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
Nike Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
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
= 3,060 – 16.27% × 21,555 = -446
The financial trajectory from May 31, 2021, to May 31, 2026, reveals a significant transition from value creation to value destruction. While the company maintained positive economic profit for the first four years of the period, a sharp decline in operational performance led to negative economic profit in the final two years.
- Net Operating Profit After Taxes (NOPAT)
- A pronounced downward trend is observed in NOPAT, particularly starting in 2023. After remaining stable between 2021 and 2022 at approximately US$ 5.6 billion, NOPAT decreased to US$ 5.01 billion in 2023 and experienced a severe contraction to US$ 2.92 billion by May 31, 2025. Although a marginal recovery to US$ 3.06 billion occurred in 2026, the operational profitability remains substantially lower than the baseline levels seen at the start of the period.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable throughout the analysis period, fluctuating within a narrow range between 16.27% and 17.57%. Invested capital showed moderate volatility, peaking at US$ 22.09 billion in 2024 before dipping to US$ 19.85 billion in 2025 and rising again to US$ 21.56 billion in 2026. The relative stability of the cost of capital indicates that the decline in economic profit was driven by operational earnings rather than a spike in the cost of financing or an excessive expansion of the capital base.
- Economic Profit Trajectory
- Economic profit exhibited a steady decline from a peak of US$ 1.96 billion in 2022 to US$ 1.40 billion in 2024. A critical inflection point occurred in 2025, where economic profit shifted to a negative value of US$ -469 million. This trend persisted into 2026 with an economic profit of US$ -446 million. This shift signifies that the returns generated by the operating assets are no longer sufficient to cover the weighted average cost of the capital employed, resulting in a destruction of shareholder value.
In summary, the erosion of economic profit is primarily attributable to the significant reduction in NOPAT. The inability to maintain operating profits relative to the invested capital base has transformed the company's financial position from one of value addition to one of economic loss.
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Net Operating Profit after Taxes (NOPAT)
Nike Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income.
3 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,091 × 3.60% = 111
4 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 339 × 21.00% = 71
5 Addition of after taxes interest expense to net income.
6 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 278 × 21.00% = 58
7 Elimination of after taxes investment income.
The financial performance exhibits a distinct bifurcation between a period of relative stability from 2021 to 2024 and a significant contraction in profitability starting in 2025. While the initial four-year window shows fluctuation, the subsequent years indicate a substantial reduction in both bottom-line earnings and core operational profitability.
- Net Income Trends
- Net income peaked in 2022 at 6,046 million US$, followed by a period of volatility. A sharp decline is observed beginning in 2025, where net income dropped to 3,219 million US$, representing a reduction of approximately 43.7% from the 2024 level. This downward trend persisted into 2026, with a further slight decrease to 3,108 million US$.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT remained relatively consistent between 2021 and 2022, followed by a decline in 2023 and a marginal recovery in 2024 to 5,146 million US$. Similar to net income, NOPAT experienced a severe contraction in 2025, falling to 2,921 million US$. A slight recovery is noted in 2026, with NOPAT rising to 3,060 million US$, suggesting a potential stabilization of operational profitability.
- Operational Correlation and Insights
- A strong positive correlation is observed between net income and NOPAT throughout the analyzed period. The simultaneous decline in both metrics starting in 2025 indicates that the erosion of profitability is driven primarily by operational factors rather than non-operating expenses or financial structuring. The proximity of NOPAT to net income suggests that operating performance is the dominant driver of the overall financial outcome.
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Cash Operating Taxes
Nike Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
The analysis of tax-related outflows reveals a consistent divergence between accrual-based income tax expenses and actual cash operating taxes paid. While income tax expenses exhibit significant volatility, cash operating taxes remained relatively stable through the mid-period before experiencing a marked contraction in the final two years.
- Income Tax Expense Trends
- Income tax expenses demonstrate a non-linear trajectory, starting at US$ 934 million in 2021, dipping to US$ 605 million in 2022, and peaking at US$ 1,131 million in 2023. A subsequent downward trend is observed, with the expense falling to US$ 666 million by 2025 before a slight recovery to US$ 792 million in 2026.
- Cash Operating Tax Patterns
- Cash operating taxes remained elevated and relatively stable between 2021 and 2024, fluctuating between US$ 1,264 million and US$ 1,482 million. However, a significant reduction occurred starting in 2025, where cash payments dropped to US$ 951 million and further declined to US$ 901 million in 2026, representing a substantial decrease in actual cash outflows for taxes.
- Variance Between Accrual and Cash Taxes
- Throughout the analyzed period, cash operating taxes consistently exceeded the recorded income tax expense. This gap was most prominent in 2022, where cash payments were more than double the accounting expense. This recurring discrepancy suggests the presence of significant timing differences, the settlement of deferred tax liabilities, or specific tax jurisdictions where cash remittances do not align with the periodic income statement recognition.
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Invested Capital
Nike Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in process.
6 Subtraction of short-term investments.
The analysis of invested capital and its components from May 31, 2021, to May 31, 2026, reveals a strategic shift in the financing mix, characterized by a steady reduction in liabilities and fluctuations in equity levels. The overall invested capital exhibits a non-linear trend, reflecting the interplay between decreasing debt and variable shareholder equity.
- Total Reported Debt and Leases
- A consistent downward trajectory is observed in total reported debt and leases, declining from 12,811 million US$ in 2021 to 11,013 million US$ by 2025. This represents a sustained reduction in leverage and lease obligations over a five-year period, with a marginal stabilization occurring in 2026 at 11,033 million US$.
- Shareholders’ Equity
- Shareholders' equity demonstrates significant volatility. An initial increase is noted between 2021 and 2022, peaking at 15,281 million US$. This was followed by a period of fluctuation, including a decline to 13,213 million US$ in 2025, before rebounding to 14,865 million US$ in 2026. This variability suggests periodic shifts in retained earnings or capital distribution strategies.
- Total Invested Capital
- The total invested capital remains relatively stable between 2021 and 2023, before reaching a peak of 22,088 million US$ in 2024. A notable contraction occurs in 2025, where invested capital drops to its lowest point in the period at 19,851 million US$, driven by simultaneous lows in both debt and equity. A recovery is evident by 2026, with the figure rising to 21,555 million US$.
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Cost of Capital
Nike Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 63,449) | 63,449) | ÷ | 73,345) | = | 0.87 | 0.87 | × | 18.40% | = | 15.92% | ||
| Long-term debt, including current portion3 | 6,805) | 6,805) | ÷ | 73,345) | = | 0.09 | 0.09 | × | 3.14% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 3,091) | 3,091) | ÷ | 73,345) | = | 0.04 | 0.04 | × | 3.60% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 73,345) | 1.00 | 16.27% | ||||||||||
Based on: 10-K (reporting date: 2026-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 107,784) | 107,784) | ÷ | 117,509) | = | 0.92 | 0.92 | × | 18.40% | = | 16.88% | ||
| Long-term debt, including current portion3 | 6,673) | 6,673) | ÷ | 117,509) | = | 0.06 | 0.06 | × | 3.14% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 3,052) | 3,052) | ÷ | 117,509) | = | 0.03 | 0.03 | × | 3.10% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,509) | 1.00 | 17.08% | ||||||||||
Based on: 10-K (reporting date: 2025-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 107,069) | 107,069) | ÷ | 117,743) | = | 0.91 | 0.91 | × | 18.40% | = | 16.73% | ||
| Long-term debt, including current portion3 | 7,631) | 7,631) | ÷ | 117,743) | = | 0.06 | 0.06 | × | 3.05% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 3,043) | 3,043) | ÷ | 117,743) | = | 0.03 | 0.03 | × | 2.90% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,743) | 1.00 | 16.95% | ||||||||||
Based on: 10-K (reporting date: 2024-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 164,518) | 164,518) | ÷ | 175,618) | = | 0.94 | 0.94 | × | 18.40% | = | 17.23% | ||
| Long-term debt, including current portion3 | 7,889) | 7,889) | ÷ | 175,618) | = | 0.04 | 0.04 | × | 3.05% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 3,211) | 3,211) | ÷ | 175,618) | = | 0.02 | 0.02 | × | 2.50% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 175,618) | 1.00 | 17.38% | ||||||||||
Based on: 10-K (reporting date: 2023-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 175,082) | 175,082) | ÷ | 187,212) | = | 0.94 | 0.94 | × | 18.40% | = | 17.21% | ||
| Long-term debt, including current portion3 | 8,933) | 8,933) | ÷ | 187,212) | = | 0.05 | 0.05 | × | 3.03% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 3,197) | 3,197) | ÷ | 187,212) | = | 0.02 | 0.02 | × | 2.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 187,212) | 1.00 | 17.35% | ||||||||||
Based on: 10-K (reporting date: 2022-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 252,677) | 252,677) | ÷ | 266,350) | = | 0.95 | 0.95 | × | 18.40% | = | 17.45% | ||
| Long-term debt, including current portion3 | 10,275) | 10,275) | ÷ | 266,350) | = | 0.04 | 0.04 | × | 3.02% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 3,398) | 3,398) | ÷ | 266,350) | = | 0.01 | 0.01 | × | 2.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 266,350) | 1.00 | 17.57% | ||||||||||
Based on: 10-K (reporting date: 2021-05-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Nike Inc., economic spread ratio calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (446) | (469) | 1,403) | 1,475) | 1,956) | 1,934) | |
| Invested capital2 | 21,555) | 19,851) | 22,088) | 20,353) | 21,093) | 20,927) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -2.07% | -2.36% | 6.35% | 7.24% | 9.27% | 9.24% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| lululemon athletica inc. | 4.83% | 10.61% | 7.90% | 1.44% | 7.33% | -0.78% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -446 ÷ 21,555 = -2.07%
4 Click competitor name to see calculations.
The financial trajectory from May 2021 to May 2026 indicates a significant transition from value creation to value destruction. While the initial period shows a stable capacity to generate returns above the cost of capital, a sharp deterioration in performance is evident starting in 2023, culminating in negative economic outcomes in the final two years of the period.
- Economic Profit Trends
- Economic profit peaked in May 2022 at 1,956 million US$, representing the high point of value addition. A consistent decline followed, with profit falling to 1,475 million US$ in 2023 and 1,403 million US$ in 2024. A critical inflection point occurred in May 2025, where economic profit shifted to a negative 469 million US$, with a marginal recovery to negative 446 million US$ by May 2026. This shift suggests that the entity's operating profits are no longer sufficient to cover its cost of capital.
- Invested Capital Stability
- The invested capital base remained relatively stable throughout the analyzed period, fluctuating between approximately 19.8 billion US$ and 22.1 billion US$. The capital base peaked in May 2024 at 22,088 million US$ before contracting to 19,851 million US$ in 2025 and expanding again to 21,555 million US$ in 2026. The lack of a corresponding drastic change in invested capital suggests that the decline in economic profit is driven by operational efficiency or market conditions rather than a massive reduction in the asset base.
- Economic Spread Ratio Analysis
- The economic spread ratio shows a clear downward trend, mirroring the decline in economic profit. From a peak of 9.27% in May 2022, the ratio contracted to 7.24% in 2023 and 6.35% in 2024. The ratio entered negative territory in May 2025 at -2.36% and remained negative at -2.07% in May 2026. This contraction indicates a narrowing gap between the return on invested capital and the weighted average cost of capital, eventually resulting in a negative spread where capital costs exceed the returns generated.
In summary, the data reflects a period of diminishing returns. The transition from a positive economic spread of over 9% to a negative spread highlights a systemic failure to maintain returns above the cost of capital in the latter half of the period, shifting the organization from an era of economic value added to one of economic value erosion.
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Economic Profit Margin
Nike Inc., economic profit margin calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (446) | (469) | 1,403) | 1,475) | 1,956) | 1,934) | |
| Revenues | 46,398) | 46,309) | 51,362) | 51,217) | 46,710) | 44,538) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -0.96% | -1.01% | 2.73% | 2.88% | 4.19% | 4.34% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| lululemon athletica inc. | 3.02% | 6.52% | 4.88% | 0.80% | 4.54% | -0.65% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -446 ÷ 46,398 = -0.96%
3 Click competitor name to see calculations.
The financial performance from May 31, 2021, through May 31, 2026, demonstrates a significant deterioration in economic value creation. A consistent downward trajectory is observed in the economic profit margin, culminating in a transition from value creation to value destruction in the final two years of the period.
- Economic Profit Trends
- Economic profit remained relatively stable between 2021 and 2022, peaking at 1,956 million US dollars. However, a steady decline began in 2023, with values dropping to 1,475 million and 1,403 million in 2023 and 2024, respectively. This downward trend accelerated sharply in 2025, where economic profit fell into negative territory at -469 million US dollars, remaining negative at -446 million US dollars in 2026.
- Revenue Performance
- Revenues exhibited growth in the initial stages, rising from 44,538 million US dollars in 2021 to a peak of 51,362 million US dollars in 2024. This period of growth was followed by a notable contraction in 2025, where revenues decreased to 46,309 million US dollars, effectively erasing the gains made over the previous four years. Revenue levels plateaued in 2026 at 46,398 million US dollars.
- Economic Profit Margin Analysis
- The economic profit margin shows a continuous erosion over the analyzed timeframe. Starting at 4.34% in 2021, the margin declined incrementally to 2.73% by 2024. The most critical shift occurred in 2025, as the margin dropped to -1.01%, indicating that the returns generated were insufficient to cover the cost of capital. A marginal improvement to -0.96% was noted in 2026, though the margin remained negative.
The correlation between declining revenues and falling economic profit suggests a systemic reduction in operational efficiency and capital productivity. The shift to a negative economic profit margin indicates that the entity ceased creating economic value for its shareholders starting in 2025, transitioning into a state of economic loss.
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