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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Economic Profit
Linde plc, economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 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: 2025-12-31), 10-K (reporting date: 2024-12-31), 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 financial analysis indicates a consistent period of negative economic profit from 2021 to 2025, suggesting that the returns generated by operating assets have not exceeded the cost of the capital employed. Despite this, a trend of recovery is evident, characterized by a significant expansion in operational profitability starting in 2023.
- Net Operating Profit After Taxes (NOPAT) Trends
- A substantial upward trajectory is observed in NOPAT, which increased from US$ 3,800 million in 2021 to US$ 7,182 million by 2025. The most significant growth occurred between 2022 and 2023, where NOPAT rose by approximately 66.7%, signaling a marked improvement in operational efficiency or revenue generation.
- Cost of Capital and Invested Capital Dynamics
- The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 14.09% and 14.39%. Concurrently, invested capital exhibited a steady increase, growing from US$ 72,560 million in 2021 to US$ 80,195 million in 2025. This expansion of the capital base increases the total profit required to offset the cost of capital and achieve a positive economic value added.
- Economic Profit Performance
- Economic profit remained negative throughout the analyzed timeframe, confirming that the business did not generate value above its cost of capital. However, the magnitude of the economic loss improved significantly from a peak deficit of US$ 6,455 million in 2022 to a minimum of US$ 3,867 million in 2024. A slight reversal is noted in 2025, where economic profit declined to -US$ 4,114 million, which correlates with the accelerated increase in invested capital during that year.
Net Operating Profit after Taxes (NOPAT)
Linde plc, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 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 allowance for expected credit losses.
3 Addition of increase (decrease) in cost reduction programs.
4 Addition of increase (decrease) in equity equivalents to net income, Linde plc.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income, Linde plc.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
Net income and net operating profit after taxes (NOPAT) exhibited positive trends over the five-year period. Both metrics demonstrate consistent growth, with a notable acceleration in later years. The difference between net income and NOPAT remains relatively small throughout the period, suggesting limited impact from financing or non-operating activities.
- NOPAT Trend
- NOPAT increased from US$3,800 million in 2021 to US$7,182 million in 2025. The growth was moderate between 2021 and 2022, with an increase of approximately 0.87%. A significant jump occurred between 2022 and 2023, with NOPAT rising to US$6,386 million, representing a growth of approximately 66.7%. This upward trajectory continued from 2023 to 2025, with increases of approximately 6.8% and 12.5% respectively.
- Relationship between Net Income and NOPAT
- The values for net income and NOPAT are closely aligned across all reported years. In 2021, NOPAT was US$3,800 million, compared to net income of US$3,826 million. This difference of US$26 million remained relatively consistent in 2022 (US$3,833 million NOPAT vs. US$4,147 million net income, a difference of US$314 million). The gap widened slightly in 2023 (US$6,386 million NOPAT vs. US$6,199 million net income) and continued to widen in 2024 (US$6,814 million NOPAT vs. US$6,565 million net income) and 2025 (US$7,182 million NOPAT vs. US$6,898 million net income). These differences suggest increasing non-operating items or financing costs as a percentage of overall profitability.
The consistent growth in NOPAT indicates improving core operational profitability. The increasing divergence between NOPAT and net income warrants further investigation to understand the drivers of these differences, potentially related to interest expense, taxes, or other non-operating items. Overall, the trend in NOPAT is positive and suggests strong underlying business performance.
Cash Operating Taxes
Linde plc, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The provision for income taxes and cash operating taxes both demonstrate an increasing trend over the five-year period. However, the magnitude of increase differs between the two items, and both exhibit some fluctuation in growth rate.
- Provision for Income Taxes
- The provision for income taxes increased from US$1,262 million in 2021 to US$1,814 million in 2023, representing a substantial rise. Growth slowed in 2024 to US$2,002 million, and then decreased slightly to US$1,989 million in 2025. This suggests a potential stabilization or minor reduction in tax obligations after a period of significant growth.
- Cash Operating Taxes
- Cash operating taxes exhibited a consistent increase throughout the period, rising from US$1,537 million in 2021 to US$2,516 million in 2025. The increase from 2021 to 2022 was US$298 million, while the increase from 2024 to 2025 was US$311 million, indicating a relatively consistent absolute increase in cash tax payments. The growth rate, however, decelerated slightly over time.
- Relationship between Provision and Cash Taxes
- Cash operating taxes consistently exceeded the provision for income taxes in each year. The difference between the two items varied between approximately US$275 million and US$527 million. This difference suggests the presence of timing differences between accounting income and taxable income, or potentially deferred tax assets/liabilities. The gap narrowed slightly between 2021 and 2023, then widened again in 2024 and 2025, indicating a changing dynamic in these timing differences.
Overall, the company experienced increasing tax obligations, both from an accounting perspective (provision for income taxes) and a cash flow perspective (cash operating taxes). The consistent difference between the two items warrants further investigation to understand the underlying causes and potential implications for future cash flows and financial reporting.
Invested Capital
Linde plc, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 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 cost reduction programs.
5 Addition of equity equivalents to total Linde plc shareholders’ equity.
6 Removal of accumulated other comprehensive income.
Analysis of the presented financial information reveals trends in the company’s capital structure and invested capital over a five-year period. Total reported debt and leases demonstrate a consistent upward trajectory, while total shareholders’ equity exhibits more fluctuation. Invested capital generally increases throughout the period, though its growth appears to be influenced by both debt and equity movements.
- Debt & Leases
- Total reported debt and leases increased steadily from US$15,216 million in 2021 to US$28,069 million in 2025. The rate of increase accelerated in later years, with a substantial rise between 2024 and 2025. This suggests an increasing reliance on debt financing.
- Shareholders’ Equity
- Total Linde plc shareholders’ equity decreased from US$44,035 million in 2021 to US$38,092 million in 2024, before experiencing a slight increase to US$38,245 million in 2025. This initial decline could be attributed to share repurchases, dividend payments, or unrealized losses. The stabilization in 2025 suggests a potential bottoming out of equity reduction.
- Invested Capital
- Invested capital remained relatively stable between 2021 and 2023, fluctuating around US$72-73 billion. A noticeable increase occurred in 2024, reaching US$74,884 million, and continued into 2025, reaching US$80,195 million. This growth in invested capital correlates with the increasing debt levels, indicating that debt financing is contributing to capital expansion. The slight dip in invested capital between 2021 and 2022 is likely due to the decrease in shareholders’ equity offsetting the increase in debt.
The combined effect of rising debt and fluctuating equity results in a generally increasing trend in invested capital. The company appears to be actively employing debt to fund its operations and growth initiatives, particularly in the later years of the observed period. Further investigation into the specific uses of the increased debt would be beneficial to assess the efficiency and effectiveness of these capital allocation decisions.
Cost of Capital
Linde plc, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Linde plc, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 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 | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 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.
An analysis of economic value added metrics reveals a period of consistent negative economic profit, though a general trend toward improvement in the spread ratio is observable between 2021 and 2025.
- Economic Profit
- Economic profit remained negative throughout the observed period. After reaching a low of -6,455 million USD in 2022, the figures showed a recovery trend through 2023 and 2024, peaking at -3,867 million USD. This positive trajectory shifted in 2025, as economic profit widened again to -4,114 million USD.
- Invested Capital
- Invested capital exhibited a general upward trend, particularly accelerating in the final year. From a base of 72,560 million USD in 2021, capital levels remained relatively stable until 2023, after which they grew more aggressively, reaching 80,195 million USD by the end of 2025.
- Economic Spread Ratio
- The economic spread ratio demonstrates a consistent trend of improvement, moving from -8.89% in 2021 to -5.13% in 2025. The most significant improvement occurred between 2022 and 2023, where the ratio shifted from -8.92% to -5.69%. This indicates that while the company continues to generate negative economic value, the gap between its return on capital and its cost of capital is narrowing.
The synthesis of these metrics suggests that while the capital base has expanded, the efficiency of that capital relative to its cost has improved over the five-year horizon, despite a slight regression in absolute economic profit in the final year.
Economic Profit Margin
Linde plc, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 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
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by persistent negative economic profit, although a general trend of recovery and margin improvement is observable through 2024, followed by a slight reversal in 2025.
- Economic Profit Trend
- Economic profit remained negative throughout the analyzed period, indicating that the returns generated did not exceed the company's cost of capital. A significant reduction in losses occurred between 2022 and 2024, with the deficit narrowing from US$ 6,455 million to US$ 3,867 million. However, this recovery trend stalled in 2025, as economic profit declined again to negative US$ 4,114 million.
- Sales Performance
- Revenue demonstrated overall growth and relative stability, increasing from US$ 30,793 million in 2021 to US$ 33,986 million by 2025. While a slight dip was noted in 2023, sales generally trended upward, providing a larger base of operations during the period of narrowing economic losses.
- Economic Profit Margin Analysis
- The economic profit margin showed a consistent improvement from 2021 to 2024, moving from -20.94% to -11.72%. This indicates an increase in the efficiency of capital utilization relative to the cost of capital. This positive trajectory was interrupted in 2025, where the margin deteriorated slightly to -12.11%, mirroring the increase in economic losses for that year.
Overall, the data suggests a period of operational transition where the gap between actual returns and the required cost of capital was substantially reduced over three years, though the company has not yet achieved a positive economic profit.