the return generated on invested capital during that year. This suggests enhanced efficiency and value creation.
Economic Profit Margin
Johnson & Johnson, economic profit margin calculation, comparison to benchmarks
| Dec 28, 2025 | Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 significant fluctuation over the five-year period. Initially strong, it experienced a substantial 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$10,476 million in 2021, representing a peak within the observed timeframe. A marked decrease followed in 2022, falling to US$6,394 million. The most significant reduction occurred in 2023, with economic profit plummeting to US$358 million. A partial recovery was noted in 2024, reaching US$2,351 million, before a substantial increase in 2025 brought economic profit to US$16,415 million, surpassing the 2021 level.
- Sales to Customers
- Sales to customers demonstrated relative stability between 2021 and 2023, fluctuating around the US$94 billion mark. A decrease was observed in 2023, with sales falling to US$85,159 million. Sales then increased in 2024 to US$88,821 million, and continued to rise in 2025, reaching US$94,193 million, returning to levels comparable to those seen in 2021 and 2022.
- Economic Profit Margin
- The economic profit margin began at 11.17% in 2021. It decreased to 6.73% in 2022, continuing a downward trend to a low of 0.42% in 2023. A modest improvement was seen in 2024, with the margin rising to 2.65%. The most substantial increase occurred in 2025, with the economic profit margin reaching 17.43%, significantly exceeding all prior values within the period.
The substantial increase in economic profit margin in 2025, despite a sales level comparable to earlier years, suggests improved efficiency in generating profit from sales. The low margin in 2023 coincided with the lowest economic profit, indicating a period of diminished profitability relative to sales. The correlation between economic profit and economic profit margin is strong, with both metrics exhibiting similar patterns of decline and recovery.