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.
Economic Profit
Lowe’s Cos. Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-30), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,308 – 14.71% × 36,866 = 2,885
The financial performance over the analyzed period exhibits significant volatility in economic profit, characterized by a peak in early 2022 followed by a general contraction toward 2026. While operational profitability remained resilient, a substantial increase in capital deployment in the final year exerted downward pressure on total value creation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated substantial fluctuation, reaching a peak of 9,827 million US$ in January 2022. Following a contraction to 7,020 million US$ in 2023, operating profits recovered and stabilized between 8,137 million and 8,789 million US$ through 2026, indicating a consistent capacity to generate operational earnings despite period-over-period variances.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 14.71% and 15.74%. A slight overall downward trend is observed, with the rate concluding at its lowest point of 14.71% in January 2026, which suggests a marginal reduction in the weighted average cost of financing.
- Invested Capital
- Invested capital experienced a decline from January 2021 through February 2023, falling from 28,534 million US$ to 24,710 million US$. This trend reversed thereafter, culminating in a sharp increase to 36,866 million US$ by January 2026. This significant spike in the final year indicates a substantial expansion of the capital base.
- Economic Profit Analysis
- Economic profit peaked in 2022 at 5,687 million US$, driven by the combination of the highest recorded NOPAT and a reduced capital base. However, a divergent trend emerged in 2026; despite stable NOPAT, economic profit declined to 2,885 million US$. This contraction is directly attributable to the surge in invested capital, which increased the capital charge and eroded the surplus generated over the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Lowe’s Cos. Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-30), 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).
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 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 4,756 × 4.43% = 211
5 2026 Calculation
Tax benefit of interest expense, net of amount capitalized = Adjusted interest expense, net of amount capitalized × Statutory income tax rate
= 1,738 × 21.00% = 365
6 Addition of after taxes interest expense to net earnings.
7 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 121 × 21.00% = 25
8 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited a generally positive trajectory over the observed period, though with some fluctuation. Initial values demonstrate growth followed by a period of decline and subsequent stabilization. A comparison with net earnings reveals distinct patterns in profitability.
- Overall NOPAT Trend
- NOPAT increased from US$7,056 million in January 2021 to a peak of US$9,827 million in January 2022, representing a substantial year-over-year increase. Following this peak, NOPAT decreased to US$7,020 million in February 2023, nearly returning to the level observed in 2021. A subsequent recovery occurred, with NOPAT reaching US$8,789 million in February 2024. The trend then moderates, with values of US$8,137 million and US$8,308 million reported for January 2025 and January 2026, respectively.
- NOPAT vs. Net Earnings
- While both NOPAT and net earnings generally moved in the same direction, the magnitude of change differed. The increase from 2021 to 2022 was more pronounced for net earnings (44.5% increase) than for NOPAT (39.3% increase). Conversely, the decline from 2022 to 2023 was more significant for net earnings (23.8% decrease) than for NOPAT (3.1% decrease). This divergence suggests that factors beyond core operating profitability, such as financing costs or non-operating items, significantly impacted net earnings.
- Recent Performance
- The most recent two years (January 2025 and January 2026) show a relatively stable NOPAT, fluctuating within a narrow range of US$8,137 million to US$8,308 million. This suggests a potential plateauing of operating profitability or a balancing of offsetting factors affecting NOPAT.
In summary, NOPAT demonstrated initial strong growth, followed by a correction, and then a period of stabilization. The relationship between NOPAT and net earnings indicates that non-operating factors play a role in overall profitability.
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Cash Operating Taxes
Lowe’s Cos. Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-30), 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).
The income tax provision and cash operating taxes exhibited fluctuating behavior over the observed period. Both metrics initially increased before demonstrating a subsequent decline.
- Income Tax Provision
- The income tax provision increased from US$1,904 million in 2021 to US$2,766 million in 2022, representing a substantial rise. This was followed by a decrease to US$2,599 million in 2023 and a further reduction to US$2,449 million in 2024. The trend continued with a decline to US$2,196 million in 2025 and US$2,093 million in 2026. This indicates a consistent downward trend in reported income tax provision over the latter half of the period.
- Cash Operating Taxes
- Cash operating taxes mirrored the general trend of the income tax provision. An increase was observed from US$2,217 million in 2021 to US$2,847 million in 2022. The value peaked at US$3,055 million in 2023 before decreasing to US$2,771 million in 2024. Further declines were recorded in 2025 (US$2,501 million) and 2026 (US$2,169 million), demonstrating a consistent reduction in cash taxes paid.
- Relationship between Metrics
- Cash operating taxes consistently exceeded the income tax provision throughout the entire period. The difference between the two metrics remained relatively stable, fluctuating between approximately US$300 million and US$400 million annually. This suggests that timing differences related to tax payments and accruals are a consistent feature of the company’s tax position.
- Overall Trend
- From 2022 to 2026, both the income tax provision and cash operating taxes experienced a net decrease. The rate of decline appeared to accelerate in the later years of the period, particularly from 2024 to 2026. This could be attributable to changes in tax laws, improved tax planning strategies, or shifts in the company’s profitability and taxable income.
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Invested Capital
Lowe’s Cos. Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-01-30), 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).
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 reported invested capital demonstrates fluctuations over the observed period. Initially, a decrease is noted, followed by a period of relative stability, and then a significant increase towards the end of the timeframe. A closer examination of the components contributing to invested capital reveals key trends in the company’s financial structure.
- Total Debt & Leases
- Total reported debt and leases exhibits a consistent upward trajectory from 2021 to 2024, increasing from US$26,211 million to US$40,145 million. A slight decrease is observed in 2025 to US$39,678 million, but this is followed by a further increase to US$44,677 million in 2026. This suggests an increasing reliance on debt financing over the period.
- Shareholders’ Equity
- Shareholders’ equity experiences a substantial decline throughout the period. Beginning with a positive value of US$1,437 million in 2021, it transitions to a deficit by 2022, reaching a deficit of US$4,816 million. This negative trend continues, with the deficit deepening to US$15,050 million in 2024, before a modest improvement to a deficit of US$9,917 million in 2026. This indicates a consistent erosion of equity value.
- Invested Capital Trend
- Invested capital decreased from US$28,534 million in 2021 to US$24,710 million in 2023. It then stabilized, fluctuating between US$25,913 million and US$26,276 million in 2024 and 2025, respectively. A notable increase is observed in 2026, with invested capital rising to US$36,866 million. This final increase appears to be driven primarily by the increase in total debt and leases, offsetting the continued negative shareholders’ equity.
The interplay between debt and equity significantly influences the invested capital. The increasing debt levels, coupled with the declining shareholders’ equity, initially resulted in a decrease in invested capital. However, the substantial increase in debt in the later years ultimately drove the overall invested capital higher, despite the continued equity deficit. This pattern suggests a shift in the company’s capital structure towards greater debt financing.
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Cost of Capital
Lowe’s Cos. Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,195) | 131,195) | ÷ | 173,249) | = | 0.76 | 0.76 | × | 18.39% | = | 13.92% | ||
| Debt3 | 37,298) | 37,298) | ÷ | 173,249) | = | 0.22 | 0.22 | × | 4.06% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 4,756) | 4,756) | ÷ | 173,249) | = | 0.03 | 0.03 | × | 4.43% × (1 – 21.00%) | = | 0.10% | ||
| Total: | 173,249) | 1.00 | 14.71% | ||||||||||
Based on: 10-K (reporting date: 2026-01-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 130,350) | 130,350) | ÷ | 166,574) | = | 0.78 | 0.78 | × | 18.39% | = | 14.39% | ||
| Debt3 | 32,033) | 32,033) | ÷ | 166,574) | = | 0.19 | 0.19 | × | 3.97% × (1 – 21.00%) | = | 0.60% | ||
| Operating lease liability4 | 4,191) | 4,191) | ÷ | 166,574) | = | 0.03 | 0.03 | × | 4.28% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 166,574) | 1.00 | 15.08% | ||||||||||
Based on: 10-K (reporting date: 2025-01-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 145,335) | 145,335) | ÷ | 182,827) | = | 0.79 | 0.79 | × | 18.39% | = | 14.62% | ||
| Debt3 | 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 | 15.26% | ||||||||||
Based on: 10-K (reporting date: 2024-02-02).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 113,624) | 113,624) | ÷ | 148,912) | = | 0.76 | 0.76 | × | 18.39% | = | 14.03% | ||
| Debt3 | 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 | 14.75% | ||||||||||
Based on: 10-K (reporting date: 2023-02-03).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 150,571) | 150,571) | ÷ | 181,324) | = | 0.83 | 0.83 | × | 18.39% | = | 15.27% | ||
| Debt3 | 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 | 15.74% | ||||||||||
Based on: 10-K (reporting date: 2022-01-28).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 130,462) | 130,462) | ÷ | 159,901) | = | 0.82 | 0.82 | × | 18.39% | = | 15.00% | ||
| Debt3 | 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 | 15.55% | ||||||||||
Based on: 10-K (reporting date: 2021-01-29).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Lowe’s Cos. Inc., economic spread ratio calculation, comparison to benchmarks
| Jan 30, 2026 | Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 2,885) | 4,175) | 4,834) | 3,375) | 5,687) | 2,619) | |
| Invested capital2 | 36,866) | 26,276) | 25,913) | 24,710) | 26,296) | 28,534) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 7.83% | 15.89% | 18.66% | 13.66% | 21.63% | 9.18% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | — | -1.61% | -5.25% | -10.78% | -21.72% | -1.96% | |
| Home Depot Inc. | 4.61% | 6.87% | 12.86% | 16.92% | 21.37% | 12.21% | |
| TJX Cos. Inc. | 8.38% | 7.44% | 7.17% | 4.23% | 4.25% | -12.60% | |
Based on: 10-K (reporting date: 2026-01-30), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,885 ÷ 36,866 = 7.83%
4 Click competitor name to see calculations.
The financial performance concerning economic value added demonstrates a period of high volatility in profitability relative to the capital employed, culminating in a significant contraction of efficiency by January 2026.
- Economic Profit Analysis
- Economic profit exhibited substantial fluctuations throughout the period. An initial surge occurred between January 2021 and January 2022, with values rising from 2,619 million US$ to a peak of 5,687 million US$. This was followed by a sharp decline in 2023, a partial recovery in 2024 to 4,834 million US$, and a subsequent steady decrease ending at 2,885 million US$ in January 2026.
- Invested Capital Trends
- Invested capital followed a downward trajectory from January 2021 (28,534 million US$) through February 2023 (24,710 million US$), suggesting a period of capital optimization or divestment. Capital levels remained relatively stable between 2024 and 2025, hovering around 26 billion US$, before experiencing a sharp increase to 36,866 million US$ by January 2026.
- Economic Spread Ratio Interpretation
- The economic spread ratio, which measures the excess return over the cost of capital, mirrored the volatility of economic profit. The ratio peaked at 21.63% in January 2022, indicating maximum value creation efficiency. While the ratio remained in double digits from 2023 through 2025, it dropped precipitously to 7.83% in January 2026. This decline is the result of the simultaneous occurrence of falling economic profit and a substantial increase in invested capital, indicating a marked reduction in the rate of value creation per unit of capital invested.
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Economic Profit Margin
Lowe’s Cos. Inc., economic profit margin calculation, comparison to benchmarks
| Jan 30, 2026 | Jan 31, 2025 | Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 2,885) | 4,175) | 4,834) | 3,375) | 5,687) | 2,619) | |
| Net sales | 86,286) | 83,674) | 86,377) | 97,059) | 96,250) | 89,597) | |
| Add: Increase (decrease) in deferred revenue | 113) | (7) | (171) | (237) | 414) | 514) | |
| Adjusted net sales | 86,399) | 83,667) | 86,206) | 96,822) | 96,664) | 90,111) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 3.34% | 4.99% | 5.61% | 3.49% | 5.88% | 2.91% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | — | -1.07% | -3.07% | -6.07% | -11.34% | -0.84% | |
| Home Depot Inc. | 2.30% | 3.14% | 4.71% | 5.95% | 6.79% | 4.60% | |
| TJX Cos. Inc. | 3.47% | 2.98% | 2.79% | 1.73% | 1.73% | -8.77% | |
Based on: 10-K (reporting date: 2026-01-30), 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).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 2,885 ÷ 86,399 = 3.34%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant volatility in value creation, characterized by an initial surge in profitability followed by a fluctuating and ultimately declining trend through early 2026. The relationship between sales volume and economic profit indicates that value generation has not maintained a linear correlation with revenue peaks.
- Economic Profit Trends
- Economic profit experienced a sharp increase from US$ 2,619 million in 2021 to a peak of US$ 5,687 million in 2022. This was followed by a notable contraction in 2023, a partial recovery to US$ 4,834 million in 2024, and a consistent downward trajectory over the subsequent two years, ending at US$ 2,885 million in 2026.
- Adjusted Net Sales Performance
- Net sales showed growth during the first three years of the period, peaking at US$ 96,822 million in February 2023. A period of contraction followed, with sales declining to a low of US$ 83,667 million by January 2025, before showing a slight recovery to US$ 86,399 million in January 2026.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of absolute economic profit, reaching its highest point of 5.88% in 2022. After a dip to 3.49% in 2023, the margin recovered to 5.61% in 2024. However, a steady decline is observed thereafter, with the margin compressing to 4.99% in 2025 and further dropping to 3.34% by 2026, suggesting a reduction in the efficiency of value creation relative to sales.
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