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:
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Geographic Areas
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) 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
= – × =
- Net operating profit after taxes (NOPAT)
- The NOPAT increased significantly from 13,736 million US dollars in 2020 to a peak of 18,861 million US dollars in 2021. However, it declined to 16,117 million in 2022 and experienced a sharper decrease in 2023 to 8,905 million. There was a partial recovery in 2024, with NOPAT rising to 11,461 million but still remaining below the earlier peak.
- Cost of capital
- The cost of capital remained relatively stable throughout the period, fluctuating narrowly between 9.26% and 9.41%. The highest recorded cost was 9.41% in 2023, and the lowest was 9.26% in 2020, indicating minimal variation in capital costs over the five years.
- Invested capital
- Invested capital showed some volatility with an initial slight decrease from 98,344 million US dollars in 2020 to 98,066 million in 2021, followed by a notable increase to 113,818 million in 2022. Subsequently, it declined again to 99,118 million in 2023 before rising to 106,513 million in 2024. This indicates fluctuating investment levels with a general upward trend in the latter years compared to the start of the period.
- Economic profit
- Economic profit exhibited strong growth from 4,631 million US dollars in 2020 to 9,715 million in 2021, reflecting improved value creation. However, it decreased substantially to 5,518 million in 2022 and turned negative in 2023 with a loss of 418 million, indicating value destruction during that year. In 2024, economic profit returned to a positive figure of 1,530 million, suggesting a partial recovery of value generation capacity.
- Overall Analysis
- Across the analyzed period, the company experienced fluctuations in profitability and value creation metrics. NOPAT and economic profit both peaked in 2021, followed by declines that culminated in a significant downturn in 2023. This downturn was marked by negative economic profit, suggesting operational challenges or inefficiencies relative to capital costs during that year. Invested capital levels showed variability but generally remained above 2020 levels in the final years. The cost of capital remained stable, indicating consistent funding costs. The partial recoveries observed in the final year suggest potential stabilization or improvement, but profitability and economic performance remain below the peak levels observed in 2021.
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 demonstrates significant fluctuations throughout the analyzed periods. It increased substantially from 4,631 million US dollars in 2020 to 9,715 million in 2021, indicating a marked improvement in value generation in that year. However, this was followed by a decrease to 5,518 million in 2022. In 2023, the economic profit turned negative, reaching -418 million, which signifies a period of loss or value destruction. The figure partially recovers in 2024 to 1,530 million, yet it remains well below the peak observed in 2021.
- Invested Capital
- Invested capital exhibits some variability with an overall upward trend over the five-year period. Starting at 98,344 million US dollars in 2020, it stayed relatively stable in 2021 at 98,066 million. There was a notable increase in 2022 reaching 113,818 million, indicating a higher asset base or increased capital investments. This was followed by a decline to 99,118 million in 2023, but it rose again in 2024 to 106,513 million. The trend suggests fluctuations in capital deployment, with a general rising tendency over time.
- Economic Spread Ratio
- The economic spread ratio shows a pattern closely tied to changes in economic profit. It doubled from 4.71% in 2020 to 9.91% in 2021, reflecting improved returns on invested capital. In 2022, the ratio decreased to 4.85%, nearly halving from the previous year. In 2023, the ratio turned negative at -0.42%, which aligns with the negative economic profit and indicates the company earned less than its cost of capital during that period. The ratio improved to 1.44% in 2024, signaling a modest return that is positive but significantly lower than earlier years.
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.
- Sales to customers
- Sales to customers demonstrated an overall fluctuating trend over the five-year period. Starting at 82,584 million US dollars in 2020, sales grew significantly to 93,775 million in 2021 and further increased slightly to 94,943 million in 2022. However, in 2023, there was a noteworthy decline to 85,159 million, followed by a partial recovery in 2024 with sales amounting to 88,821 million. This pattern indicates a peak in sales during 2021-2022, with some subsequent volatility in the following years.
- Economic profit
- The economic profit experienced considerable volatility throughout the period. It rose markedly from 4,631 million US dollars in 2020 to a peak of 9,715 million in 2021. This was followed by a sharp decline to 5,518 million in 2022 and further deterioration into negative territory in 2023 with a loss of 418 million. A recovery was observed in 2024 with economic profit returning to a positive value of 1,530 million, although this remained significantly lower than earlier peak levels. The fluctuation in economic profit suggests challenges in maintaining profitability despite variations in sales volume.
- Economic profit margin
- The economic profit margin mirrored the trends observed in economic profit. It rose from 5.61% in 2020 to a high of 10.36% in 2021, indicating improved profitability relative to sales in that year. The margin then declined sharply to 5.81% in 2022 and turned negative to -0.49% in 2023, reflecting the period when economic profit was negative. In 2024, the margin showed signs of recovery to 1.72%, though still well below earlier highs. The negative margin in 2023 highlights a year of inefficiency or increased costs relative to revenue generation.
- Overall analysis
- The data indicate that the company experienced its strongest financial performance in 2021, with peak sales, economic profit, and margin. However, the following years saw declining profitability and increased volatility, culminating in a loss and negative margin in 2023 despite relatively stable sales compared to prior years. The partial recovery in 2024 suggests efforts to restore profitability are underway, but performance remains below the peak levels observed earlier in the period. These trends may warrant further investigation into cost management, market conditions, or strategic decisions affecting profitability and sales stability.