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
Philip Morris International Inc., economic profit 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 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
= 11,862 – 9.14% × 53,321 = 6,988
An analysis of the economic value added (EVA) reveals a period of declining economic profit from 2021 through 2024, followed by a significant recovery in 2025. The downward trajectory during the initial four-year period was characterized by a contraction in operating profitability coupled with a substantial expansion of the capital base.
- Net Operating Profit After Taxes (NOPAT)
- A consistent downward trend in NOPAT is observed from 2021 to 2024, with values falling from 10,212 million US$ to 8,285 million US$. This period of erosion was reversed in 2025, where NOPAT experienced a sharp increase to 11,862 million US$, marking the highest level of operating profit within the analyzed timeframe.
- Invested Capital and Cost of Capital
- Invested capital grew aggressively between 2021 and 2023, rising from 29,155 million US$ to a peak of 51,360 million US$. While a slight contraction occurred in 2024, the capital base expanded again to 53,321 million US$ by 2025. Simultaneously, the cost of capital remained relatively stable, fluctuating within a narrow range between 8.38% and 9.14%, though it trended upward in the final two years of the period.
- Economic Profit Trends
- Economic profit exhibited a strong negative correlation with the increase in invested capital and the decrease in NOPAT between 2021 and 2024. The profit declined from 7,602 million US$ to a low of 3,931 million US$ as the capital charge grew relative to the operating earnings. However, the substantial growth in NOPAT in 2025 more than offset the higher cost of capital and expanded investment base, resulting in a recovery of economic profit to 6,988 million US$.
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Net Operating Profit after Taxes (NOPAT)
Philip Morris International Inc., NOPAT calculation
US$ 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
= 733 × 6.00% = 44
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,631 × 21.00% = 343
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
= 621 × 21.00% = 130
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$11,862 million. This represents the highest NOPAT value within the observed period.
- Relationship to Net Earnings
- While both NOPAT and net earnings attributable to the company generally moved in the same direction, the fluctuations in NOPAT were less pronounced than those in net earnings. For example, the decline from 2021 to 2024 was similar in direction for both metrics, but the recovery in 2025 was more substantial for NOPAT. This suggests that factors beyond core operational profitability, such as financing costs or non-operating items, may have significantly influenced net earnings.
The substantial increase in NOPAT in 2025 warrants further investigation to determine the underlying drivers. Potential factors could include cost reduction initiatives, increased sales volume, improved pricing strategies, or changes in the tax environment. The period of decline from 2021 to 2024 also merits further scrutiny to identify the specific operational or economic factors contributing to the reduced profitability.
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Cash Operating Taxes
Philip Morris International Inc., cash operating taxes calculation
US$ 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$1059 million, respectively. The divergence suggests potential timing differences between reported income tax expense and actual cash outflows for taxes, or changes in deferred tax assets and liabilities.
The increasing trend in cash operating taxes, particularly in 2024 and 2025, warrants further investigation to determine the underlying drivers, such as changes in tax rates, taxable income, or tax planning strategies. The fluctuations in the provision for income taxes, while less pronounced, also merit attention to understand their impact on reported earnings.
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Invested Capital
Philip Morris International Inc., invested capital calculation (financing approach)
US$ 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$9,994 million was observed in 2025. The changes in the deficit appear to partially offset the increases in debt, influencing the overall invested capital figure.
The correlation between the increase in debt and the increase in invested capital suggests that the company has been utilizing debt financing to fund its operations and investments. The fluctuations in the stockholders’ deficit contribute to the overall changes in invested capital, but the primary driver appears to be the company’s debt management strategy.
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Cost of Capital
Philip Morris International Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 284,577) | 284,577) | ÷ | 333,935) | = | 0.85 | 0.85 | × | 10.16% | = | 8.66% | ||
| Debt, including finance lease obligations3 | 48,625) | 48,625) | ÷ | 333,935) | = | 0.15 | 0.15 | × | 4.10% × (1 – 21.00%) | = | 0.47% | ||
| Operating lease liability4 | 733) | 733) | ÷ | 333,935) | = | 0.00 | 0.00 | × | 6.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 333,935) | 1.00 | 9.14% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 225,952) | 225,952) | ÷ | 271,202) | = | 0.83 | 0.83 | × | 10.16% | = | 8.46% | ||
| Debt, including finance lease obligations3 | 44,646) | 44,646) | ÷ | 271,202) | = | 0.16 | 0.16 | × | 4.14% × (1 – 21.00%) | = | 0.54% | ||
| Operating lease liability4 | 604) | 604) | ÷ | 271,202) | = | 0.00 | 0.00 | × | 5.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 271,202) | 1.00 | 9.01% | ||||||||||
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 | 138,184) | 138,184) | ÷ | 185,804) | = | 0.74 | 0.74 | × | 10.16% | = | 7.56% | ||
| Debt, including finance lease obligations3 | 46,967) | 46,967) | ÷ | 185,804) | = | 0.25 | 0.25 | × | 4.04% × (1 – 21.00%) | = | 0.81% | ||
| Operating lease liability4 | 653) | 653) | ÷ | 185,804) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 185,804) | 1.00 | 8.38% | ||||||||||
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 | 158,682) | 158,682) | ÷ | 200,048) | = | 0.79 | 0.79 | × | 10.16% | = | 8.06% | ||
| Debt, including finance lease obligations3 | 40,752) | 40,752) | ÷ | 200,048) | = | 0.20 | 0.20 | × | 3.39% × (1 – 21.00%) | = | 0.55% | ||
| Operating lease liability4 | 614) | 614) | ÷ | 200,048) | = | 0.00 | 0.00 | × | 3.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 200,048) | 1.00 | 8.61% | ||||||||||
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 | 167,319) | 167,319) | ÷ | 197,913) | = | 0.85 | 0.85 | × | 10.16% | = | 8.59% | ||
| Debt, including finance lease obligations3 | 30,058) | 30,058) | ÷ | 197,913) | = | 0.15 | 0.15 | × | 2.96% × (1 – 21.00%) | = | 0.36% | ||
| Operating lease liability4 | 536) | 536) | ÷ | 197,913) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 197,913) | 1.00 | 8.95% | ||||||||||
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 | 6,988) | 3,931) | 4,526) | 5,565) | 7,602) | |
| Invested capital2 | 53,321) | 48,314) | 51,360) | 47,362) | 29,155) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 13.11% | 8.14% | 8.81% | 11.75% | 26.08% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | 5.93% | 3.47% | 3.97% | 3.66% | 5.20% | |
| Mondelēz International Inc. | -3.78% | 0.04% | -0.12% | -3.93% | -0.92% | |
| PepsiCo Inc. | 2.72% | 5.30% | 4.22% | 4.19% | 4.75% | |
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 × 6,988 ÷ 53,321 = 13.11%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a period of diminishing economic efficiency followed by a recovery in the final year. A significant contraction in value creation is observed between 2021 and 2024, with a partial rebound occurring in 2025.
- Economic Spread Ratio Trends
- A sharp downward trajectory is observed in the economic spread ratio, which fell from 26.08% in 2021 to a low of 8.14% in 2024. This decline indicates a narrowing gap between the return on invested capital and the cost of that capital over this four-year period. However, a reversal of this trend occurred in 2025, with the ratio increasing to 13.11%.
- Invested Capital Dynamics
- There was a substantial expansion of the capital base, increasing from 29,155 million US dollars in 2021 to 53,321 million US dollars by 2025. The most pronounced growth occurred between 2021 and 2022, where invested capital rose by approximately 62%. This rapid increase in the capital base likely exerted downward pressure on the economic spread ratio during the early part of the analyzed period.
- Economic Profit Performance
- Economic profit exhibited a consistent decline from 2021 to 2024, falling from 7,602 million US dollars to 3,931 million US dollars. This trend aligns with the compression of the economic spread ratio. A significant recovery is noted in 2025, with economic profit rising to 6,988 million US dollars, suggesting improved operational efficiency or a reduction in the relative cost of capital.
The correlation between the increasing invested capital and the decreasing economic profit through 2024 suggests a period of capital-intensive investment that did not yield immediate proportional economic gains. The recovery observed in 2025 indicates a positive shift in the ability to generate value above the cost of capital.
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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 | 6,988) | 3,931) | 4,526) | 5,565) | 7,602) | |
| Net revenues | 40,648) | 37,878) | 35,174) | 31,762) | 31,405) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 17.19% | 10.38% | 12.87% | 17.52% | 24.21% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Coca-Cola Co. | 11.49% | 6.41% | 7.25% | 6.81% | 10.80% | |
| Mondelēz International Inc. | -6.03% | 0.06% | -0.21% | -7.96% | -1.98% | |
| PepsiCo Inc. | 2.41% | 4.43% | 3.46% | 3.37% | 4.17% | |
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 × 6,988 ÷ 40,648 = 17.19%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2021 to 2025 reveals a divergence between revenue growth and the generation of economic value. While net revenues demonstrated consistent year-over-year growth, economic profit experienced a prolonged decline before a significant recovery in the final period.
- Revenue Growth Trend
- Net revenues exhibited a steady upward trajectory, increasing from 31,405 million USD in 2021 to 40,648 million USD by 2025. This represents a consistent expansion of the top line over the five-year period.
- Economic Profit Volatility
- Economic profit followed a contrasting pattern to revenue between 2021 and 2024, decreasing from 7,602 million USD to a low of 3,931 million USD. This downward trend suggests that the cost of capital increased or operating returns diminished relative to the investment base. However, a sharp reversal occurred in 2025, with economic profit rebounding to 6,988 million USD.
- Economic Profit Margin Compression and Recovery
- The economic profit margin underwent significant compression from 2021 to 2024, falling from 24.21% to 10.38%. This indicates a reduction in the efficiency of value creation per dollar of revenue. The trend reversed in 2025, with the margin recovering to 17.19%, although it remained below the 2021 peak.
The data indicates that while the organization successfully scaled its operations in terms of revenue, the ability to generate economic value above the cost of capital was strained for several years. The recovery observed in 2025 suggests a successful realignment of operational returns or a reduction in the capital charge, leading to a renewed improvement in economic efficiency.
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