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.
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Philip Morris International Inc. pages available for free this week:
- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2008
- Return on Assets (ROA) 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
= – × =
An analysis of the economic profit from 2021 to 2025 reveals a period of contraction followed by a significant recovery. Between 2021 and 2024, economic profit experienced a consistent downward trajectory, falling from US$ 7,656 million to US$ 4,018 million. This decline is reversed in 2025, with economic profit rebounding to US$ 7,087 million.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a steady decline from 2021 through 2024, decreasing from US$ 10,212 million to a low of US$ 8,285 million. A sharp increase is observed in 2025, with profits rising to US$ 11,862 million. This surge in operating performance serves as the primary catalyst for the improvement in overall economic value added during the final period.
- Invested Capital
- A substantial expansion in invested capital occurred between 2021 and 2022, increasing from US$ 29,155 million to US$ 47,362 million. Capital levels remained elevated through 2025, peaking at US$ 53,321 million. The significant increase in the capital base during the early part of the period contributed to the erosion of economic profit, as the operating returns did not increase proportionally with the additional investment.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 8.22% and 8.95%. A slight downward trend occurred between 2021 and 2023, followed by a moderate increase in 2024 and 2025. The stability of this metric suggests that the fluctuations in economic profit were driven primarily by operational performance and capital deployment rather than shifts in the cost of funding.
- Economic Profit Synthesis
- The contraction in economic profit from 2021 to 2024 resulted from the combined effect of declining NOPAT and a significantly larger invested capital base. This indicates a period where the entity's ability to generate returns above its cost of capital diminished. The recovery in 2025 demonstrates a return to higher operational profitability that effectively offsets both the increased cost of capital and the expanded investment base.
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.
An analysis of the financial performance from 2021 to 2025 reveals a period of significant capital expansion accompanied by volatility in value creation efficiency. While the entity experienced a multi-year decline in both economic profit and the economic spread ratio, a notable reversal in these trends is observed in the final year of the period.
- Economic Profit Trends
- Economic profit exhibited a consistent downward trajectory between 2021 and 2024, falling from US$ 7,656 million to a low of US$ 4,018 million. This represents a substantial contraction in absolute economic value added over a four-year span. However, a sharp recovery occurred in 2025, with economic profit rising to US$ 7,087 million, suggesting a return toward previous profitability levels.
- Invested Capital Expansion
- A rapid increase in invested capital is observed, particularly between 2021 and 2022, when the amount rose from US$ 29,155 million to US$ 47,362 million. Following this initial surge, the capital base remained elevated, peaking at US$ 53,321 million in 2025. The significant growth in the capital base indicates a period of aggressive investment or asset acquisition.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a severe contraction, dropping from 26.26% in 2021 to a minimum of 8.32% in 2024. This decline is a direct result of the simultaneous increase in invested capital and the decrease in economic profit, reflecting a narrowing margin between the return on invested capital and the cost of capital. A partial recovery to 13.29% in 2025 indicates an improvement in the efficiency of capital utilization, although the ratio remains well below the 2021 peak.
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.
An analysis of the financial performance between 2021 and 2025 reveals a divergence between revenue growth and economic value creation, characterized by a period of margin compression followed by a significant recovery in the final year.
- Net Revenue Trends
- A consistent upward trajectory in net revenues is observed throughout the five-year period. Revenues increased from 31,405 million US dollars in 2021 to 40,648 million US dollars by 2025, representing steady top-line growth.
- Economic Profit Volatility
- Economic profit exhibited a sustained decline from 2021 through 2024, falling from a peak of 7,656 million US dollars to a low of 4,018 million US dollars. This downward trend indicates a period where value creation above the cost of capital was diminished. However, a sharp reversal occurred in 2025, with economic profit rebounding to 7,087 million US dollars.
- Economic Profit Margin Compression and Recovery
- The economic profit margin reflects a significant contraction between 2021 and 2024, dropping from 24.38% to 10.61%. This decline occurred despite the simultaneous increase in net revenues, suggesting that the growth in capital charges or operating expenses outpaced revenue gains during this interval. The margin experienced a substantial recovery in 2025, rising to 17.44%, although it remained below the 2021 baseline.
The data indicates that while the scale of operations expanded consistently, the efficiency of generating economic value was strained for three consecutive years before regaining momentum in 2025.