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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Economic Profit
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 | ||||||
| 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
= – × =
The financial performance from 2021 to 2025 is characterized by a persistent failure to generate positive economic profit, indicating that the return on invested capital has remained consistently below the weighted average cost of capital. Despite a steady increase in absolute operating profitability, the capital charges associated with the invested base have outweighed the net operating profit after taxes (NOPAT) throughout the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trajectory in NOPAT is observed, growing from 2,357,407 thousand US dollars in 2021 to 3,193,137 thousand US dollars by 2025. This represents a sustained increase in the organization's ability to generate operating income after tax obligations, reflecting growth in core operational efficiency or revenue expansion over the five-year span.
- Invested Capital and Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 17.65% and 18.59%. Invested capital exhibited more volatility, peaking at 17,346,300 thousand US dollars in 2022, experiencing a slight contraction in 2023, and then rising sharply to 19,297,800 thousand US dollars by 2025. The significant increase in invested capital in the final year contributed to a higher capital charge, offsetting the gains made in operating profit.
- Economic Profit Trends
- Economic profit remained negative for the entire duration, signifying that the company did not create economic value above its cost of capital. The most significant deficit occurred in 2022 at -582,827 thousand US dollars. A notable recovery was observed in 2024, where the economic loss narrowed to its lowest point of -144,330 thousand US dollars. However, this improvement was reversed in 2025, as economic profit declined again to -363,213 thousand US dollars, driven primarily by the substantial expansion of the invested capital base.
Net Operating Profit after Taxes (NOPAT)
Sherwin-Williams Co., NOPAT calculation
US$ in thousands
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
= × =
8 2025 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 2025 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 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$2,568,500 thousand, representing a potential shift in factors impacting overall profitability beyond core operations.
- Relationship between NOPAT and Net Income
- From 2021 to 2024, NOPAT consistently exceeded net income. This difference could be attributed to factors such as interest expense, non-operating income or expenses, and tax implications. The widening gap between NOPAT and net income in 2024 and 2025, coupled with the decline in net income in 2025, suggests that non-operating factors are increasingly influencing the bottom line. Further analysis is needed to determine the specific drivers of this divergence.
The sustained growth in NOPAT is a positive indicator of the company’s core business performance. However, the recent decrease in net income, despite continued NOPAT growth, suggests a need to investigate factors impacting overall profitability beyond operational efficiency.
Cash Operating Taxes
Sherwin-Williams Co., cash operating taxes calculation
US$ in thousands
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$731.4 million in 2025. This decline is more substantial than the decrease observed in provisions for income taxes.
The divergence between the two measures in 2025 is noteworthy. The larger decrease in cash operating taxes compared to provisions for income taxes could indicate factors such as tax credits, changes in tax planning strategies, or timing differences between reported provisions and actual cash outflows. Further investigation would be required to determine the underlying causes of this difference.
- Overall Trend
- Both measures initially increased, likely reflecting increased profitability or changes in the tax environment. The subsequent stabilization and decrease in 2025 suggest a potential shift in the company’s tax position or a response to evolving economic conditions. The differing magnitudes of change between provisions and cash taxes warrant further scrutiny to understand the drivers of these trends and their impact on economic value added.
Invested Capital
Sherwin-Williams Co., invested capital calculation (financing approach)
US$ in thousands
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$4,598.3 million in 2025. This represents a steady and substantial increase in equity over the five years.
The fluctuations in invested capital appear to be influenced by both debt and equity levels. While debt experienced a dip in 2023, equity continued to grow, partially offsetting the decrease. The substantial increase in invested capital in 2025 is attributable to increases in both debt & leases and shareholders’ equity.
Cost of Capital
Sherwin-Williams Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| 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 »
Economic Spread Ratio
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | ||||||
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 analysis of the economic value added metrics reveals a consistent failure to generate positive economic profit between 2021 and 2025, indicating that returns on invested capital remained below the cost of capital throughout the period.
- Economic Profit Trends
- Economic profit remained negative for the entire duration. The deficit widened from -460,218 thousand USD in 2021 to a peak loss of -582,827 thousand USD in 2022. A recovery trend followed, culminating in the narrowest deficit of -144,330 thousand USD by 2024, before deteriorating again to -363,213 thousand USD in 2025.
- Invested Capital Dynamics
- The capital base exhibited fluctuations, starting at 15,808,100 thousand USD in 2021 and reaching a peak of 19,297,800 thousand USD in 2025. A temporary contraction was noted in 2023, where invested capital decreased to 16,412,900 thousand USD, prior to a substantial expansion in the final year.
- Economic Spread Ratio Performance
- The economic spread ratio stayed negative, mirroring the trend of economic profit. The ratio reached its lowest point of -3.36% in 2022. A significant improvement was observed in 2024, where the ratio climbed to -0.86%, representing the point of highest relative efficiency. However, this progress was reversed in 2025, as the ratio declined to -1.88%.
The correlation between the significant increase in invested capital in 2025 and the simultaneous drop in the economic spread ratio suggests a reduction in capital efficiency during the final year of the analyzed period.
Economic Profit Margin
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 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Linde plc | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
An analysis of the economic value added metrics reveals a consistent trend of negative economic profit throughout the period from 2021 to 2025. Despite a steady increase in top-line revenue, the organization failed to generate returns exceeding its cost of capital, though the magnitude of this shortfall fluctuated significantly over the five-year interval.
- Net Sales Performance
- A continuous upward trajectory in net sales is observed, growing from 19,944,600 thousand US dollars in 2021 to 23,574,300 thousand US dollars by 2025. This represents a sustained expansion of market reach or pricing power over the analyzed period.
- Economic Profit Trends
- Economic profit remained negative for all five years, indicating that the company did not create economic value above the required return. The most significant deficit occurred in 2022 at -582,827 thousand US dollars. A notable recovery trend was observed between 2023 and 2024, with the deficit narrowing to its lowest point of -144,330 thousand US dollars in 2024, before deteriorating again to -363,213 thousand US dollars in 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin widened to -2.63% in 2022, reflecting a decrease in value creation efficiency. A significant improvement followed, peaking in 2024 with a margin of -0.62%, which represents the period's closest approach to achieving a positive economic value added. However, this progress was partially reversed in 2025, as the margin declined to -1.54%.
In summary, while the company successfully scaled its net sales, the inability to transition to a positive economic profit margin suggests that the growth in revenue was not sufficient to offset the cost of the capital employed. The volatility observed in 2024 and 2025 indicates a fluctuating ability to manage the gap between operational returns and the cost of capital.