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
Target Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,141 – 15.36% × 37,821 = -1,667
An analysis of the economic profit trajectory reveals a consistent inability to generate value above the cost of capital for the majority of the period. Despite a significant outlier of value creation in 2022, the overall trend indicates an erosion of economic value characterized by increasing capital requirements and volatile operating profits.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited substantial volatility throughout the period. A significant peak was recorded in 2022 at 7,872 million, representing the highest point of operational profitability. This was followed by a sharp decline in 2023 to 3,821 million. While a moderate recovery occurred in 2024, the subsequent two years show a gradual downward trajectory, concluding at 4,141 million in 2026.
- Invested Capital and Cost of Capital
- There is a clear upward trend in invested capital, which grew from 30,495 million in 2021 to 37,821 million in 2026. This expansion of the capital base occurred alongside a relatively stable cost of capital, which experienced a marginal decline from 17.06% to 15.36%. The increasing amount of capital employed suggests an expansion in assets or investments that has not consistently translated into proportional increases in operating profit.
- Economic Profit Performance
- Economic profit remained negative in five out of the six years analyzed. The only period of positive value creation occurred in 2022, with an economic profit of 2,681 million, driven by the spike in NOPAT. From 2023 onward, economic profit returned to negative territory and continued to deteriorate. The deficit widened from -1,146 million in 2023 to -1,667 million in 2026, reflecting a widening gap between the actual operating returns and the required return on the growing capital base.
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Net Operating Profit after Taxes (NOPAT)
Target Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net earnings.
3 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,834 × 4.61% = 177
4 2026 Calculation
Tax benefit of net interest expense = Adjusted net interest expense × Statutory income tax rate
= 622 × 21.00% = 131
5 Addition of after taxes interest expense to net earnings.
Net operating profit after taxes (NOPAT) exhibited significant fluctuation over the observed period. Initial values were strong, followed by a substantial decline, and then a partial recovery. A comparison with net earnings reveals some divergence in performance trends.
- Overall NOPAT Trend
- NOPAT began at US$5,024 million in January 2021, increasing substantially to US$7,872 million in January 2022. This represents a growth of approximately 57.2%. However, a marked decrease occurred in January 2023, with NOPAT falling to US$3,821 million. Subsequent years show a recovery, reaching US$4,953 million in February 2024, US$4,376 million in February 2025, and US$4,141 million in January 2026. While recovering, NOPAT did not return to the peak observed in 2022.
- Relationship to Net Earnings
- In January 2021, NOPAT exceeded net earnings by approximately US$656 million. This difference widened in January 2022, with NOPAT exceeding net earnings by approximately US$926 million. However, the gap narrowed considerably in January 2023, with NOPAT exceeding net earnings by only US$41 million. In February 2024, NOPAT exceeded net earnings by US$815 million, and this difference continued in subsequent years, reaching US$666 million in February 2025 and US$436 million in January 2026. The fluctuating difference suggests changes in non-operating items or tax impacts affecting net earnings relative to core operational profitability.
- Recent Performance
- The most recent two periods (February 2025 and January 2026) demonstrate a slight downward trend in NOPAT, decreasing from US$4,376 million to US$4,141 million. This represents a decline of approximately 5.6%. This recent deceleration warrants further investigation to determine the underlying causes.
The observed volatility in NOPAT suggests sensitivity to external factors or internal operational changes. Further analysis, including a breakdown of the components contributing to NOPAT, is recommended to understand the drivers behind these fluctuations and inform future strategic decisions.
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Cash Operating Taxes
Target Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
The provision for income taxes and cash operating taxes exhibited fluctuating behavior over the observed period. A notable divergence between the two metrics is apparent, suggesting factors beyond standard income tax accounting are influencing cash tax payments.
- Provision for Income Taxes
- The provision for income taxes began at US$1,178 million in 2021, increased significantly to US$1,961 million in 2022, then decreased substantially to US$638 million in 2023. A subsequent rise to US$1,159 million occurred in 2024, followed by a slight increase to US$1,170 million in 2025, and a minor decrease to US$1,062 million in 2026. This pattern indicates considerable volatility, potentially linked to changes in pre-tax income, tax rate adjustments, or the recognition of deferred tax assets or liabilities.
- Cash Operating Taxes
- Cash operating taxes started at US$1,585 million in 2021 and decreased to US$1,546 million in 2022. A dramatic decline to US$178 million was observed in 2023, representing a significant reduction in cash outflow for taxes. The value then increased to US$998 million in 2024, followed by a substantial rise to US$1,474 million in 2025, and a moderate decrease to US$1,248 million in 2026. The fluctuations in cash taxes are more pronounced than those in the provision for income taxes.
- Relationship between Provision and Cash Taxes
- In 2021 and 2022, cash operating taxes were relatively close to the provision for income taxes. However, beginning in 2023, a significant difference emerged. Cash operating taxes were considerably lower than the provision for income taxes in 2023, suggesting potential benefits from tax loss carryforwards, tax credits, or timing differences related to deductible items. The gap narrowed in 2024 and 2025 as cash taxes increased, but remained notable. This divergence implies that the company’s actual cash tax payments do not directly correlate with its accounting income tax expense.
The observed trends suggest that the company’s effective tax rate and cash tax payments are subject to considerable variability. Further investigation into the specific drivers of these fluctuations, such as changes in tax legislation, utilization of tax credits, and the impact of deferred tax items, would be beneficial for a comprehensive understanding of the company’s tax position.
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Invested Capital
Target Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ investment.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction-in-progress.
The reported invested capital demonstrates a generally increasing trend over the observed period. However, the components contributing to invested capital – total reported debt & leases and shareholders’ investment – exhibit differing patterns. An initial assessment reveals fluctuations in both debt and equity financing, impacting the overall capital structure.
- Total Reported Debt & Leases
- Total reported debt & leases consistently increased from US$15,109 million in January 2021 to US$20,290 million in January 2026. The rate of increase was most pronounced between January 2022 and January 2023, growing by US$2,606 million. Subsequent increases were more moderate, suggesting a potential stabilization in debt financing strategies after 2023.
- Shareholders’ Investment
- Shareholders’ investment experienced a decline from US$14,440 million in January 2021 to a low of US$11,232 million in January 2023. A recovery began in January 2024, with the investment reaching US$16,165 million by January 2026. This indicates a period of reduced equity financing followed by renewed investor confidence or strategic capital raising activities.
- Invested Capital
- Despite the fluctuations in its components, invested capital remained relatively stable between January 2021 and January 2023, fluctuating around the US$30 billion mark. A significant increase occurred between January 2023 and February 2024, reaching US$34,307 million. This growth continued through January 2026, reaching US$37,821 million, driven by the combined effect of increasing debt and recovering shareholders’ investment. The overall trend suggests a growing capital base, potentially supporting expansion or strategic initiatives.
The interplay between debt and equity financing suggests a dynamic capital structure management approach. The initial decline in shareholders’ investment was largely offset by increased debt, maintaining a consistent level of invested capital. The subsequent recovery in shareholders’ investment, coupled with continued debt financing, resulted in a more substantial increase in the overall invested capital base in the later years of the period.
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Cost of Capital
Target Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 53,790) | 53,790) | ÷ | 73,469) | = | 0.73 | 0.73 | × | 19.77% | = | 14.48% | ||
| Long-term debt and other borrowings, including current portion3 | 15,845) | 15,845) | ÷ | 73,469) | = | 0.22 | 0.22 | × | 4.05% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 3,834) | 3,834) | ÷ | 73,469) | = | 0.05 | 0.05 | × | 4.61% × (1 – 21.00%) | = | 0.19% | ||
| Total: | 73,469) | 1.00 | 15.36% | ||||||||||
Based on: 10-K (reporting date: 2026-01-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,874) | 48,874) | ÷ | 67,923) | = | 0.72 | 0.72 | × | 19.77% | = | 14.23% | ||
| Long-term debt and other borrowings, including current portion3 | 15,114) | 15,114) | ÷ | 67,923) | = | 0.22 | 0.22 | × | 3.77% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 3,935) | 3,935) | ÷ | 67,923) | = | 0.06 | 0.06 | × | 4.51% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 67,923) | 1.00 | 15.10% | ||||||||||
Based on: 10-K (reporting date: 2025-02-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 76,950) | 76,950) | ÷ | 96,038) | = | 0.80 | 0.80 | × | 19.77% | = | 15.84% | ||
| Long-term debt and other borrowings, including current portion3 | 15,480) | 15,480) | ÷ | 96,038) | = | 0.16 | 0.16 | × | 3.85% × (1 – 21.00%) | = | 0.49% | ||
| Operating lease liability4 | 3,608) | 3,608) | ÷ | 96,038) | = | 0.04 | 0.04 | × | 4.22% × (1 – 21.00%) | = | 0.13% | ||
| Total: | 96,038) | 1.00 | 16.46% | ||||||||||
Based on: 10-K (reporting date: 2024-02-03).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 75,274) | 75,274) | ÷ | 93,968) | = | 0.80 | 0.80 | × | 19.77% | = | 15.84% | ||
| Long-term debt and other borrowings, including current portion3 | 15,760) | 15,760) | ÷ | 93,968) | = | 0.17 | 0.17 | × | 3.84% × (1 – 21.00%) | = | 0.51% | ||
| Operating lease liability4 | 2,934) | 2,934) | ÷ | 93,968) | = | 0.03 | 0.03 | × | 3.52% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 93,968) | 1.00 | 16.43% | ||||||||||
Based on: 10-K (reporting date: 2023-01-28).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 99,882) | 99,882) | ÷ | 117,512) | = | 0.85 | 0.85 | × | 19.77% | = | 16.81% | ||
| Long-term debt and other borrowings, including current portion3 | 14,883) | 14,883) | ÷ | 117,512) | = | 0.13 | 0.13 | × | 3.50% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 2,747) | 2,747) | ÷ | 117,512) | = | 0.02 | 0.02 | × | 3.28% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,512) | 1.00 | 17.22% | ||||||||||
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 89,043) | 89,043) | ÷ | 106,113) | = | 0.84 | 0.84 | × | 19.77% | = | 16.59% | ||
| Long-term debt and other borrowings, including current portion3 | 14,641) | 14,641) | ÷ | 106,113) | = | 0.14 | 0.14 | × | 3.70% × (1 – 21.00%) | = | 0.40% | ||
| Operating lease liability4 | 2,429) | 2,429) | ÷ | 106,113) | = | 0.02 | 0.02 | × | 3.54% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 106,113) | 1.00 | 17.06% | ||||||||||
Based on: 10-K (reporting date: 2021-01-30).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Target Corp., economic spread ratio calculation, comparison to benchmarks
| Jan 31, 2026 | Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,667) | (1,075) | (693) | (1,146) | 2,681) | (178) | |
| Invested capital2 | 37,821) | 36,107) | 34,307) | 30,226) | 30,151) | 30,495) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -4.41% | -2.98% | -2.02% | -3.79% | 8.89% | -0.58% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | — | 5.72% | 6.42% | 1.62% | 5.70% | 4.10% | |
| Walmart Inc. | 4.18% | 2.34% | 0.88% | -1.53% | -0.99% | 0.48% | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,667 ÷ 37,821 = -4.41%
4 Click competitor name to see calculations.
The analysis of economic value added indicates a period of significant volatility and a general trend of value destruction over the observed timeframe. While a notable spike in performance occurred in early 2022, the subsequent years show a persistent inability to generate returns that exceed the cost of capital.
- Economic Profit Trends
- Economic profit remained negative for the majority of the period. A substantial outlier is observed on January 29, 2022, where economic profit reached a peak of 2,681 million USD. However, this was followed by a sharp reversal to a loss of 1,146 million USD in 2023. The trend continues downward in later projections, with economic profit expected to decline further to negative 1,667 million USD by January 31, 2026.
- Invested Capital Growth
- Invested capital remained relatively stable between 2021 and 2023, hovering around 30 billion USD. Starting in 2024, a consistent upward trend is observed, with capital increasing to 34,307 million USD and continuing to climb to a projected 37,821 million USD by 2026. This indicates a steady increase in the capital base despite the declining economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the trajectory of economic profit, highlighting a failure to create economic value in five out of the six years analyzed. The ratio reached a high of 8.89% in January 2022 but fell sharply to negative 3.79% by January 2023. Although there was a slight recovery to negative 2.02% in 2024, the ratio is projected to deteriorate further, reaching negative 4.41% by January 2026. This persistent negative spread suggests that the return on invested capital is consistently below the company's cost of capital.
The divergence between increasing invested capital and decreasing economic profit suggests a decline in capital efficiency. The expansion of the capital base is not translating into higher economic returns, resulting in an accelerating rate of value destruction as evidenced by the widening negative economic spread.
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Economic Profit Margin
Target Corp., economic profit margin calculation, comparison to benchmarks
| Jan 31, 2026 | Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,667) | (1,075) | (693) | (1,146) | 2,681) | (178) | |
| Net sales | 104,780) | 106,566) | 107,412) | 109,120) | 106,005) | 93,561) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -1.59% | -1.01% | -0.65% | -1.05% | 2.53% | -0.19% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | — | 0.81% | 0.85% | 0.24% | 0.81% | 0.61% | |
| Walmart Inc. | 1.03% | 0.56% | 0.21% | -0.38% | -0.27% | 0.14% | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -1,667 ÷ 104,780 = -1.59%
3 Click competitor name to see calculations.
An analysis of economic value creation reveals a period of significant volatility, characterized by a brief window of value generation followed by a prolonged trend of economic loss.
- Net Sales Performance
- Revenue experienced an initial growth phase, increasing from 93,561 million in January 2021 to a peak of 109,120 million in January 2023. This growth trend reversed thereafter, with a gradual decline in annual sales reaching 104,780 million by January 2026.
- Economic Profit Trends
- Economic profit exhibited extreme fluctuation over the period. Following a marginal loss in 2021, a substantial surplus of 2,681 million was achieved in January 2022. However, this gain was not sustained, and the company entered a period of consistent economic losses from 2023 through 2026, with the deficit expanding to 1,667 million by the end of the analyzed period.
- Economic Profit Margin Analysis
- The economic profit margin indicates a failure to consistently generate returns exceeding the cost of capital. The margin peaked at 2.53% in January 2022 but remained negative for five of the six years analyzed. A deteriorating trend is observable in the later years, as the margin shifted from -0.65% in February 2024 to -1.59% in January 2026, signaling an increasing gap between operational returns and the required return on capital.
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