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 – 14.72% × 36,866 = 2,883
The financial performance over the six-year period is characterized by significant volatility in economic profit, driven by fluctuations in net operating profit after taxes (NOPAT) and a substantial shift in the invested capital base toward the end of the period. While the entity consistently generated positive economic profit, the efficiency of capital utilization varied considerably.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a non-linear trend, reaching a peak of US$ 9,827 million in 2022 before experiencing a sharp decline to US$ 7,020 million in 2023. A recovery followed in 2024, with figures stabilizing between US$ 8,137 million and US$ 8,308 million in the final two years of the analysis.
- Invested Capital
- A period of capital reduction occurred between 2021 and 2023, where invested capital declined from US$ 28,534 million to US$ 24,710 million. This was followed by a moderate increase through 2025, culminating in a sharp surge to US$ 36,866 million by January 30, 2026, representing a significant expansion of the capital base.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, oscillating within a narrow range between 14.72% and 15.75%. A slight downward trajectory is observed in the final year, reaching its lowest point of 14.72%.
- Economic Profit Analysis
- Economic profit peaked in 2022 at US$ 5,686 million, a result of the simultaneous increase in NOPAT and a reduction in invested capital. However, a downward trend is evident from 2024 onwards. By 2026, economic profit declined to US$ 2,883 million. This decline is primarily attributable to the substantial increase in invested capital in 2026, which outpaced the growth in NOPAT, thereby increasing the total capital charge and eroding the value added above 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$36,866 million. This final increase appears to be driven primarily by the increase in total debt and leases, offsetting the continued negative shareholders’ equity.
The interplay between debt and equity significantly influences the invested capital. The increasing debt levels, coupled with the declining shareholders’ equity, initially resulted in a decrease in invested capital. However, the substantial increase in debt in the later years ultimately drove the overall invested capital higher, despite the continued equity deficit. This pattern suggests a shift in the company’s capital structure towards greater debt financing.
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Cost of Capital
Lowe’s Cos. Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,195) | 131,195) | ÷ | 173,249) | = | 0.76 | 0.76 | × | 18.40% | = | 13.93% | ||
| Debt3 | 37,298) | 37,298) | ÷ | 173,249) | = | 0.22 | 0.22 | × | 4.06% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 4,756) | 4,756) | ÷ | 173,249) | = | 0.03 | 0.03 | × | 4.43% × (1 – 21.00%) | = | 0.10% | ||
| Total: | 173,249) | 1.00 | 14.72% | ||||||||||
Based on: 10-K (reporting date: 2026-01-30).
1 US$ 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 | × | 18.40% | = | 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 | × | 18.40% | = | 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 | 15.27% | ||||||||||
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 | × | 18.40% | = | 14.04% | ||
| 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 | 14.76% | ||||||||||
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 | × | 18.40% | = | 15.28% | ||
| 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 | 15.75% | ||||||||||
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 | × | 18.40% | = | 15.01% | ||
| 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 | 15.56% | ||||||||||
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 | 2,883) | 4,174) | 4,833) | 3,373) | 5,686) | 2,617) | |
| Invested capital2 | 36,866) | 26,276) | 25,913) | 24,710) | 26,296) | 28,534) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 7.82% | 15.88% | 18.65% | 13.65% | 21.62% | 9.17% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | — | -1.65% | -5.28% | -10.81% | -21.75% | -1.99% | |
| Home Depot Inc. | 4.60% | 6.86% | 12.85% | 16.92% | 21.36% | 12.21% | |
| TJX Cos. Inc. | 8.39% | 7.45% | 7.18% | 4.24% | 4.26% | -12.59% | |
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 × 2,883 ÷ 36,866 = 7.82%
4 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits significant volatility between 2021 and 2026, characterized by a peak in efficiency in 2022 followed by a marked decline in the final period.
- Economic Profit Trends
- Economic profit experienced a substantial increase from 2,617 million USD in 2021 to a peak of 5,686 million USD in 2022. Following this peak, a volatile trajectory is observed, with a contraction in 2023, a recovery to 4,833 million USD in 2024, and a subsequent downward trend resulting in 2,883 million USD by 2026.
- Invested Capital Dynamics
- Invested capital followed a general downward trend from 2021 through 2023, reaching a minimum of 24,710 million USD. A period of relative stability occurred between 2024 and 2025. However, a significant increase is noted in 2026, with invested capital rising sharply to 36,866 million USD, marking the highest capital deployment across the analyzed timeframe.
- Economic Spread Ratio Analysis
- The economic spread ratio demonstrates a high degree of variance, peaking at 21.62% in 2022. Although the ratio maintained double-digit levels from 2023 to 2025, it fell to its lowest point of 7.82% in 2026. This sharp deterioration in the final year is attributable to the convergence of declining economic profits and a substantial increase in invested capital, indicating a reduction in the excess return generated over the cost of capital.
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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 | 2,883) | 4,174) | 4,833) | 3,373) | 5,686) | 2,617) | |
| 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% | 3.48% | 5.88% | 2.90% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | — | -1.09% | -3.09% | -6.09% | -11.35% | -0.85% | |
| Home Depot Inc. | 2.30% | 3.14% | 4.71% | 5.94% | 6.79% | 4.59% | |
| TJX Cos. Inc. | 3.48% | 2.99% | 2.80% | 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 × 2,883 ÷ 86,399 = 3.34%
3 Click competitor name to see calculations.
The analysis of economic value creation between 2021 and 2026 reveals a period of significant volatility characterized by fluctuating profitability and inconsistent sales growth. While the company experienced a substantial peak in economic value added early in the period, the subsequent years show a general trend of contraction in both absolute economic profit and the corresponding margins.
- Economic Profit Trends
- Economic profit exhibited sharp fluctuations, rising from 2,617 million USD in 2021 to a peak of 5,686 million USD in 2022. Following this peak, a decline to 3,373 million USD occurred in 2023, followed by a partial recovery to 4,833 million USD in 2024. However, the final two years of the period show a consistent downward trajectory, with economic profit falling to 4,174 million USD in 2025 and further decreasing to 2,883 million USD by 2026.
- Adjusted Net Sales Performance
- Adjusted net sales grew from 90,111 million USD in 2021 to a maximum of 96,822 million USD in 2023. A notable contraction followed, with sales dropping to 86,206 million USD in 2024 and reaching a period low of 83,667 million USD in 2025. A modest recovery was observed in 2026, with sales increasing to 86,399 million USD.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute profit figures, peaking at 5.88% in 2022. An interesting divergence is observed in 2024, where the margin increased to 5.61% despite a significant decrease in adjusted net sales, indicating a temporary improvement in capital efficiency or cost management. This efficiency gain was not sustained, as the margin contracted to 4.99% in 2025 and dropped further to 3.34% in 2026, reflecting a diminished capacity to generate economic value relative to sales volume.
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