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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Sherwin-Williams Co. pages available for free this week:
- Statement of Comprehensive Income
- Cash Flow Statement
- Common-Size Income Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Dividend Discount Model (DDM)
- Debt to Equity since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Economic Profit
Sherwin-Williams Co., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data presents several key trends in the operational profitability, cost of capital, invested capital, and economic profit over a five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a consistent upward trend across the entire period, increasing from approximately $2.19 billion in 2020 to nearly $2.96 billion in 2024. This steady growth indicates improving operational efficiency and profitability before considering capital costs.
- Cost of Capital
- The cost of capital remains relatively stable but shows a slight upward trend from 14.66% in 2020 to 15.25% in 2024. The incremental increase suggests marginally higher financing or equity costs over time, which could impact the company’s valuation and investment decisions.
- Invested Capital
- Invested capital rises from roughly $15.49 billion in 2020 to about $17.35 billion in 2022, then slightly declines in 2023 before modestly increasing again in 2024 to $16.71 billion. This pattern may reflect capital expenditure decisions, asset disposals, or changes in working capital that influence the overall capital base.
- Economic Profit
- The economic profit exhibits marked variability, starting negative at approximately -$80.7 million in 2020, turning positive in 2021 at around $44.8 million, then slipping back to a negative -$37.0 million in 2022. It turns positive again in 2023 with $31.6 million and significantly improves in 2024 to $414.5 million. This volatility suggests fluctuating returns relative to the cost of capital, with a notable improvement in generating value above the required return in the most recent year.
Overall, the data reflects continuous operational profit growth against a backdrop of a slightly rising cost of capital and fluctuating invested capital. The pronounced surge in economic profit in 2024 demonstrates enhanced value creation, indicating improved management effectiveness in utilizing capital and generating returns exceeding capital costs.
Net Operating Profit after Taxes (NOPAT)
Sherwin-Williams Co., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 Plan.
6 Addition of increase (decrease) in equity equivalents to net income.
7 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income.
10 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
- Net Income Trend Analysis
- The net income shows a fluctuating yet overall upward trend over the five-year period. Beginning in 2020 at approximately 2.03 billion US dollars, there is a noticeable decline in 2021 to about 1.86 billion US dollars. However, this decline appears temporary as net income recovers in 2022 to just over 2.02 billion US dollars. The upward trajectory continues more strongly in the subsequent years, with net income rising to nearly 2.39 billion in 2023 and further to approximately 2.68 billion in 2024. These figures suggest improving profitability and potential operational efficiency gains or favorable market conditions beginning in 2022 and sustaining growth through 2024.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT exhibits a consistent and steady increase throughout the five-year span. Starting from about 2.19 billion US dollars in 2020, it increases each year without decline, reaching around 2.36 billion in 2021, then 2.48 billion in 2022, 2.51 billion in 2023, and culminating at nearly 2.96 billion in 2024. This steady growth indicates progressively efficient core operations and suggests successful management of operating expenses and taxes. The more pronounced increase in later years aligns with the increasing net income, reinforcing the positive operational and financial performance trend.
- Comparative Insights
- While net income experienced a dip in 2021, the continual growth of NOPAT during this period underscores that the core operational profitability remained robust, indicating that the net income downturn may have resulted from non-operational factors or extraordinary items. The consistent rise in NOPAT emphasizes improved operational effectiveness, which appears to translate into increasing net income from 2022 onwards. Overall, the financial data reflect strengthening company profitability and operational efficiency, particularly evident from 2022 through 2024.
Cash Operating Taxes
Sherwin-Williams Co., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
The analysis of the financial data reveals significant trends relating to the provisions for income taxes and cash operating taxes over the five-year period from 2020 to 2024.
- Provisions for Income Taxes
- The provisions for income taxes exhibited notable fluctuations throughout the years. Starting at 488,800 thousand US dollars in 2020, there was a decrease in 2021 to 384,200 thousand US dollars, representing a drop of approximately 21.4%. However, this was followed by a substantial increase in 2022, reaching 553,000 thousand US dollars, which is roughly a 44% rise from the previous year. The upward trend continued into 2023 and 2024, with values rising to 721,100 and 770,400 thousand US dollars respectively. Between 2022 and 2024, the provisions grew by about 39.3%, indicating increasing tax liabilities or adjustments potentially tied to revenue or profit growth.
- Cash Operating Taxes
- Cash operating taxes displayed a similar upward trajectory, despite some fluctuations. The value started at 717,833 thousand US dollars in 2020 and decreased in 2021 to 545,605 thousand US dollars, a reduction of approximately 24%. In 2022, cash operating taxes increased sharply to 791,620 thousand US dollars, exceeding the 2020 level by roughly 10.3%. This growth continued, with values rising to 908,014 in 2023 and 948,147 thousand US dollars in 2024. From 2022 to 2024, there was an incremental increase of around 19.8%, reflecting higher tax payments possibly associated with improved operational results or changes in tax regulations.
Overall, both provisions for income taxes and cash operating taxes show a pattern of initial decline between 2020 and 2021, followed by a consistent and significant increase through 2024. This suggests a possible recovery or expansion phase after 2021, with increasing taxable income or shifts in tax policies impacting the tax expenses.
Invested Capital
Sherwin-Williams Co., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 Plan.
7 Addition of equity equivalents to shareholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
- Total reported debt & leases
- The total reported debt and leases have generally increased over the years, starting from approximately $10.11 billion in 2020 and reaching about $12.10 billion by 2024. Notably, there was a steady rise from 2020 to 2022, peaking at around $12.51 billion. Following this peak, a slight decrease was observed in 2023, with a minor uptick again in 2024. This pattern suggests a tendency toward increasing leverage, with some adjustments made after 2022.
- Shareholders’ equity
- Shareholders’ equity exhibited volatility during the period analyzed. It decreased markedly from approximately $3.61 billion in 2020 to $2.44 billion in 2021, indicating a significant reduction in net assets. However, from 2021 onwards, equity increased steadily, rising to about $4.05 billion by 2024. This recovery and growth imply a restoration of financial strength and potentially improved profitability or capital infusion after the initial decline.
- Invested capital
- The invested capital demonstrated an overall upward trend, increasing from around $15.49 billion in 2020 to approximately $16.71 billion in 2024. There was a peak in 2022 at $17.35 billion, followed by a decline in 2023, and a slight recovery in 2024. The fluctuations in invested capital reflect changes in the company's operational investments and financing structure, consistent with the movements seen in debt and equity during the same periods.
Cost of Capital
Sherwin-Williams Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Sherwin-Williams Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated significant volatility over the analyzed periods. Initially, there was a considerable loss of 80,657 thousand US dollars in 2020, followed by a reversal to a positive figure of 44,755 thousand in 2021. This positive trend was not sustained, as the profit once again turned negative to -36,982 thousand in 2022. However, subsequent years showed recovery, with economic profit rising to 31,622 thousand in 2023 and experiencing a substantial increase to 414,500 thousand by 2024. This pattern indicates fluctuations in profitability with a marked improvement in the most recent year.
- Invested Capital
- Invested capital showed an overall increasing trend with some minor variability. The capital invested increased from 15,489,500 thousand US dollars in 2020 to 15,808,100 thousand in 2021, followed by a more significant rise to 17,346,300 thousand in 2022. However, a decline was observed in 2023 when invested capital decreased to 16,412,900 thousand before slightly increasing again to 16,707,900 thousand in 2024. Despite these fluctuations, the general tendency was upward, indicating ongoing capital investments with minor retrenchments.
- Economic Spread Ratio
- The economic spread ratio exhibited notable fluctuations corresponding with the economic profit movements. It started at a negative ratio of -0.52% in 2020, improved to a positive 0.28% in 2021, then declined again to -0.21% in 2022. The ratio turned positive once more to 0.19% in 2023 and increased substantially to 2.48% in 2024. This indicates that the return on invested capital in relation to the cost of capital improved markedly in the latest period, reflecting enhanced value creation.
Economic Profit Margin
Sherwin-Williams Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Linde plc | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The analyzed financial data reveals notable fluctuations and trends over the five-year period. The net sales show consistent growth from 18,361,700 thousand USD in 2020 to 23,098,500 thousand USD in 2024, indicating a positive sales expansion and overall revenue growth.
Despite the increasing net sales, the economic profit figures demonstrate high volatility. The economic profit was negative at -80,657 thousand USD in 2020, turning positive at 44,755 thousand USD in 2021. However, it reverted to a negative value of -36,982 thousand USD in 2022 before moving back into positive territory in 2023 at 31,622 thousand USD and then rising substantially to 414,500 thousand USD in 2024. This pattern suggests that the company experienced varying cost efficiency or capital charges impacting profitability, with a significant improvement in economic profit observed in the most recent year.
The economic profit margin, expressed as a percentage of net sales, mirrors the fluctuations in economic profit. It shifted from a negative margin of -0.44% in 2020 to a positive 0.22% in 2021, then dropped back to -0.17% in 2022. It returned to a positive margin of 0.14% in 2023 and expanded significantly to 1.79% in 2024. This indicates that the company's ability to generate economic profit relative to sales strengthened considerably in 2024, reflecting improved operational efficiency and value creation.
- Net Sales
- Demonstrated steady growth throughout the period, increasing approximately 26% from 2020 to 2024.
- Economic Profit
- Displayed significant volatility with alternating negative and positive results, culminating in a strong positive performance in 2024.
- Economic Profit Margin
- Exhibited fluctuations consistent with economic profit changes, ending with a marked improvement that indicates enhanced profitability relative to sales.
Overall, the data suggests that while the company faced challenges impacting its economic profit in certain years, it managed to achieve significant improvements in 2024. This reflects positively on its recent operational and financial management effectiveness.