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:
- Common-Size Income Statement
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2008
- Return on Assets (ROA) since 2008
- Total Asset Turnover since 2008
- Price to Book Value (P/BV) since 2008
- Analysis of Revenues
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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
= – × =
Analysis of economic profit reveals a period of contraction between 2021 and 2024, followed by a substantial recovery in 2025. The overall trajectory indicates a phase of capital expansion that initially pressured value creation before a significant operational rebound occurred in the final year.
- Net Operating Profit After Taxes (NOPAT)
- A consistent downward trend is observed from 2021 to 2024, with values decreasing from 10,212 million to 8,285 million. This four-year decline was reversed in 2025, when NOPAT increased sharply to 11,862 million, marking the highest level of operating profit within the analyzed period.
- Invested Capital and Cost of Capital
- Invested capital grew significantly from 2021 to 2023, rising from 29,155 million to a peak of 51,360 million. This expansion suggests a period of heavy investment. The cost of capital remained relatively stable, fluctuating between a low of 8.05% in 2023 and a high of 8.76% in 2025, indicating a consistent risk profile and funding cost environment.
- Economic Profit Performance
- Economic profit followed a downward trajectory from 2021 to 2024, falling from 7,712 million to a low of 4,110 million. This decline was driven by the combination of shrinking NOPAT and a substantially larger capital base, which increased the total capital charge. A strong recovery is evident in 2025, where economic profit rose to 7,191 million, driven by the surge in operating profit which more than compensated for the increase in invested capital to 53,321 million.
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 regarding economic value creation exhibits a period of contraction followed by a recovery. Between 2021 and 2024, a consistent decline in economic profit and the economic spread ratio is observed, coinciding with a substantial increase in invested capital. However, 2025 marks a significant reversal of this trend, with a notable increase in both absolute economic profit and the efficiency of the capital spread.
- Economic Spread Ratio
- A significant downward trajectory is observed from 2021 to 2024, with the ratio falling from 26.45% to a low of 8.51%. This contraction indicates a narrowing gap between the return on invested capital and the cost of capital during this period. A recovery occurs in 2025, where the ratio rises to 13.49%, signaling improved capital efficiency.
- Invested Capital
- The capital base expanded rapidly between 2021 and 2022, increasing from 29,155 million US$ to 47,362 million US$. This growth continued through 2023, reaching 51,360 million US$, followed by a slight contraction in 2024 and a subsequent rise to 53,321 million US$ by 2025. The initial surge in invested capital correlates with the sharp decline in the economic spread ratio, suggesting that the additional capital deployed did not yield immediate proportional increases in economic profit.
- Economic Profit
- Absolute economic profit experienced a steady decline for three consecutive years, dropping from 7,712 million US$ in 2021 to 4,110 million US$ in 2024. This trend is interrupted in 2025 by a sharp increase to 7,191 million US$, nearly returning to 2021 levels. This rebound, occurring alongside the highest recorded level of invested capital, indicates a substantial improvement in the operational effectiveness of the deployed assets.
Economic Profit Margin
Philip Morris International Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
Between 2021 and 2025, a divergent relationship is observed between net revenue growth and economic profit generation. While net revenues grew consistently throughout the period, economic profit and the corresponding profit margin experienced a three-year contraction before recovering in the final year.
- Net Revenue Trends
- Net revenues demonstrated a sustained upward trajectory, increasing from US$ 31,405 million in 2021 to US$ 40,648 million in 2025. This indicates a consistent expansion of the company's top-line performance over the five-year analysis period.
- Economic Profit Volatility
- Economic profit followed a U-shaped pattern. A steady decline was recorded from 2021 (US$ 7,712 million) through 2024, where it reached a trough of US$ 4,110 million. This downward trend was interrupted in 2025 by a significant recovery, with economic profit rising to US$ 7,191 million.
- Economic Profit Margin Analysis
- The economic profit margin underwent substantial compression, falling from 24.56% in 2021 to 10.85% in 2024. This decline suggests that the cost of capital or operating expenses grew at a faster rate than net revenues during this period, reducing the value created above the required return. A recovery to 17.69% in 2025 indicates a marked improvement in capital efficiency and value creation, although the margin did not return to the 2021 peak.