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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	18.29%	18.46%	18.27%	17.52%	17.69%
Invested capital³	19,297,800)	16,707,900)	16,412,900)	17,346,300)	15,808,100)

Economic profit⁴	(337,044)	(121,411)	(488,977)	(560,441)	(439,508)

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 – 18.29% × 19,297,800 = -337,044

The financial analysis of economic profit from 2021 through 2025 reveals a persistent inability to generate returns exceeding the cost of capital, resulting in consistent negative economic value added. While there is a clear upward trajectory in operational profitability, the capital requirements and the associated cost of capital have constrained the ability to achieve positive economic profit.

Net Operating Profit After Taxes (NOPAT): A consistent and strong growth trend is observed in NOPAT, which increased from 2,357,407 thousand US$ in 2021 to 3,193,137 thousand US$ by 2025. This represents a steady improvement in the core operational efficiency and earning power of the business over the five-year period.
Cost of Capital and Invested Capital: The cost of capital remained relatively stable, fluctuating within a narrow band between 17.52% and 18.46%. Invested capital showed more volatility, peaking at 19,297,800 thousand US$ in 2025 after a period of relative stabilization between 2023 and 2024. The significant expansion of the capital base in 2025 placed additional pressure on the company's ability to create economic value.
Economic Profit Trends: Economic profit remained negative throughout the entire period, indicating that the return on invested capital did not meet the minimum threshold required by investors. A notable improvement occurred in 2024, where the economic loss narrowed to its lowest point of -121,411 thousand US$, driven by a surge in NOPAT while invested capital remained controlled. However, this progress was reversed in 2025, as the loss widened to -337,044 thousand US$. This decline is primarily attributable to the substantial increase in invested capital, which outpaced the growth in operating profits.

In summary, the data indicates a divergence between operational growth and economic value creation. Despite the continuous growth in NOPAT, the high cost of capital combined with expanding invested capital has prevented the transition to a positive economic profit position.

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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	×	20.39%	=	17.91%
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					18.29%

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	×	20.39%	=	18.12%
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					18.46%

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	×	20.39%	=	17.92%
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					18.27%

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	×	20.39%	=	17.05%
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					17.52%

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	×	20.39%	=	17.30%
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					17.69%

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	(337,044)	(121,411)	(488,977)	(560,441)	(439,508)
Invested capital²	19,297,800)	16,707,900)	16,412,900)	17,346,300)	15,808,100)
Performance Ratio
Economic spread ratio³	-1.75%	-0.73%	-2.98%	-3.23%	-2.78%
Benchmarks
Economic Spread Ratio, Competitors⁴
Linde plc	-5.08%	-5.11%	-5.63%	-8.87%	-8.83%

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 × -337,044 ÷ 19,297,800 = -1.75%

⁴ Click competitor name to see calculations.

The financial data indicates a persistent failure to generate positive economic value over the five-year period from 2021 to 2025. Throughout this interval, the entity consistently operated with a negative economic profit and a negative economic spread ratio, signifying that the returns on invested capital remained below the weighted average cost of capital.

Economic Profit Trends: Economic profit remained negative across all reported years, with fluctuations indicating varying levels of value destruction. A peak in value loss occurred in 2022 at -560.4 million USD. A significant recovery was observed in 2024, where economic profit improved to -121.4 million USD, its highest point in the series. However, this trend reversed in 2025, with economic profit declining again to -337.0 million USD.
Invested Capital Trajectory: Invested capital showed a general upward trend, growing from 15.8 billion USD in 2021 to 19.3 billion USD by 2025. While there was a slight contraction in 2023 to 16.4 billion USD, the subsequent growth indicates an increase in the capital base. The increase in invested capital in 2025 coincided with a decline in economic profit, suggesting that the additional capital deployed did not yield returns sufficient to cover the cost of capital.
Economic Spread Ratio Analysis: The economic spread ratio mirrored the trends seen in economic profit, remaining negative throughout the period. The ratio widened to its lowest point of -3.23% in 2022, indicating the greatest divergence between actual returns and the cost of capital. A notable narrowing of the spread occurred in 2024, reaching -0.73%, which represents the point of maximum operational efficiency relative to the cost of capital. This efficiency was not sustained into 2025, as the ratio widened again to -1.75%.

In summary, the analysis reveals a pattern of consistent economic value destruction. Although 2024 demonstrated a significant reduction in the negative spread and a narrowing of economic losses, the subsequent decline in 2025 suggests that the company has struggled to maintain a positive spread despite a larger invested capital base.

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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	(337,044)	(121,411)	(488,977)	(560,441)	(439,508)
Net sales	23,574,300)	23,098,500)	23,051,900)	22,148,900)	19,944,600)
Performance Ratio
Economic profit margin²	-1.43%	-0.53%	-2.12%	-2.53%	-2.20%
Benchmarks
Economic Profit Margin, Competitors³
Linde plc	-11.98%	-11.59%	-12.59%	-19.23%	-20.81%

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 × -337,044 ÷ 23,574,300 = -1.43%

³ Click competitor name to see calculations.

The financial performance from 2021 to 2025 is characterized by a persistent negative economic profit, indicating that the returns generated did not exceed the company's cost of capital during this period. However, the magnitude of these losses exhibited significant volatility despite a steady increase in top-line revenue.

Net Sales Growth: A consistent upward trajectory is observed in net sales, which grew from US$ 19,944,600 thousand in 2021 to US$ 23,574,300 thousand in 2025. This represents a steady expansion of market reach or pricing power over the five-year horizon.
Economic Profit Trends: Economic profit remained in negative territory throughout the analyzed timeframe. The deficit widened to a peak loss of US$ 560,441 thousand in 2022. A substantial recovery occurred in 2024, where the loss narrowed significantly to US$ 121,411 thousand, before deteriorating again to US$ 337,044 thousand in 2025.
Economic Profit Margin Analysis: The economic profit margin fluctuated in alignment with absolute economic profit. The margin reached its lowest point in 2022 at -2.53%, followed by a trend of improvement that peaked in 2024 at -0.53%. The subsequent decline to -1.43% in 2025 suggests that the gains in operational efficiency or capital utilization achieved in 2024 were not sustained into the following year.

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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