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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Sherwin-Williams Co., economic profit calculation

US$ in thousands

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	3,193,137)	2,962,399)	2,509,420)	2,478,341)	2,357,407)
Cost of capital²	18.35%	18.52%	18.33%	17.57%	17.75%
Invested capital³	19,297,800)	16,707,900)	16,412,900)	17,346,300)	15,808,100)

Economic profit⁴	(348,155)	(131,142)	(498,430)	(569,945)	(448,301)

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
= 3,193,137 – 18.35% × 19,297,800 = -348,155

An analysis of the economic value added indicates that the entity consistently failed to generate positive economic profit between 2021 and 2025, reflecting a persistent destruction of shareholder value over the observed five-year period.

Net Operating Profit After Taxes (NOPAT): A consistent upward trajectory is observed in NOPAT, which grew from 2,357,407 thousand US$ in 2021 to 3,193,137 thousand US$ by 2025. This represents a steady improvement in operational profitability, with the most pronounced gains occurring between 2023 and 2025.
Invested Capital and Cost of Capital: Invested capital demonstrated a general increase, rising from 15,808,100 thousand US$ in 2021 to a peak of 19,297,800 thousand US$ in 2025, despite a temporary contraction in 2023. The cost of capital remained relatively stable throughout the period, fluctuating within a tight range between 17.57% and 18.52%.
Economic Profit Trends: Economic profit remained negative for all five years, indicating that NOPAT was insufficient to cover the imputed cost of invested capital. While the deficit widened in 2022 to 569,945 thousand US$, a recovery phase followed, reaching the period's minimum deficit of 131,142 thousand US$ in 2024. However, this progress was reversed in 2025, with the economic profit falling back to negative 348,155 thousand US$. This late-period decline is attributable to the significant expansion of invested capital in 2025, which outpaced the growth in operational earnings.

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Sherwin-Williams Co., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2025	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Net income	2,568,500)	2,681,400)	2,388,800)	2,020,100)	1,864,400)
Deferred income tax expense (benefit)¹	153,200)	(74,900)	(88,900)	(144,800)	(80,300)
Increase (decrease) in allowance for current expected credit losses²	2,100)	800)	3,000)	7,700)	(4,600)
Increase (decrease) in LIFO reserve³	(13,400)	(37,800)	(124,700)	199,700)	280,900)
Increase (decrease) in accrual for product warranty claims⁴	10,900)	6,000)	4,200)	1,000)	(8,100)
Increase (decrease) in restructuring initiatives⁵	39,700)	—)	(41,700)	41,700)	—)
Increase (decrease) in equity equivalents⁶	192,500)	(105,900)	(248,100)	105,300)	187,900)
Interest expense	465,000)	415,700)	417,500)	390,800)	334,700)
Interest expense, operating lease liability⁷	93,209)	85,046)	74,434)	63,961)	56,412)
Adjusted interest expense	558,209)	500,746)	491,934)	454,761)	391,112)
Tax benefit of interest expense⁸	(117,224)	(105,157)	(103,306)	(95,500)	(82,134)
Adjusted interest expense, after taxes⁹	440,985)	395,589)	388,628)	359,261)	308,978)
Interest income	(11,200)	(11,000)	(25,200)	(8,000)	(4,900)
Investment income, before taxes	(11,200)	(11,000)	(25,200)	(8,000)	(4,900)
Tax expense (benefit) of investment income¹⁰	2,352)	2,310)	5,292)	1,680)	1,029)
Investment income, after taxes¹¹	(8,848)	(8,690)	(19,908)	(6,320)	(3,871)
Net operating profit after taxes (NOPAT)	3,193,137)	2,962,399)	2,509,420)	2,478,341)	2,357,407)

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 allowance for current expected credit losses.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in accrual for product warranty claims.

⁵ Addition of increase (decrease) in restructuring initiatives.

⁶ Addition of increase (decrease) in equity equivalents to net income.

⁷ 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,071,300 × 4.50% = 93,209

⁸ 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 558,209 × 21.00% = 117,224

⁹ Addition of after taxes interest expense to net income.

¹⁰ 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 11,200 × 21.00% = 2,352

¹¹ Elimination of after taxes investment income.

Net income and net operating profit after taxes (NOPAT) both demonstrate positive performance over the analyzed period. While net income experienced a slight decrease in the most recent year, NOPAT consistently increased, suggesting improvements in core operational profitability. The divergence between the two metrics warrants further investigation.

NOPAT Trend: NOPAT exhibited a consistent upward trend from 2021 through 2025. Starting at US$2,357,407 thousand in 2021, it increased to US$2,478,341 thousand in 2022, and US$2,509,420 thousand in 2023. The rate of increase accelerated in 2024, reaching US$2,962,399 thousand, and continued to rise to US$3,193,137 thousand in 2025. This indicates strengthening operational efficiency and profitability.
Net Income Trend: Net income also generally increased from 2021 to 2024. It rose from US$1,864,400 thousand in 2021 to US$2,020,100 thousand in 2022, and US$2,388,800 thousand in 2023. A further increase was observed in 2024, reaching US$2,681,400 thousand. However, net income decreased in 2025 to US$2,568,500 thousand, representing a potential shift in factors impacting overall profitability beyond core operations.
Relationship between NOPAT and Net Income: From 2021 to 2024, NOPAT consistently exceeded net income. This difference could be attributed to factors such as interest expense, non-operating income or expenses, and tax implications. The widening gap between NOPAT and net income in 2024 and 2025, coupled with the decline in net income in 2025, suggests that non-operating factors are increasingly influencing the bottom line. Further analysis is needed to determine the specific drivers of this divergence.

The sustained growth in NOPAT is a positive indicator of the company’s core business performance. However, the recent decrease in net income, despite continued NOPAT growth, suggests a need to investigate factors impacting overall profitability beyond operational efficiency.

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Sherwin-Williams Co., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2025	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Provisions for income taxes	769,700)	770,400)	721,100)	553,000)	384,200)
Less: Deferred income tax expense (benefit)	153,200)	(74,900)	(88,900)	(144,800)	(80,300)
Add: Tax savings from interest expense	117,224)	105,157)	103,306)	95,500)	82,134)
Less: Tax imposed on investment income	2,352)	2,310)	5,292)	1,680)	1,029)
Cash operating taxes	731,372)	948,147)	908,014)	791,620)	545,605)

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 provisions for income taxes and cash operating taxes both demonstrate an increasing trend from 2021 to 2023, followed by stabilization and a decrease in the most recent year presented. A more detailed examination reveals differing patterns between the two measures.

Provisions for Income Taxes: Provisions for income taxes increased from US$384.2 million in 2021 to US$721.1 million in 2023, representing a substantial rise over the two-year period. Growth slowed in 2024, with provisions reaching US$770.4 million, and then decreased slightly to US$769.7 million in 2025. This suggests a potential stabilization of tax obligations after a period of significant increase.
Cash Operating Taxes: Cash operating taxes exhibited a similar upward trajectory from 2021 to 2023, increasing from US$545.6 million to US$908.0 million. The rate of increase was notably higher than that of provisions for income taxes. Like provisions, growth moderated in 2024, reaching US$948.1 million, before experiencing a more pronounced decrease to US$731.4 million in 2025. This decline is more substantial than the decrease observed in provisions for income taxes.

The divergence between the two measures in 2025 is noteworthy. The larger decrease in cash operating taxes compared to provisions for income taxes could indicate factors such as tax credits, changes in tax planning strategies, or timing differences between reported provisions and actual cash outflows. Further investigation would be required to determine the underlying causes of this difference.

Overall Trend: Both measures initially increased, likely reflecting increased profitability or changes in the tax environment. The subsequent stabilization and decrease in 2025 suggest a potential shift in the company’s tax position or a response to evolving economic conditions. The differing magnitudes of change between provisions and cash taxes warrant further scrutiny to understand the drivers of these trends and their impact on economic value added.

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Sherwin-Williams Co., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2025	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Short-term borrowings	1,200,500)	662,400)	374,200)	978,100)	763,500)
Current portion of long-term debt	350,100)	1,049,200)	1,098,800)	600)	260,600)
Current portion of finance lease liabilities	700)	3,700)	—)	—)	—)
Long-term debt, excluding current portion	9,320,700)	8,176,800)	8,377,900)	9,591,000)	8,590,900)
Long-term finance lease liabilities, excluding current portion	194,700)	185,600)	—)	—)	—)
Operating lease liability¹	2,071,300)	2,024,900)	1,958,800)	1,938,200)	1,880,400)
Total reported debt & leases	13,138,000)	12,102,600)	11,809,700)	12,507,900)	11,495,400)
Shareholders’ equity	4,598,300)	4,051,200)	3,715,800)	3,102,100)	2,437,200)
Net deferred tax (assets) liabilities²	670,800)	540,000)	606,100)	604,600)	705,400)
Allowance for current expected credit losses³	62,500)	60,400)	59,600)	56,600)	48,900)
Excess of FIFO over LIFO⁴	616,800)	630,200)	668,000)	792,700)	593,000)
Accrual for product warranty claims⁵	57,300)	46,400)	40,400)	36,200)	35,200)
Restructuring initiatives⁶	39,700)	—)	—)	41,700)	—)
Equity equivalents⁷	1,447,100)	1,277,000)	1,374,100)	1,531,800)	1,382,500)
Accumulated other comprehensive (income) loss, net of tax⁸	634,400)	875,200)	624,300)	700,600)	698,400)
Adjusted shareholders’ equity	6,679,800)	6,203,400)	5,714,200)	5,334,500)	4,518,100)
Construction in progress⁹	(520,000)	(1,598,100)	(1,111,000)	(496,100)	(205,400)
Invested capital	19,297,800)	16,707,900)	16,412,900)	17,346,300)	15,808,100)

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 LIFO reserve. See details »

⁵ Addition of accrual for product warranty claims.

⁶ Addition of restructuring initiatives.

⁷ Addition of equity equivalents to shareholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress.

The invested capital of the company demonstrates a generally increasing trend over the five-year period, though with some fluctuation. Total reported debt & leases and shareholders’ equity both contribute to this invested capital figure, and their individual movements influence the overall trend.

Invested Capital Trend: Invested capital increased from US$15,808.1 million in 2021 to US$17,346.3 million in 2022, representing a significant rise. A decrease was then observed in 2023, falling to US$16,412.9 million. This was followed by a modest increase in 2024 to US$16,707.9 million, before a more substantial increase in 2025, reaching US$19,297.8 million. The 2025 value represents the highest level of invested capital over the observed period.
Debt & Leases: Total reported debt & leases generally increased throughout the period. From US$11,495.4 million in 2021, it rose to US$12,507.9 million in 2022. A decrease occurred in 2023 to US$11,809.7 million, followed by a slight increase in 2024 to US$12,102.6 million. The most significant increase was observed between 2024 and 2025, with debt & leases reaching US$13,138.0 million.
Shareholders’ Equity: Shareholders’ equity exhibited consistent growth throughout the period. It increased from US$2,437.2 million in 2021 to US$3,102.1 million in 2022, US$3,715.8 million in 2023, US$4,051.2 million in 2024, and finally to US$4,598.3 million in 2025. This represents a steady and substantial increase in equity over the five years.

The fluctuations in invested capital appear to be influenced by both debt and equity levels. While debt experienced a dip in 2023, equity continued to grow, partially offsetting the decrease. The substantial increase in invested capital in 2025 is attributable to increases in both debt & leases and shareholders’ equity.

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Sherwin-Williams Co., cost of capital calculations

Dec 31, 2025

	Capital (fair value)¹	Weights					Cost of capital
Equity²	88,606,734)	88,606,734)	÷	100,887,734)	=	0.88	0.88	×	20.46%	=	17.97%
Debt and finance lease liabilities³	10,209,700)	10,209,700)	÷	100,887,734)	=	0.10	0.10	×	3.86% × (1 – 21.00%)	=	0.31%
Operating lease liability⁴	2,071,300)	2,071,300)	÷	100,887,734)	=	0.02	0.02	×	4.50% × (1 – 21.00%)	=	0.07%
Total:	100,887,734)					1.00					18.35%

Based on: 10-K (reporting date: 2025-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	87,982,475)	87,982,475)	÷	99,032,075)	=	0.89	0.89	×	20.46%	=	18.18%
Debt and finance lease liabilities³	9,024,700)	9,024,700)	÷	99,032,075)	=	0.09	0.09	×	3.76% × (1 – 21.00%)	=	0.27%
Operating lease liability⁴	2,024,900)	2,024,900)	÷	99,032,075)	=	0.02	0.02	×	4.20% × (1 – 21.00%)	=	0.07%
Total:	99,032,075)					1.00					18.52%

Based on: 10-K (reporting date: 2024-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	79,204,627)	79,204,627)	÷	90,153,527)	=	0.88	0.88	×	20.46%	=	17.97%
Debt and finance lease liabilities³	8,990,100)	8,990,100)	÷	90,153,527)	=	0.10	0.10	×	3.63% × (1 – 21.00%)	=	0.29%
Operating lease liability⁴	1,958,800)	1,958,800)	÷	90,153,527)	=	0.02	0.02	×	3.80% × (1 – 21.00%)	=	0.07%
Total:	90,153,527)					1.00					18.33%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	57,537,005)	57,537,005)	÷	68,837,105)	=	0.84	0.84	×	20.46%	=	17.10%
Debt and finance lease liabilities³	9,361,900)	9,361,900)	÷	68,837,105)	=	0.14	0.14	×	3.71% × (1 – 21.00%)	=	0.40%
Operating lease liability⁴	1,938,200)	1,938,200)	÷	68,837,105)	=	0.03	0.03	×	3.30% × (1 – 21.00%)	=	0.07%
Total:	68,837,105)					1.00					17.57%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	69,577,080)	69,577,080)	÷	82,000,280)	=	0.85	0.85	×	20.46%	=	17.36%
Debt and finance lease liabilities³	10,542,800)	10,542,800)	÷	82,000,280)	=	0.13	0.13	×	3.29% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	1,880,400)	1,880,400)	÷	82,000,280)	=	0.02	0.02	×	3.00% × (1 – 21.00%)	=	0.05%
Total:	82,000,280)					1.00					17.75%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Sherwin-Williams Co., 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 thousands)
Economic profit¹	(348,155)	(131,142)	(498,430)	(569,945)	(448,301)
Invested capital²	19,297,800)	16,707,900)	16,412,900)	17,346,300)	15,808,100)
Performance Ratio
Economic spread ratio³	-1.80%	-0.78%	-3.04%	-3.29%	-2.84%
Benchmarks
Economic Spread Ratio, Competitors⁴
Linde plc	-5.13%	-5.16%	-5.69%	-8.92%	-8.89%

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 × -348,155 ÷ 19,297,800 = -1.80%

⁴ Click competitor name to see calculations.

The analysis of financial performance from 2021 through 2025 reveals a consistent inability to generate positive economic value added, as evidenced by persistent negative economic profit and a negative economic spread ratio. While a significant improvement in efficiency was observed in 2024, the overall trend indicates that the return on invested capital remained below the required cost of capital throughout the period.

Economic Profit: Economic profit remained negative for the entire five-year duration, indicating that the company did not create value above its cost of capital. The most significant deficit occurred in 2022, reaching -569,945 thousand US$. A notable recovery was observed in 2024, where the deficit narrowed to -131,142 thousand US$, before deteriorating again in 2025 to -348,155 thousand US$.
Invested Capital: A general upward trend in invested capital is observed, growing from 15,808,100 thousand US$ in 2021 to 19,297,800 thousand US$ by 2025. A slight contraction occurred in 2023, followed by a substantial increase in 2025, suggesting a period of significant capital expansion in the final year of the analysis.
Economic Spread Ratio: The economic spread ratio remained negative throughout the period, mirroring the trend of economic profit. The ratio reached its lowest point in 2022 at -3.29%. A sharp improvement was recorded in 2024, where the ratio rose to -0.78%, representing the closest alignment with the cost of capital. However, this progress was reversed in 2025, as the ratio declined to -1.80%, coinciding with the increase in invested capital.

The correlation between the increase in invested capital in 2025 and the subsequent decline in the economic spread ratio suggests that recent capital deployments have not yet yielded returns sufficient to offset their associated costs. The volatility in the economic spread ratio underscores a fluctuating gap between the company's actual returns and its capital requirements.

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Sherwin-Williams Co., 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 thousands)
Economic profit¹	(348,155)	(131,142)	(498,430)	(569,945)	(448,301)
Net sales	23,574,300)	23,098,500)	23,051,900)	22,148,900)	19,944,600)
Performance Ratio
Economic profit margin²	-1.48%	-0.57%	-2.16%	-2.57%	-2.25%
Benchmarks
Economic Profit Margin, Competitors³
Linde plc	-12.11%	-11.72%	-12.71%	-19.35%	-20.94%

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 sales
= 100 × -348,155 ÷ 23,574,300 = -1.48%

³ Click competitor name to see calculations.

An analysis of the economic value added indicates that the company operated with a negative economic profit throughout the period from 2021 to 2025. Despite a consistent upward trajectory in net sales, which grew from 19,944,600 thousand dollars in 2021 to 23,574,300 thousand dollars in 2025, the returns generated were insufficient to cover the cost of capital employed.

Economic Profit Trajectory: Economic profit exhibited significant volatility over the five-year span. A decline was observed between 2021 and 2022, with the deficit widening to 569,945 thousand dollars. This was followed by a period of recovery, reaching a peak efficiency point in 2024 when the economic profit deficit narrowed substantially to 131,142 thousand dollars. However, this improvement was not sustained, as the deficit expanded again to 348,155 thousand dollars by the end of 2025.
Economic Profit Margin Analysis: The economic profit margin reflected the instability of the absolute economic profit. The margin deteriorated to its lowest point of -2.57% in 2022. A subsequent recovery trend led to a significant improvement in 2024, where the margin reached its highest level of -0.57%. The final period saw a regression, with the margin sliding to -1.48% in 2025, indicating a reduction in the company's ability to generate value above its cost of capital relative to its sales volume.

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Sherwin-Williams Co. (NYSE:SHW)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin