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.
Economic Profit
Sherwin-Williams Co., economic profit 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 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 – 18.20% × 19,297,800 = -319,138
The financial performance from 2021 to 2025 reveals a consistent inability to generate positive economic value, as the net operating profit after taxes (NOPAT) remained insufficient to cover the total cost of invested capital throughout the period.
- Net Operating Profit After Taxes (NOPAT)
- A steady upward trend is observed in NOPAT, which increased from US$ 2,357,407 thousand in 2021 to US$ 3,193,137 thousand in 2025. This indicates consistent growth in operational profitability over the five-year horizon.
- Cost and Scale of Invested Capital
- The cost of capital remained relatively stable, oscillating between a low of 17.43% in 2022 and a peak of 18.36% in 2024. Invested capital exhibited more volatility, decreasing in 2023 before rising sharply to US$ 19,297,800 thousand by 2025, the highest level in the analyzed period.
- Economic Profit Analysis
- Economic profit remained negative for all five years, confirming that the company did not meet its required rate of return. A period of improvement occurred between 2022 and 2024, where the economic deficit narrowed from -US$ 545,122 thousand to -US$ 105,728 thousand. However, this progress was reversed in 2025, as economic profit fell to -US$ 319,138 thousand. This deterioration in the final year is attributable to the substantial increase in invested capital, which expanded more rapidly than the corresponding growth in NOPAT.
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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
= 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$2,568,500 thousand, representing a potential shift in factors impacting overall profitability beyond core operations.
- Relationship between NOPAT and Net Income
- From 2021 to 2024, NOPAT consistently exceeded net income. This difference could be attributed to factors such as interest expense, non-operating income or expenses, and tax implications. The widening gap between NOPAT and net income in 2024 and 2025, coupled with the decline in net income in 2025, suggests that non-operating factors are increasingly influencing the bottom line. Further analysis is needed to determine the specific drivers of this divergence.
The sustained growth in NOPAT is a positive indicator of the company’s core business performance. However, the recent decrease in net income, despite continued NOPAT growth, suggests a need to investigate factors impacting overall profitability beyond operational efficiency.
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Cash Operating Taxes
Sherwin-Williams Co., cash operating taxes calculation
US$ 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$731.4 million in 2025. This decline is more substantial than the decrease observed in provisions for income taxes.
The divergence between the two measures in 2025 is noteworthy. The larger decrease in cash operating taxes compared to provisions for income taxes could indicate factors such as tax credits, changes in tax planning strategies, or timing differences between reported provisions and actual cash outflows. Further investigation would be required to determine the underlying causes of this difference.
- Overall Trend
- Both measures initially increased, likely reflecting increased profitability or changes in the tax environment. The subsequent stabilization and decrease in 2025 suggest a potential shift in the company’s tax position or a response to evolving economic conditions. The differing magnitudes of change between provisions and cash taxes warrant further scrutiny to understand the drivers of these trends and their impact on economic value added.
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Invested Capital
Sherwin-Williams Co., invested capital calculation (financing approach)
US$ 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$4,598.3 million in 2025. This represents a steady and substantial increase in equity over the five years.
The fluctuations in invested capital appear to be influenced by both debt and equity levels. While debt experienced a dip in 2023, equity continued to grow, partially offsetting the decrease. The substantial increase in invested capital in 2025 is attributable to increases in both debt & leases and shareholders’ equity.
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Cost of Capital
Sherwin-Williams Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 88,606,734) | 88,606,734) | ÷ | 100,887,734) | = | 0.88 | 0.88 | × | 20.29% | = | 17.82% | ||
| Debt and finance lease liabilities3 | 10,209,700) | 10,209,700) | ÷ | 100,887,734) | = | 0.10 | 0.10 | × | 3.86% × (1 – 21.00%) | = | 0.31% | ||
| Operating lease liability4 | 2,071,300) | 2,071,300) | ÷ | 100,887,734) | = | 0.02 | 0.02 | × | 4.50% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 100,887,734) | 1.00 | 18.20% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 87,982,475) | 87,982,475) | ÷ | 99,032,075) | = | 0.89 | 0.89 | × | 20.29% | = | 18.02% | ||
| 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 | 18.36% | ||||||||||
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 | 79,204,627) | 79,204,627) | ÷ | 90,153,527) | = | 0.88 | 0.88 | × | 20.29% | = | 17.82% | ||
| 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 | 18.18% | ||||||||||
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 | 57,537,005) | 57,537,005) | ÷ | 68,837,105) | = | 0.84 | 0.84 | × | 20.29% | = | 16.96% | ||
| 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 | 17.43% | ||||||||||
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 | 69,577,080) | 69,577,080) | ÷ | 82,000,280) | = | 0.85 | 0.85 | × | 20.29% | = | 17.21% | ||
| 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 | 17.60% | ||||||||||
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 | (319,138) | (105,728) | (473,743) | (545,122) | (425,337) | |
| Invested capital2 | 19,297,800) | 16,707,900) | 16,412,900) | 17,346,300) | 15,808,100) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -1.65% | -0.63% | -2.89% | -3.14% | -2.69% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | -5.14% | -5.18% | -5.70% | -8.94% | -8.90% | |
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 × -319,138 ÷ 19,297,800 = -1.65%
4 Click competitor name to see calculations.
The analysis of economic value added indicates a consistent failure to generate positive economic profit from 2021 through 2025. This suggests that the returns generated on invested capital have remained below the required cost of capital throughout the observed period, resulting in a destruction of economic value.
- Economic Profit Trends
- Economic profit remained negative across all five years, with a peak deficit of 545.1 million US dollars recorded in 2022. A significant recovery was observed in 2024, when the economic loss narrowed to 105.7 million US dollars, although this improvement was not sustained into 2025, where losses widened again to 319.1 million US dollars.
- Invested Capital Dynamics
- Invested capital exhibited an overall upward trajectory, increasing from 15.8 billion US dollars in 2021 to 19.3 billion US dollars by 2025. A temporary contraction occurred in 2023, with capital decreasing to 16.4 billion US dollars, before resuming growth in the subsequent two years.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative throughout the period, confirming that the company's return on invested capital did not exceed its cost of capital. The ratio reached its lowest point in 2022 at -3.14%. The most favorable performance occurred in 2024, where the spread narrowed to -0.63%, indicating the smallest gap between actual returns and the cost of capital, before deteriorating to -1.65% in 2025.
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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 | (319,138) | (105,728) | (473,743) | (545,122) | (425,337) | |
| Net sales | 23,574,300) | 23,098,500) | 23,051,900) | 22,148,900) | 19,944,600) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.35% | -0.46% | -2.06% | -2.46% | -2.13% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Linde plc | -12.13% | -11.75% | -12.74% | -19.37% | -20.97% | |
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 × -319,138 ÷ 23,574,300 = -1.35%
3 Click competitor name to see calculations.
An analysis of the economic profit margin reveals a consistent trend of negative value creation relative to the cost of capital from 2021 through 2025. While net sales demonstrated steady growth over this five-year period, the company failed to achieve a positive economic profit, indicating that the returns generated were insufficient to cover the total cost of the capital employed.
- Economic Profit Margin Volatility
- The economic profit margin exhibited fluctuating performance, reaching its lowest point in 2022 at -2.46%. A recovery trend was observed between 2023 and 2024, with the margin improving significantly to its peak of -0.46% by the end of 2024. This positive trajectory was reversed in 2025, as the margin deteriorated to -1.35%.
- Revenue Growth versus Value Creation
- Net sales increased consistently from 19.94 billion USD in 2021 to 23.57 billion USD in 2025. Despite this sustained growth in top-line revenue, the inability to transition to a positive economic profit margin suggests that the expansion in scale did not translate into economic value added. The divergence between increasing sales and persistently negative economic profit indicates that operational gains were offset by the cost of capital.
- Economic Profit Absolute Trends
- The absolute economic profit mirrored the margin fluctuations, with the most substantial deficit occurring in 2022 at -545.12 million USD. A marked improvement occurred in 2024, where the deficit was narrowed to -105.73 million USD. However, the deficit widened again in 2025 to -319.14 million USD, confirming a pattern of instability in the company's ability to generate returns above its capital threshold.
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