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 – 16.30% × 21,555 = -453
The financial performance from May 2021 through May 2026 exhibits a significant transition from positive value creation to economic value destruction. While the company maintained a positive economic profit for the first four years of the period, a sharp deterioration in operating profitability led to negative returns relative to the cost of capital starting in 2025.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trend is observed in NOPAT, which peaked at 5,616 million USD in 2022 before entering a period of decline. A substantial contraction occurred in 2025, where NOPAT dropped to 2,921 million USD, representing nearly a 43% decrease from the previous year. Although a slight recovery to 3,060 million USD is noted in 2026, the profit levels remain significantly below the 2021-2024 average.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 16.30% and 17.61%. Invested capital showed moderate volatility, peaking at 22,088 million USD in 2024 before contracting to 19,851 million USD in 2025 and rising again to 21,555 million USD in 2026. The stability of the cost of capital suggests that the decline in economic profit is driven by operational earnings rather than shifts in financing costs or market risk premiums.
- Economic Profit Trends
- Economic profit demonstrates a clear downward trajectory. The company generated a peak economic profit of 1,948 million USD in 2022, indicating that returns exceeded the cost of capital. However, this surplus diminished steadily until 2025, when economic profit turned negative at -477 million USD. This shift indicates that the business began destroying shareholder value, as the NOPAT was no longer sufficient to cover the imputed cost of the capital employed. The negative trend persists into 2026 with an economic profit of -453 million USD.
The overall analysis indicates that the erosion of economic profit is directly correlated with the precipitous decline in NOPAT. Despite the cost of capital remaining stable and invested capital showing only moderate fluctuations, the failure to maintain operating profit levels resulted in a transition to negative economic value added in the final two years of the analyzed period.
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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 | × | 18.44% | = | 15.95% | ||
| 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 | 16.30% | ||||||||||
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 | × | 18.44% | = | 16.91% | ||
| 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 | 17.12% | ||||||||||
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 | × | 18.44% | = | 16.77% | ||
| 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 | 16.98% | ||||||||||
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 | × | 18.44% | = | 17.27% | ||
| 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 | 17.42% | ||||||||||
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 | × | 18.44% | = | 17.25% | ||
| 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 | 17.39% | ||||||||||
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 | × | 18.44% | = | 17.49% | ||
| 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 | 17.61% | ||||||||||
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 | (453) | (477) | 1,394) | 1,466) | 1,948) | 1,926) | |
| Invested capital2 | 21,555) | 19,851) | 22,088) | 20,353) | 21,093) | 20,927) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -2.10% | -2.40% | 6.31% | 7.20% | 9.23% | 9.20% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| lululemon athletica inc. | 4.77% | 10.55% | 7.83% | 1.38% | 7.27% | -0.85% | |
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 × -453 ÷ 21,555 = -2.10%
4 Click competitor name to see calculations.
A significant erosion of economic value is evident over the analyzed six-year period. The financial trajectory indicates a transition from consistent value creation to value destruction, characterized by a precipitous decline in both economic profit and the economic spread ratio.
- Economic Profit Trend
- Economic profit peaked in May 2022 at 1,948 million US dollars before initiating a downward trend. A critical inflection point occurred between May 2024 and May 2025, where profit plummeted from 1,394 million US dollars to a deficit of 477 million US dollars. This negative trend persisted into May 2026, with a marginal recovery to -453 million US dollars, indicating that the entity failed to return to a positive economic profit state.
- Economic Spread Ratio Analysis
- The economic spread ratio exhibits a severe contraction, falling from 9.20% in May 2021 to -2.10% by May 2026. The ratio remained stable during the first two years but declined steadily thereafter. The shift into negative territory in May 2025 (-2.40%) signifies that the return on invested capital fell below the cost of capital, confirming that the assets employed were not generating sufficient returns to cover the cost of financing.
- Invested Capital Dynamics
- Invested capital remained relatively stable, fluctuating within a range of 19,851 million to 22,088 million US dollars. Because the capital base did not undergo a proportional reduction during the collapse of economic profit, the deterioration in performance is attributable to a decline in the efficiency of capital utilization rather than a change in the scale of investment.
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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 | (453) | (477) | 1,394) | 1,466) | 1,948) | 1,926) | |
| Revenues | 46,398) | 46,309) | 51,362) | 51,217) | 46,710) | 44,538) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -0.98% | -1.03% | 2.71% | 2.86% | 4.17% | 4.32% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| lululemon athletica inc. | 2.98% | 6.48% | 4.84% | 0.77% | 4.50% | -0.70% | |
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 × -453 ÷ 46,398 = -0.98%
3 Click competitor name to see calculations.
The financial trajectory over the observed period indicates a systemic erosion of economic value creation, culminating in a shift from value generation to value destruction by 2025.
- Economic Profit Volatility
- Economic profit showed initial resilience, peaking at 1,948 million USD in May 2022. A subsequent decline was recorded through 2024, followed by a sharp transition into negative territory in 2025, where economic profit fell to negative 477 million USD. This deficit persisted into May 2026, with a reported value of negative 453 million USD.
- Revenue Growth and Contraction
- A period of revenue expansion was observed from May 2021 to May 2024, with totals rising from 44,538 million USD to a peak of 51,362 million USD. However, this growth trend reversed in 2025, as revenues contracted to 46,309 million USD and remained nearly stagnant at 46,398 million USD by May 2026.
- Economic Profit Margin Deterioration
- The economic profit margin followed a continuous downward trend throughout the analysis period. The margin compressed from a high of 4.32% in 2021 to 2.71% in 2024, demonstrating that revenue growth during this phase did not translate into proportional economic value. The margin turned negative in 2025, reaching -1.03%, and remained in negative territory at -0.98% in 2026, signaling that the return on capital failed to cover the cost of capital during the final two years.
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