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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Lowe’s Cos. Inc., economic profit calculation

US$ in millions

12 months ended:	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Net operating profit after taxes (NOPAT)¹	8,789)	7,020)	9,827)	7,056)	5,097)	2,817)
Cost of capital²	12.11%	11.73%	12.46%	12.32%	10.61%	12.47%
Invested capital³	25,913)	24,710)	26,296)	28,534)	26,717)	24,572)

Economic profit⁴	5,650)	4,121)	6,552)	3,540)	2,262)	(246)

Based on: 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), 10-K (reporting date: 2019-02-01).

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
= 8,789 – 12.11% × 25,913 = 5,650

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Lowe’s Cos. Inc. economic profit decreased from 2022 to 2023 but then increased from 2023 to 2024 not reaching 2022 level.

Lowe’s Cos. Inc., NOPAT calculation

US$ in millions

12 months ended:	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Net earnings	7,726)	6,437)	8,442)	5,835)	4,281)	2,314)
Deferred income tax expense (benefit)¹	5)	(188)	140)	(99)	139)	(157)
Increase (decrease) in deferred revenue²	(171)	(237)	414)	514)	(13)	(55)
Increase (decrease) in equity equivalents³	(166)	(425)	554)	415)	126)	(212)
Interest expense, net of amount capitalized	1,483)	1,160)	897)	872)	718)	652)
Interest expense, operating lease liability⁴	174)	152)	167)	172)	182)	281)
Adjusted interest expense, net of amount capitalized	1,657)	1,312)	1,064)	1,044)	900)	933)
Tax benefit of interest expense, net of amount capitalized⁵	(348)	(276)	(223)	(219)	(189)	(196)
Adjusted interest expense, net of amount capitalized, after taxes⁶	1,309)	1,037)	841)	825)	711)	737)
Interest income	(101)	(37)	(12)	(24)	(27)	(28)
Investment income, before taxes	(101)	(37)	(12)	(24)	(27)	(28)
Tax expense (benefit) of investment income⁷	21)	8)	3)	5)	6)	6)
Investment income, after taxes⁸	(80)	(29)	(9)	(19)	(21)	(22)
Net operating profit after taxes (NOPAT)	8,789)	7,020)	9,827)	7,056)	5,097)	2,817)

Based on: 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), 10-K (reporting date: 2019-02-01).

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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 4,224 × 4.11% = 174

⁵ 2024 Calculation
Tax benefit of interest expense, net of amount capitalized = Adjusted interest expense, net of amount capitalized × Statutory income tax rate
= 1,657 × 21.00% = 348

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
= 101 × 21.00% = 21

⁸ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Lowe’s Cos. Inc. NOPAT decreased from 2022 to 2023 but then increased from 2023 to 2024 not reaching 2022 level.

Lowe’s Cos. Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Income tax provision	2,449)	2,599)	2,766)	1,904)	1,342)	1,080)
Less: Deferred income tax expense (benefit)	5)	(188)	140)	(99)	139)	(157)
Add: Tax savings from interest expense, net of amount capitalized	348)	276)	223)	219)	189)	196)
Less: Tax imposed on investment income	21)	8)	3)	5)	6)	6)
Cash operating taxes	2,771)	3,055)	2,847)	2,217)	1,386)	1,427)

Based on: 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), 10-K (reporting date: 2019-02-01).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Lowe’s Cos. Inc. cash operating taxes increased from 2022 to 2023 but then decreased significantly from 2023 to 2024.

Lowe’s Cos. Inc., invested capital calculation (financing approach)

US$ in millions

	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Short-term borrowings	—)	499)	—)	—)	1,941)	722)
Current maturities of long-term debt	537)	585)	868)	1,112)	597)	1,110)
Long-term debt, excluding current maturities	35,384)	32,876)	23,859)	20,668)	16,768)	14,391)
Operating lease liability¹	4,224)	4,034)	4,657)	4,431)	4,444)	3,663)
Total reported debt & leases	40,145)	37,994)	29,384)	26,211)	23,750)	19,886)
Shareholders’ equity (deficit)	(15,050)	(14,254)	(4,816)	1,437)	1,972)	3,644)
Net deferred tax (assets) liabilities²	(248)	(250)	(164)	(340)	(216)	(294)
Deferred revenue³	2,633)	2,804)	3,041)	2,627)	2,113)	2,126)
Equity equivalents⁴	2,385)	2,554)	2,877)	2,287)	1,897)	1,832)
Accumulated other comprehensive (income) loss, net of tax⁵	(300)	(307)	36)	136)	136)	209)
Adjusted shareholders’ equity (deficit)	(12,965)	(12,007)	(1,903)	3,860)	4,005)	5,685)
Construction in progress⁶	(708)	(793)	(715)	(831)	(506)	(525)
Investments⁷	(559)	(484)	(470)	(706)	(532)	(474)
Invested capital	25,913)	24,710)	26,296)	28,534)	26,717)	24,572)

Based on: 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), 10-K (reporting date: 2019-02-01).

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Lowe’s Cos. Inc. invested capital decreased from 2022 to 2023 but then increased from 2023 to 2024 not reaching 2022 level.

Lowe’s Cos. Inc., cost of capital calculations

Feb 2, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	145,335)	145,335)	÷	182,827)	=	0.79	0.79	×	14.43%	=	11.47%
Debt, including finance lease obligations³	33,268)	33,268)	÷	182,827)	=	0.18	0.18	×	3.96% × (1 – 21.00%)	=	0.57%
Operating lease liability⁴	4,224)	4,224)	÷	182,827)	=	0.02	0.02	×	4.11% × (1 – 21.00%)	=	0.08%
Total:	182,827)					1.00					12.11%

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 »

Feb 3, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	113,624)	113,624)	÷	148,912)	=	0.76	0.76	×	14.43%	=	11.01%
Debt, including finance lease obligations³	31,254)	31,254)	÷	148,912)	=	0.21	0.21	×	3.86% × (1 – 21.00%)	=	0.64%
Operating lease liability⁴	4,034)	4,034)	÷	148,912)	=	0.03	0.03	×	3.78% × (1 – 21.00%)	=	0.08%
Total:	148,912)					1.00					11.73%

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 »

Jan 28, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	150,571)	150,571)	÷	181,324)	=	0.83	0.83	×	14.43%	=	11.98%
Debt, including finance lease obligations³	26,096)	26,096)	÷	181,324)	=	0.14	0.14	×	3.53% × (1 – 21.00%)	=	0.40%
Operating lease liability⁴	4,657)	4,657)	÷	181,324)	=	0.03	0.03	×	3.59% × (1 – 21.00%)	=	0.07%
Total:	181,324)					1.00					12.46%

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 »

Jan 29, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	130,462)	130,462)	÷	159,901)	=	0.82	0.82	×	14.43%	=	11.77%
Debt, including finance lease obligations³	25,008)	25,008)	÷	159,901)	=	0.16	0.16	×	3.74% × (1 – 21.00%)	=	0.46%
Operating lease liability⁴	4,431)	4,431)	÷	159,901)	=	0.03	0.03	×	3.88% × (1 – 21.00%)	=	0.08%
Total:	159,901)					1.00					12.32%

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 »

Jan 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	51,186)	51,186)	÷	77,097)	=	0.66	0.66	×	14.43%	=	9.58%
Debt, including finance lease obligations³	21,467)	21,467)	÷	77,097)	=	0.28	0.28	×	3.83% × (1 – 21.00%)	=	0.84%
Operating lease liability⁴	4,444)	4,444)	÷	77,097)	=	0.06	0.06	×	4.10% × (1 – 21.00%)	=	0.19%
Total:	77,097)					1.00					10.61%

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 »

Feb 1, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	87,480)	87,480)	÷	107,117)	=	0.82	0.82	×	14.43%	=	11.78%
Debt, including finance lease obligations³	15,975)	15,975)	÷	107,117)	=	0.15	0.15	×	4.04% × (1 – 21.00%)	=	0.48%
Operating lease liability⁴	3,663)	3,663)	÷	107,117)	=	0.03	0.03	×	7.68% × (1 – 21.00%)	=	0.21%
Total:	107,117)					1.00					12.47%

Based on: 10-K (reporting date: 2019-02-01).

¹ US$ in millions

² Equity. See details »

³ Debt, including finance lease obligations. See details »

⁴ Operating lease liability. See details »

Lowe’s Cos. Inc., economic spread ratio calculation, comparison to benchmarks

	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	5,650)	4,121)	6,552)	3,540)	2,262)	(246)
Invested capital²	25,913)	24,710)	26,296)	28,534)	26,717)	24,572)
Performance Ratio
Economic spread ratio³	21.80%	16.68%	24.92%	12.41%	8.47%	-1.00%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	—	-4.03%	-15.30%	4.79%	2.15%	-1.19%
Home Depot Inc.	17.22%	21.16%	25.66%	16.48%	23.56%	24.00%
TJX Cos. Inc.	10.63%	7.61%	7.53%	-9.39%	8.31%	7.59%

Based on: 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), 10-K (reporting date: 2019-02-01).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 5,650 ÷ 25,913 = 21.80%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Lowe’s Cos. Inc. economic spread ratio deteriorated from 2022 to 2023 but then improved from 2023 to 2024 not reaching 2022 level.

Lowe’s Cos. Inc., economic profit margin calculation, comparison to benchmarks

	Feb 2, 2024	Feb 3, 2023	Jan 28, 2022	Jan 29, 2021	Jan 31, 2020	Feb 1, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	5,650)	4,121)	6,552)	3,540)	2,262)	(246)

Net sales	86,377)	97,059)	96,250)	89,597)	72,148)	71,309)
Add: Increase (decrease) in deferred revenue	(171)	(237)	414)	514)	(13)	(55)
Adjusted net sales	86,206)	96,822)	96,664)	90,111)	72,135)	71,254)
Performance Ratio
Economic profit margin²	6.55%	4.26%	6.78%	3.93%	3.14%	-0.35%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	—	-2.27%	-7.99%	2.06%	0.83%	-0.54%
Home Depot Inc.	6.32%	7.43%	8.16%	6.20%	7.82%	7.58%
TJX Cos. Inc.	4.14%	3.11%	3.06%	-6.54%	3.72%	3.39%

Based on: 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), 10-K (reporting date: 2019-02-01).

¹ Economic profit. See details »

² 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 5,650 ÷ 86,206 = 6.55%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Lowe’s Cos. Inc. economic profit margin deteriorated from 2022 to 2023 but then improved from 2023 to 2024 not reaching 2022 level.

Lowe’s Cos. Inc. (NYSE:LOW)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin