Economic Value Added (EVA)
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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.
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Philip Morris International Inc. pages available for free this week:
- Income Statement
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2008
- Return on Assets (ROA) since 2008
- Current Ratio since 2008
- Total Asset Turnover since 2008
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Economic Profit
Philip Morris International Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial trajectory from 2021 to 2025 reveals a period of contracting economic value creation followed by a significant recovery in the final year. A sustained decline in economic profit is observed between 2021 and 2024, coinciding with a simultaneous decrease in operating profitability and a substantial expansion of the capital base.
- Net Operating Profit After Taxes (NOPAT)
- A consistent downward trend in NOPAT is evident from 2021 to 2024, with values falling from 10,212 million USD to 8,285 million USD. This period of erosion suggests operational headwinds or increasing costs. However, a sharp reversal occurs in 2025, where NOPAT increases to 11,862 million USD, marking the highest level in the analyzed period.
- Invested Capital
- The capital base experienced a significant expansion starting in 2022, jumping from 29,155 million USD to 47,362 million USD. Despite a minor contraction in 2024 to 48,314 million USD, the total invested capital reached its peak of 53,321 million USD by 2025. This suggests an aggressive investment strategy or a significant acquisition during the early part of the period.
- Cost of Capital
- The cost of capital remained relatively stable, showing a slight decline from 8.72% in 2021 to a low of 8.17% in 2023. A subsequent upward trend is noted in 2024 and 2025, reaching 8.91%. The increase in the cost of capital during the latter years adds pressure to the requirement for higher operating returns to maintain economic value.
- Economic Profit
- Economic profit exhibits a strong correlation with NOPAT trends but is further pressured by the increased capital base. The value declined steadily from 7,669 million USD in 2021 to a low of 4,040 million USD in 2024. This contraction is the result of the combined effect of falling operating profits and a significantly higher capital charge. The trend reverses sharply in 2025, with economic profit rising to 7,112 million USD, driven primarily by the substantial growth in NOPAT which outweighed the increase in both the cost of capital and the total invested capital.
Net Operating Profit after Taxes (NOPAT)
Philip Morris International Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in restructuring related liabilities.
4 Addition of increase (decrease) in equity equivalents to net earnings attributable to PMI.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net earnings attributable to PMI.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited a generally declining trend from 2021 through 2024, followed by a substantial increase in 2025. This pattern mirrors, though with differing magnitudes, the trend observed in net earnings attributable to the company. The initial decline suggests potential pressures on operational profitability, while the subsequent recovery indicates improved performance or changing business conditions.
- NOPAT Trend (2021-2025)
- In 2021, NOPAT stood at US$10,212 million. A decrease was noted in 2022, with NOPAT reaching US$9,644 million. This downward trend continued into 2023, with NOPAT reported as US$8,828 million, and further declined to US$8,285 million in 2024. However, a significant recovery occurred in 2025, with NOPAT increasing to US$11,862 million. This represents the highest NOPAT value within the observed period.
- Relationship to Net Earnings
- While both NOPAT and net earnings attributable to the company generally moved in the same direction, the fluctuations in NOPAT were less pronounced than those in net earnings. For example, the decline from 2021 to 2024 was similar in direction for both metrics, but the recovery in 2025 was more substantial for NOPAT. This suggests that factors beyond core operational profitability, such as financing costs or non-operating items, may have significantly influenced net earnings.
The substantial increase in NOPAT in 2025 warrants further investigation to determine the underlying drivers. Potential factors could include cost reduction initiatives, increased sales volume, improved pricing strategies, or changes in the tax environment. The period of decline from 2021 to 2024 also merits further scrutiny to identify the specific operational or economic factors contributing to the reduced profitability.
Cash Operating Taxes
Philip Morris International Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The provision for income taxes and cash operating taxes exhibited fluctuating behavior over the five-year period. Both metrics demonstrate increases in later years, though with differing magnitudes and patterns.
- Provision for Income Taxes
- The provision for income taxes decreased from US$2,671 million in 2021 to US$2,244 million in 2022, representing a decline of approximately 15.9%. A subsequent increase to US$2,339 million was observed in 2023. This was followed by a more substantial rise to US$3,017 million in 2024, and a slight decrease to US$2,737 million in 2025. Overall, the provision for income taxes shows volatility, ending the period lower than its initial value but with a peak in 2024.
- Cash Operating Taxes
- Cash operating taxes began at US$2,825 million in 2021 and decreased to US$2,606 million in 2022, a reduction of approximately 7.8%. An increase to US$2,899 million occurred in 2023. Further increases were noted in 2024, reaching US$3,381 million, and continued into 2025, culminating in US$3,796 million. This metric demonstrates a consistent upward trend in the latter half of the period, surpassing its initial value.
- Relationship between Provision and Cash Taxes
- In 2021 and 2022, cash operating taxes exceeded the provision for income taxes by US$154 million and US$362 million, respectively. This difference narrowed in 2023 to US$560 million, then reversed in 2024 and 2025, with the provision for income taxes being lower than cash operating taxes by US$280 million and US$1059 million, respectively. The divergence suggests potential timing differences between reported income tax expense and actual cash outflows for taxes, or changes in deferred tax assets and liabilities.
The increasing trend in cash operating taxes, particularly in 2024 and 2025, warrants further investigation to determine the underlying drivers, such as changes in tax rates, taxable income, or tax planning strategies. The fluctuations in the provision for income taxes, while less pronounced, also merit attention to understand their impact on reported earnings.
Invested Capital
Philip Morris International Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of restructuring related liabilities.
5 Addition of equity equivalents to total PMI stockholders’ deficit.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
The reported invested capital demonstrates a generally increasing trend over the five-year period, although with some fluctuation. A significant increase is observed between 2021 and 2022, followed by continued growth until 2023, a slight decrease in 2024, and then a resumption of growth in 2025. This pattern is closely linked to changes in both total reported debt & leases and total stockholders’ deficit.
- Invested Capital Trend
- Invested capital began at US$29,155 million in 2021 and rose substantially to US$47,362 million in 2022, representing a 62.5% increase. Further growth occurred in 2023, reaching US$51,360 million. A minor decline to US$48,314 million was noted in 2024 before recovering to US$53,321 million in 2025, the highest value within the observed period.
- Debt & Leases
- Total reported debt & leases exhibited a consistent upward trajectory from US$28,342 million in 2021 to US$49,568 million in 2025. The most substantial increase occurred between 2021 and 2022, mirroring the increase in invested capital. While the growth rate slowed in subsequent years, debt levels remained elevated, with a slight decrease observed in 2024 before resuming growth.
- Stockholders’ Deficit
- The total stockholders’ deficit remained negative throughout the period, indicating a liability position. The deficit fluctuated, moving from -US$10,106 million in 2021 to -US$8,957 million in 2022, then increasing in magnitude to -US$11,750 million in 2024. A reduction in the deficit to -US$9,994 million was observed in 2025. The changes in the deficit appear to partially offset the increases in debt, influencing the overall invested capital figure.
The correlation between the increase in debt and the increase in invested capital suggests that the company has been utilizing debt financing to fund its operations and investments. The fluctuations in the stockholders’ deficit contribute to the overall changes in invested capital, but the primary driver appears to be the company’s debt management strategy.
Cost of Capital
Philip Morris International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt, including finance lease obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt, including finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Philip Morris International Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance between 2021 and 2025 is characterized by a period of diminishing value creation efficiency followed by a notable recovery in the final year. A general contraction in economic profit and a compression of the economic spread ratio occurred through 2024, coinciding with a substantial expansion of the invested capital base.
- Economic Profit Trends
- Economic profit exhibited a consistent downward trajectory from 2021 to 2024, falling from 7,669 million US$ to a period low of 4,040 million US$. This represented a decline of approximately 47% over four years. However, a significant reversal occurred in 2025, with economic profit rebounding to 7,112 million US$, nearly returning to 2021 levels.
- Invested Capital Dynamics
- There was a sharp increase in invested capital between 2021 and 2022, rising from 29,155 million US$ to 47,362 million US$. Capital deployment continued to grow, peaking in 2023 at 51,360 million US$, before a slight correction in 2024 to 48,314 million US$. By 2025, the capital base expanded further to 53,321 million US$, indicating a long-term trend of increased asset investment.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a severe contraction, dropping from 26.31% in 2021 to 8.36% in 2024. This trend indicates that the return on invested capital narrowed significantly relative to the cost of capital during this period, largely driven by the rapid increase in invested capital outpacing the growth in economic profit. A recovery was observed in 2025, with the ratio rising to 13.34%, suggesting an improvement in the efficiency of capital utilization.
The overall pattern indicates that while the organization expanded its capital base aggressively starting in 2022, this expansion initially pressured the economic spread and reduced absolute economic profit. The 2025 results suggest a successful pivot toward regaining value creation efficiency, as evidenced by the simultaneous increase in both economic profit and the spread ratio despite a continuing increase in invested capital.
Economic Profit Margin
Philip Morris International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance between 2021 and 2025 is characterized by a divergence between consistent revenue growth and fluctuating economic profitability, culminating in a significant recovery in the final year.
- Revenue Growth Trends
- Net revenues exhibited a steady and uninterrupted upward trajectory, increasing from 31,405 million USD in 2021 to 40,648 million USD by 2025. This consistent expansion indicates a successful increase in the scale of operations over the five-year period.
- Economic Profit Trajectory
- Economic profit experienced a sustained decline from 2021 to 2024, falling from 7,669 million USD to a period low of 4,040 million USD. This downward trend was abruptly reversed in 2025, when economic profit surged to 7,112 million USD, representing a substantial recovery toward 2021 levels.
- Economic Profit Margin Analysis
- The economic profit margin followed a U-shaped pattern, contracting from a peak of 24.42% in 2021 to a minimum of 10.67% in 2024. The margin then rebounded to 17.50% in 2025. This contraction suggests that between 2021 and 2024, the growth in revenues was offset by an increase in the cost of capital or operational inefficiencies that eroded value creation relative to sales.
The analysis indicates that while the company successfully expanded its top-line revenue, the ability to generate economic value above the cost of capital diminished for four consecutive years. The sharp recovery in both economic profit and the economic profit margin in 2025 suggests a pivot toward higher capital efficiency or a reduction in the capital charges associated with the business operations.