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
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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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
= – × =
The analysis of the financial data reveals several important trends and fluctuations over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a growth from 13,736 million US$ in 2020 to a peak of 18,861 million US$ in 2021. This was followed by a decline in 2022 to 16,117 million US$, then a more significant drop in 2023 to 8,905 million US$. However, there was a recovery in 2024 to 11,461 million US$. The overall pattern indicates volatility with a marked decrease after 2021 and partial recovery afterward.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating slightly between 9.18% and 9.33%. This suggests a consistent expectation of return from investors and an unchanged risk profile associated with the capital employed.
- Invested Capital
- Invested capital showed some variability: starting at 98,344 million US$ in 2020, it slightly decreased to 98,066 million US$ in 2021, then increased significantly to 113,818 million US$ in 2022. Afterward, it dropped to 99,118 million US$ in 2023 but rose again in 2024 to 106,513 million US$. These fluctuations suggest changes in the asset base or capital deployment strategies over time.
- Economic Profit
- Economic profit followed a similar trend to NOPAT but with more pronounced effects. It increased from 4,708 million US$ in 2020 to 9,793 million US$ in 2021, and then fell to 5,608 million US$ in 2022. In 2023, it turned negative, reaching -338 million US$, indicating a period where the returns failed to cover the cost of capital. A partial recovery occurred in 2024 with economic profit rising to 1,614 million US$ but still well below earlier peak levels.
In summary, the financial performance experienced significant volatility, characterized by a strong peak in 2021 followed by declines in profitability and economic value added. The invested capital exhibited notable fluctuations which may reflect strategic adjustments. The cost of capital remained relatively steady, implying stable financing conditions. The negative economic profit in 2023 raises concerns about returns falling below the company's cost expectations during that year, albeit with some recovery thereafter.
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 displayed an upward trend from 2020 to 2021, increasing notably from 4,708 million USD to 9,793 million USD. However, a decline occurred in 2022, dropping to 5,608 million USD, followed by a negative value in 2023 at -338 million USD. The year 2024 showed a recovery with economic profit rising to 1,614 million USD, although it remained below the levels observed in 2020 and 2021.
- Invested Capital
- Invested capital remained relatively stable between 2020 and 2021, with a slight decrease from 98,344 million USD to 98,066 million USD. A substantial increase was observed in 2022, reaching 113,818 million USD. This was followed by a reduction in 2023 to 99,118 million USD, and an increase again in 2024 to 106,513 million USD. Overall, invested capital showed fluctuations but exhibited a generally upward movement over the five-year period.
- Economic Spread Ratio
- The economic spread ratio followed a pattern similar to economic profit. It saw a significant increase from 4.79% in 2020 to 9.99% in 2021, nearly doubling. This was followed by a decrease to 4.93% in 2022 and a sharp decline to negative territory at -0.34% in 2023, indicating a potentially unfavorable spread in that year. In 2024, the ratio recovered to 1.52%, though it remained substantially below the peak observed in 2021.
- Overall Insights
- The data suggests that the company experienced strong economic performance in 2021, reflected by high economic profit and a robust economic spread ratio. Following this peak, both economic profit and spread ratio declined significantly in subsequent years, particularly in 2023 where economic profit turned negative and economic spread ratio dropped below zero, indicating a period of diminished profitability or elevated costs of capital. Invested capital showed variability but did not display a consistent correlation with economic profit or spread ratio changes, implying that factors other than capital investment levels influenced profitability trends during these years. The partial recovery in 2024 highlights some improvement, yet performance remains below the earlier peak, signaling potential challenges in regaining prior profitability levels.
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.
- Economic Profit
- The economic profit showed significant variability over the analyzed period. It increased notably from 4,708 million US dollars in 2020 to a peak of 9,793 million US dollars in 2021. However, there was a decline in 2022 to 5,608 million US dollars, followed by a sharp reduction into negative territory in 2023 at -338 million US dollars. A recovery is observed in 2024, with economic profit rising to 1,614 million US dollars, although it remains below the levels seen in 2020 and 2021.
- Sales to Customers
- Sales experienced a generally upward trend from 2020 through 2022, increasing from 82,584 million US dollars to 94,943 million US dollars. In 2023, sales decreased significantly to 85,159 million US dollars but showed partial recovery in 2024, rising to 88,821 million US dollars. Despite this rebound, the 2024 sales figure remains below the 2022 peak.
- Economic Profit Margin
- The economic profit margin followed a pattern consistent with economic profit. It rose sharply from 5.7% in 2020 to 10.44% in 2021, then decreased to 5.91% in 2022. In 2023, the margin turned negative at -0.4%, before recovering slightly to 1.82% in 2024. This indicates that profitability relative to sales weakened substantially in 2023 and has only partially improved in the subsequent year, reflecting fluctuations in operational efficiency or cost management.
- Overall Insights
- The data reveals considerable fluctuations in both profitability and sales over the five-year period. After a period of growth reaching peaks in 2021 and 2022, the company faced a downturn in 2023 marked by negative economic profit and margin, as well as decreased sales. The partial recovery noted in 2024 suggests improvements but ongoing challenges remain in restoring prior profitability levels relative to sales. These patterns may suggest external market pressures or internal operational issues impacting financial performance during the recent years.