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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Lowe’s Cos. Inc. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Current Ratio since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
- Analysis of Debt
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Economic Profit
Lowe’s Cos. Inc., economic profit calculation
US$ in millions
| 12 months ended: | Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
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 data over the six-year period reveals several notable trends and fluctuations in key performance indicators.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT demonstrates a general upward trend from 2020 to 2022, peaking at 9,827 million US dollars in 2022. However, this peak is followed by a significant decline to 7,020 million in 2023. The metric then recovers to some extent in 2024, increasing to 8,789 million, before slightly decreasing again to 8,137 million in 2025.
- Cost of Capital
- The cost of capital fluctuates within a relatively narrow range, starting at 11.82% in 2020 and rising to a peak of 13.97% in 2022. Thereafter, it gradually decreases to 13.41% by 2025, indicating some moderation in the overall capital costs despite previous increases.
- Invested Capital
- Invested capital shows an inconsistent pattern. It begins at 26,717 million in 2020, rises slightly in 2021 to 28,534 million, then declines steadily through 2023 to 24,710 million. Following this decline, it experiences a modest recovery in 2024 and 2025, reaching 26,276 million.
- Economic Profit
- Economic profit exhibits significant volatility. It more than triples from 1,938 million in 2020 to 6,153 million in 2022, reflecting improved profitability relative to the cost of capital. In 2023, economic profit decreases sharply to 3,776 million but then recovers partially to 5,273 million in 2024, before declining again to 4,613 million in 2025. This pattern suggests sensitivity to fluctuations in both operating results and capital costs over the years.
Overall, the period between 2020 and 2025 is characterized by growth in profitability metrics through 2022, followed by a marked decrease in 2023 and partial recovery in subsequent years. The cost of capital steadily increased until 2022 but showed signs of easing thereafter. Invested capital trends downward after 2021 but recovers slightly by 2025. The volatility in economic profit parallels changes in operating profit and invested capital, highlighting a dynamic financial environment with varying returns on invested resources.
Net Operating Profit after Taxes (NOPAT)
Lowe’s Cos. Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
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 amount capitalized = Adjusted interest expense, net of amount 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.
- Net Earnings
- The net earnings of the company demonstrated a significant upward trend from 2020 to 2022, rising from 4,281 million US dollars to 8,442 million US dollars. This almost doubled the net earnings within a two-year period, indicating robust profitability. However, in 2023, there was a noticeable decline to 6,437 million US dollars, followed by a partial recovery in 2024 to 7,726 million US dollars. The most recent data for 2025 shows a decrease again to 6,957 million US dollars, suggesting some volatility or challenges impacting net earnings in the latter period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT figures align with the general trend observed in net earnings. Starting at 5,097 million US dollars in 2020, NOPAT increased steadily through 2021 and peaked at 9,827 million US dollars in 2022. This indicates improved operational efficiency and profitability. Following the peak, NOPAT decreased to 7,020 million US dollars in 2023, then rose again to 8,789 million US dollars in 2024, before declining to 8,137 million US dollars in 2025. Although the fluctuations in NOPAT mirror those in net earnings, the values still reflect a relatively strong operating performance over the years.
Cash Operating Taxes
Lowe’s Cos. Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
The data reflects the annual figures for income tax provision and cash operating taxes over a six-year period. Both financial items show a general upward trend from 2020 to 2023, followed by a noticeable decline in the later years.
- Income Tax Provision
- The income tax provision increased significantly from 1,342 million USD in 2020 to a peak of 2,766 million USD in 2022. After 2022, the provision declined steadily to 2,196 million USD by 2025. This pattern suggests a rise in taxable income or tax liabilities initially, followed by effective tax management or reduced taxable income in the later years.
- Cash Operating Taxes
- Cash operating taxes also exhibit consistent growth, increasing from 1,386 million USD in 2020 to a peak of 3,055 million USD in 2023. Post-2023, these taxes decreased to 2,501 million USD by 2025. This trend aligns closely with the income tax provision pattern, indicating cash tax payments followed similar dynamics, perhaps influenced by timing differences or changes in tax regulations.
Overall, the data shows strong growth in tax-related expenses through early years, peaking around 2022-2023, with subsequent reductions suggesting strategic tax planning, fluctuations in earnings, or changes in tax rules that impacted both provision and cash taxes similarly.
Invested Capital
Lowe’s Cos. Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to shareholders’ equity (deficit).
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investments.
The financial data reveals several notable trends over the periods analyzed. One prominent pattern is the consistent increase in total reported debt and leases from 23,750 million US dollars in early 2020 to a peak of 40,145 million US dollars in early 2024, followed by a slight reduction to 39,678 million US dollars in early 2025. This indicates a significant rise in the company's leverage over the five-year period, particularly between 2021 and 2024.
Shareholders' equity shows a concerning downward trajectory, decreasing from 1,972 million US dollars in early 2020 to a negative value starting in 2022. The deficit deepens sharply from -4,816 million US dollars in early 2022 to a low point around -15,050 million US dollars in early 2024, with a minor improvement to -14,231 million US dollars in early 2025. This negative equity position suggests substantial accumulated losses or other equity-reducing events, which may impact the company’s financial stability and shareholder confidence.
Invested capital fluctuates throughout the period, starting at 26,717 million US dollars in early 2020 and peaking at 28,534 million US dollars in early 2021. Subsequently, it declines to a low of 24,710 million US dollars in early 2023 before gradually increasing again to 26,276 million US dollars by early 2025. These movements reflect variations in the company’s long-term investments and financing structure, possibly influenced by the changes in debt and equity.
- Total Reported Debt & Leases
- Shows a strong upward trend from 2020 through 2024, increasing by approximately 69%, followed by a slight decrease in 2025.
- Shareholders’ Equity (Deficit)
- Transitions from positive equity into a growing deficit starting in 2022, with the deficit nearly tripling by 2024 and remaining substantial in 2025.
- Invested Capital
- Peaks in 2021, declines through 2023, then recovers modestly by 2025, suggesting adjustments in capital investment and financing.
Overall, the company exhibits increasing financial leverage and deteriorating equity over the analyzed period, which may reflect operational challenges, increased borrowing, or sustained losses. The minor recovery in invested capital in the later periods could indicate attempts to stabilize or improve financial structure. Close attention to the relationship between debt levels and equity is warranted to assess ongoing financial health and risk exposure.
Cost of Capital
Lowe’s Cos. Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-01-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-02-02).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-02-03).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-01-28).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-01-29).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-01-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Lowe’s Cos. Inc., economic spread ratio calculation, comparison to benchmarks
| Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| TJX Cos. Inc. | |||||||
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
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 analysis of the financial data reveals notable trends in economic profit, invested capital, and economic spread ratio over the six-year period.
- Economic Profit (US$ in millions)
- Economic profit exhibited a generally increasing trend from 2020 to 2024, rising from 1,938 million USD in 2020 to a peak of 6,153 million USD in 2022. Thereafter, it showed some fluctuations, declining to 3,776 million USD in 2023, then recovering to 5,273 million USD in 2024 before a slight decrease to 4,613 million USD in 2025. Overall, the data reflects a strong growth followed by moderation in economic profit levels towards the end of the period.
- Invested Capital (US$ in millions)
- Invested capital demonstrated a relatively stable pattern with minor fluctuations. It increased slightly from 26,717 million USD in 2020 to 28,534 million USD in 2021, followed by a decline to 24,710 million USD by 2023. A subsequent moderate recovery was observed, with invested capital reaching 26,276 million USD in 2025. This suggests controlled adjustments in capital investments over the years without significant expansion or contraction.
- Economic Spread Ratio (%)
- There was a marked improvement in the economic spread ratio throughout the period. Starting at 7.25% in 2020, it increased steadily to reach a high of 23.4% in 2022. This substantial increase indicates enhanced profitability relative to capital costs during that period. The ratio declined to 15.28% in 2023 but rebounded to 20.35% in 2024 before a modest decline to 17.56% in 2025. Overall, the economic spread ratio remains significantly elevated compared to the initial year, implying strong value generation capability.
In summary, the financial data indicates robust profitability improvements, particularly notable through the economic profit and economic spread ratio increases up to 2022. Although some volatility is observed subsequently, both metrics maintain levels considerably above those at the beginning of the period. Invested capital has remained relatively steady, implying that these profitability gains have been achieved largely through improved efficiency or operational performance rather than expansion of capital investment.
Economic Profit Margin
Lowe’s Cos. Inc., economic profit margin calculation, comparison to benchmarks
| Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | |||||||
| Net sales | |||||||
| Add: Increase (decrease) in deferred revenue | |||||||
| Adjusted net sales | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | |||||||
| Home Depot Inc. | |||||||
| TJX Cos. Inc. | |||||||
Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The data reflects financial performance metrics over a six-year period ending January 31, 2025. Several notable trends and patterns are observable.
- Economic Profit
- Economic profit exhibits significant growth from 2020 to 2022, increasing from 1,938 million US dollars to 6,153 million US dollars. However, this upward trajectory is followed by a decline to 3,776 million in 2023. The trend then reverses gently, recovering to 5,273 million in 2024 but again dipping somewhat to 4,613 million in 2025. This pattern suggests variability and may indicate the influence of fluctuating market conditions or operational challenges impacting profitability after the peak in 2022.
- Adjusted Net Sales
- Adjusted net sales show a steady increase from 72,135 million US dollars in 2020 to a peak of 96,822 million in 2023. After this peak, sales decline to 86,206 million in 2024 and further to 83,667 million in 2025. This pattern points to a strong sales growth phase culminating in early 2023, followed by a notable contraction over the subsequent two years, which could reflect market saturation, competitive pressures, or macroeconomic influences.
- Economic Profit Margin
- The economic profit margin trends mirror the economic profit figures, rising from 2.69% in 2020 to a peak of 6.36% in 2022. After a reduction to 3.9% in 2023, it climbs again to 6.12% in 2024 before declining slightly to 5.51% in 2025. These fluctuations suggest periodic changes in profitability relative to sales, with peak efficiency occurring in 2022 and 2024, and temporary setbacks in the years immediately after.
Overall, the financial data indicates a period of strong growth up to 2022, followed by volatility in both sales and profitability. While sales peaked in early 2023 before declining, economic profit margins have shown more resilience with some recovery post-2023, implying efforts to manage expenses or improve operational efficiency despite declining top-line revenue.