Economic Value Added (EVA)
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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: Assets
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
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Economic Profit
Johnson & Johnson, economic profit calculation
US$ in millions
| 12 months ended: | Dec 29, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT demonstrated a strong growth from 13,736 million US dollars in 2020 to a peak of 18,861 million US dollars in 2021. However, this was followed by a decline to 16,117 million in 2022 and a significant drop to 8,905 million in 2023. A partial recovery was observed in 2024, with NOPAT rising to 11,461 million, though it remained below the levels seen in 2021 and 2022.
- Cost of Capital
- The cost of capital remained relatively stable over the observed period, fluctuating slightly between 9.25% and 9.4%. This stability suggests consistent external financing conditions or the company’s risk profile, without significant changes that would impact investment decisions.
- Invested Capital
- Invested capital showed an overall increasing trend from 98,344 million US dollars in 2020 to a high of 113,818 million in 2022, indicating increased asset base or capital expenditures. This was followed by a decrease to 99,118 million in 2023, and a rebound to 106,513 million by the end of 2024. These fluctuations may reflect strategic investment adjustments or divestitures over time.
- Economic Profit
- Economic profit increased markedly from 4,639 million US dollars in 2020 to 9,723 million in 2021, reflecting efficient use of invested capital surpassing the cost of capital. It then declined significantly to 5,527 million in 2022, before turning negative with a loss of 410 million in 2023, indicating that returns fell below the cost of capital in that year. In 2024, economic profit improved again to 1,539 million but remained well below earlier peak levels, suggesting a gradual recovery in value creation.
- Overall Analysis
- The data reveals volatility in operational profitability and economic profit after 2021, with 2023 being a particularly challenging year marked by a sharp decline in NOPAT and a negative economic profit, signifying underperformance relative to capital costs. The partial recovery in 2024 suggests some improvement in operational efficiency or market conditions, but key profitability measures had not yet returned to their previous highs. The stable cost of capital across the period indicates consistent capital market perceptions and financial costs. Invested capital changes reflect dynamic capital allocation, with peaks and troughs that could correspond to strategic initiatives or asset rebalancing.
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
= × =
5 2024 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 2024 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 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 | ÷ | = | × | = | |||||||||
| 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 »
| 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: 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 | ||||||
| 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: 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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit experienced significant fluctuations over the analyzed period. It increased markedly from 4,639 million USD in 2020 to a peak of 9,723 million USD in 2021. However, there was a notable decline in 2022 to 5,527 million USD, followed by a drop into negative territory in 2023 at -410 million USD. The value partially recovered in 2024, reaching 1,539 million USD, yet still remained significantly lower than earlier peaks.
- Invested Capital
- The invested capital showed variability with a general upward trend, albeit with some decreases. Starting at 98,344 million USD in 2020, it slightly decreased in 2021 to 98,066 million USD. This was followed by a considerable increase to 113,818 million USD in 2022. Subsequently, the invested capital decreased in 2023 to 99,118 million USD but rose again in 2024 to 106,513 million USD. These fluctuations indicate changes in asset base or capital allocation during the period.
- Economic Spread Ratio
- The economic spread ratio mirrored the volatility seen in economic profit. It began at 4.72% in 2020, increased significantly to 9.91% in 2021, and then dropped sharply to 4.86% in 2022. In 2023, the ratio turned negative (-0.41%), reflecting a period where the return on invested capital fell below the cost of capital. By 2024, the ratio improved to 1.44%, suggesting a partial recovery but indicating continued challenges in generating returns above the capital cost.
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 | ||||||
| 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: 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 × ÷ =
3 Click competitor name to see calculations.
The financial data indicates variability in the company's economic profit over the five-year period. Economic profit shows a peak in the year ending 2021, reaching a high level, followed by a significant decline in 2023, where it registers a negative value, and a partial recovery in the final year analyzed.
Sales to customers exhibit fluctuating performance. There is a notable incremental trend from 2020 through 2022, culminating in the highest sales value in 2022. However, this is followed by a substantial decrease in 2023, which partially recovers by the end of 2024 but does not reach the previous peak levels observed in 2022.
The economic profit margin mirrors the economic profit trends. It rises substantially to the highest margin in 2021, declines sharply to a negative margin in 2023, and modestly improves thereafter. This indicates a shift in profitability efficiency relative to sales, with reduced profitability and even losses in the year 2023 before a slight recovery in the subsequent period.
- Economic Profit
- Increased sharply from 2020 to 2021, more than doubling.
- Declined in 2022, remaining positive but well below the 2021 peak.
- Dropped to a negative figure in 2023, indicating a loss in economic value.
- Partially recovered in 2024, but remained significantly lower than earlier peak levels.
- Sales to Customers
- Increased gradually from 2020 through 2022, reaching the highest sales figure in 2022.
- Experienced a notable decline in 2023.
- Showed signs of recovery in 2024 but did not fully regain prior peak sales.
- Economic Profit Margin
- Roughly doubled from 2020 to 2021, indicating improved profitability.
- Decreased in 2022 but stayed positive.
- Turned negative in 2023, reflecting unprofitable operations relative to sales.
- Improved in 2024, though margins remained low compared with earlier years.