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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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Net Profit Margin since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Aggregate Accruals
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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 period under review demonstrates a complex relationship between net operating profit after taxes, cost of capital, and invested capital, resulting in consistently negative economic profit. While NOPAT generally increased over the five-year span, it was insufficient to overcome the combined effect of the cost of capital and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited an overall upward trend, increasing from US$2,357,407 thousand in 2021 to US$3,193,137 thousand in 2025. However, the rate of increase was not consistent. The largest year-over-year increase occurred between 2023 and 2024, while the increase from 2024 to 2025 was more moderate.
- Cost of Capital
- The cost of capital fluctuated throughout the period. It initially decreased slightly from 17.68% in 2021 to 17.50% in 2022, then increased to 18.44% in 2024 before decreasing slightly to 18.28% in 2025. These fluctuations contributed to the overall negative economic profit, as a higher cost of capital reduces economic profit.
- Invested Capital
- Invested capital showed an initial increase from US$15,808,100 thousand in 2021 to US$17,346,300 thousand in 2022. It then decreased in 2023 to US$16,412,900 thousand, followed by a modest increase in 2024. A significant increase was observed in 2025, reaching US$19,297,800 thousand. This growth in invested capital, particularly in the final year, placed further downward pressure on economic profit.
- Economic Profit
- Economic profit remained negative throughout the entire period, ranging from a low of US$-557,551 thousand in 2022 to a high of US$-118,453 thousand in 2024. While the negative economic profit lessened in 2024, it increased again in 2025 to US$-333,666 thousand. This indicates that the company’s returns on its invested capital were consistently below its cost of capital. The improvement in 2024 suggests a temporary positive shift in the relationship between NOPAT, cost of capital, and invested capital, but this was not sustained into 2025.
In summary, despite increasing NOPAT, the company experienced negative economic profit due to a combination of a relatively stable to increasing cost of capital and fluctuating, but ultimately increasing, invested capital. The year 2024 represented a relative improvement, but the trend reverted in the final year of the period.
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 economic spread ratio exhibited a fluctuating pattern over the five-year period. Initially negative, the ratio demonstrated improvement before declining again. Invested capital increased overall, while economic profit remained consistently negative, though with varying magnitudes.
- Economic Spread Ratio
- The economic spread ratio began at -2.76% in 2021 and decreased to -3.21% in 2022, indicating a widening gap between the company’s cost of capital and its return on invested capital. A notable improvement occurred in 2023, with the ratio moving to -2.96%, suggesting a narrowing of this gap. This positive trend continued into 2024, with a significant increase to -0.71%, the highest value observed during the period. However, the ratio subsequently declined to -1.73% in 2025, representing a deterioration in performance relative to the cost of capital.
- Economic Profit
- Economic profit was negative throughout the observed period. The largest negative value occurred in 2022, at -557,551 US$ in thousands. While economic profit improved to -486,103 US$ in thousands in 2023, it remained substantial. A significant reduction in the magnitude of the loss was seen in 2024, with economic profit reaching -118,453 US$ in thousands. However, the loss increased again in 2025, reaching -333,666 US$ in thousands.
- Invested Capital
- Invested capital generally increased over the period. From 2021 to 2022, invested capital rose from 15,808,100 US$ in thousands to 17,346,300 US$ in thousands. A slight decrease was observed in 2023, to 16,412,900 US$ in thousands, followed by a further increase to 16,707,900 US$ in thousands in 2024. The most substantial increase occurred between 2024 and 2025, with invested capital reaching 19,297,800 US$ in thousands.
The consistent negative economic profit, despite increasing invested capital, suggests the company is not generating returns sufficient to cover its cost of capital. The improvement in the economic spread ratio in 2023 and 2024 was not sustained, as indicated by the decline in 2025. This suggests potential challenges in effectively deploying capital and generating profitable returns.
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.
The economic profit margin exhibited fluctuations over the five-year period. Initially negative, the margin demonstrated improvement before experiencing renewed decline.
- Economic Profit Margin Trend
- In 2021, the economic profit margin stood at -2.19%. This margin deteriorated to -2.52% in 2022, representing the lowest point within the observed timeframe. A subsequent improvement was noted in 2023, with the margin increasing to -2.11%. However, this positive trend was not sustained. The margin significantly improved to -0.51% in 2024, indicating a substantial reduction in economic loss. Finally, in 2025, the economic profit margin decreased to -1.42%, suggesting a weakening of economic profitability relative to sales.
The economic profit itself consistently remained negative throughout the period, although the magnitude of the loss varied. The largest economic loss occurred in 2022, followed by 2021 and 2023. The loss was considerably reduced in 2024, but increased again in 2025.
- Relationship between Net Sales and Economic Profit Margin
- Net sales generally increased over the period, moving from 19,944,600 to 23,574,300. Despite this growth in sales, the economic profit margin did not consistently improve. The most significant improvement in the margin occurred in 2024, coinciding with a relatively modest increase in net sales. This suggests that factors beyond revenue growth, such as cost of capital or operational efficiency, play a crucial role in determining economic profitability.
The observed pattern indicates that while the company has been increasing its sales, it has struggled to generate economic profit. The improvement in 2024 suggests potential positive changes in cost management or capital allocation, but the subsequent decline in 2025 warrants further investigation.