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
United Parcel Service Inc., economic profit calculation
US$ in millions
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
= 6,540 – 15.31% × 50,644 = -1,212
The financial trajectory from 2021 to 2025 demonstrates a significant deterioration in value creation, characterized by a transition from substantial economic profit to persistent economic loss.
- Net Operating Profit After Taxes (NOPAT)
- A consistent and sharp downward trend is observed in NOPAT, which fell from 15,125 million US$ in 2021 to 6,540 million US$ by 2025. This represents a total contraction of approximately 56.8% over the period, indicating a substantial reduction in operational profitability.
- Invested Capital
- In contrast to the decline in operational profit, invested capital has increased steadily every year, rising from 44,396 million US$ in 2021 to 50,644 million US$ in 2025. The growth in the capital base occurred despite the diminishing returns generated by the business operations.
- Cost of Capital
- The cost of capital remained relatively stable throughout the analysis period, exhibiting a slight gradual decline from 16.49% in 2021 to 15.31% in 2025. This marginal decrease was insufficient to offset the negative impact of falling profits and rising capital requirements.
- Economic Profit and Value Creation
- The convergence of declining NOPAT and increasing invested capital led to a collapse in economic profit. While the company generated a significant positive economic profit of 7,802 million US$ in 2021, this figure plummeted to 349 million US$ by 2023. The trend culminated in a shift to negative economic profit in 2024 (-935 million US$) and 2025 (-1,212 million US$), signaling that the entity is currently destroying shareholder value as the return on invested capital has fallen below the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
United Parcel Service Inc., NOPAT calculation
US$ in millions
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 credit losses.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 4,463 × 3.66% = 163
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,180 × 21.00% = 248
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0
8 Elimination of after taxes investment income.
A review of the financial information reveals a notable shift in performance between 2021 and 2025. Net income and net operating profit after taxes (NOPAT) both demonstrate a declining trajectory over the five-year period.
- NOPAT Trend
- NOPAT experienced a substantial decrease from US$15,125 million in 2021 to US$6,540 million in 2025. This represents a cumulative decline of approximately 56.8%. The most significant reduction occurred between 2021 and 2022, with a decrease of US$2,399 million. While the rate of decline slowed between 2022 and 2023, it continued, and the period from 2023 to 2025 shows a relatively stable, but still negative, trend.
- Net Income vs. NOPAT
- While both metrics decreased, NOPAT consistently exceeded net income throughout the observed period. The difference between NOPAT and net income suggests significant non-operating expenses or other adjustments impacting reported net income. The gap between NOPAT and net income widened from US$2,235 million in 2021 to US$972 million in 2025, indicating a growing divergence between core operating profitability and overall net earnings.
The consistent decline in NOPAT warrants further investigation to determine the underlying drivers. Potential factors could include increased operating costs, decreased revenue growth, changes in the tax rate, or increased capital charges. The relationship between NOPAT and net income suggests that factors beyond core operations are significantly influencing the company’s bottom line.
- Rate of Decline
- The percentage decrease in NOPAT from 2021 to 2022 was approximately 15.9%. This was followed by a more substantial decrease of 40.3% from 2022 to 2023. The rate of decline moderated to 8.4% from 2023 to 2024 and further to 0.3% from 2024 to 2025, suggesting a potential stabilization, albeit at a considerably lower level of profitability.
Continued monitoring of these trends is recommended, along with a detailed analysis of the components of NOPAT and net income to identify the root causes of the observed performance.
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Cash Operating Taxes
United Parcel Service Inc., cash operating taxes calculation
US$ in millions
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 reported income tax expense and cash operating taxes exhibit distinct trends over the five-year period. Income tax expense generally decreased, while cash operating taxes remained relatively stable with some fluctuation.
- Income Tax Expense
- Income tax expense decreased from US$3,705 million in 2021 to US$1,592 million in 2025. A significant decline occurred between 2021 and 2022, followed by more moderate decreases in subsequent years. This suggests potential changes in pre-tax income, applicable tax rates, or tax planning strategies.
- Cash Operating Taxes
- Cash operating taxes showed less volatility than income tax expense. The value increased from US$2,219 million in 2021 to US$2,913 million in 2022, then decreased to US$1,861 million in 2023. It experienced a slight increase in 2024 to US$1,889 million before decreasing again to US$1,848 million in 2025. The relative stability suggests a consistent cash outflow related to operational tax obligations, despite fluctuations.
- Relationship between Income Tax Expense and Cash Operating Taxes
- The difference between income tax expense and cash operating taxes varied across the period. In 2021, income tax expense exceeded cash operating taxes by US$1,486 million. This difference narrowed in 2022 to US$364 million. In 2023, the values were nearly equivalent, differing by only US$4 million. This pattern continued in 2024 and 2025, with income tax expense slightly exceeding cash operating taxes by US$229 million and US$256 million respectively. This indicates a potential shift in the timing of tax payments relative to reported tax expense, or the recognition of deferred tax assets or liabilities.
The divergence between the two metrics warrants further investigation to understand the underlying drivers and their impact on the company’s effective tax rate and cash flow.
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Invested Capital
United Parcel Service Inc., invested capital calculation (financing approach)
US$ in millions
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 equity equivalents to equity for controlling interests.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction-in-progress.
7 Subtraction of marketable securities.
The reported invested capital demonstrates a generally increasing trend over the five-year period. While fluctuations are present, the overall trajectory suggests a growing need for capital to support operations and expansion. A closer examination of the components contributing to invested capital reveals further insights.
- Total Invested Capital
- Invested capital began at US$44,396 million in 2021 and experienced a modest increase to US$44,780 million in 2022. This was followed by a further increase to US$45,460 million in 2023. A more substantial rise occurred between 2023 and 2024, reaching US$48,150 million, and continued into 2025, culminating in US$50,644 million. This indicates an accelerating demand for capital in the latter part of the period.
- Debt & Leases
- Total reported debt and leases decreased from US$25,528 million in 2021 to US$23,521 million in 2022. However, it subsequently increased to US$26,729 million in 2023, then decreased slightly to US$25,652 million in 2024, before rising again to US$28,590 million in 2025. This suggests a dynamic debt management strategy, potentially influenced by interest rate environments and investment opportunities.
- Equity
- Equity for controlling interests showed a significant increase from US$14,253 million in 2021 to US$19,786 million in 2022. This was followed by a decrease to US$17,306 million in 2023, and further declines to US$16,718 million in 2024 and US$16,227 million in 2025. The decline in equity during the latter years, despite increasing invested capital, implies a greater reliance on debt financing.
The combination of increasing invested capital and fluctuating, but ultimately rising, debt levels, coupled with declining equity, suggests a shift in the company’s capital structure. The increasing invested capital, particularly in the later years, warrants further investigation to determine the specific investments driving this trend and their associated returns. The decreasing equity balance, while not necessarily negative, should be monitored to ensure it does not indicate underlying financial strain or a change in shareholder value distribution policies.
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Cost of Capital
United Parcel Service Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 98,080) | 98,080) | ÷ | 126,124) | = | 0.78 | 0.78 | × | 18.69% | = | 14.54% | ||
| Long-term debt and finance leases, including current maturities3 | 23,581) | 23,581) | ÷ | 126,124) | = | 0.19 | 0.19 | × | 4.54% × (1 – 21.00%) | = | 0.67% | ||
| Operating lease liability4 | 4,463) | 4,463) | ÷ | 126,124) | = | 0.04 | 0.04 | × | 3.66% × (1 – 21.00%) | = | 0.10% | ||
| Total: | 126,124) | 1.00 | 15.31% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance leases, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 98,589) | 98,589) | ÷ | 123,212) | = | 0.80 | 0.80 | × | 18.69% | = | 14.96% | ||
| Long-term debt and finance leases, including current maturities3 | 20,255) | 20,255) | ÷ | 123,212) | = | 0.16 | 0.16 | × | 4.29% × (1 – 21.00%) | = | 0.56% | ||
| Operating lease liability4 | 4,368) | 4,368) | ÷ | 123,212) | = | 0.04 | 0.04 | × | 3.50% × (1 – 21.00%) | = | 0.10% | ||
| Total: | 123,212) | 1.00 | 15.61% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance leases, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 126,738) | 126,738) | ÷ | 153,275) | = | 0.83 | 0.83 | × | 18.69% | = | 15.46% | ||
| Long-term debt and finance leases, including current maturities3 | 22,072) | 22,072) | ÷ | 153,275) | = | 0.14 | 0.14 | × | 4.14% × (1 – 21.00%) | = | 0.47% | ||
| Operating lease liability4 | 4,465) | 4,465) | ÷ | 153,275) | = | 0.03 | 0.03 | × | 3.20% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 153,275) | 1.00 | 16.00% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance leases, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 153,251) | 153,251) | ÷ | 175,300) | = | 0.87 | 0.87 | × | 18.69% | = | 16.34% | ||
| Long-term debt and finance leases, including current maturities3 | 18,190) | 18,190) | ÷ | 175,300) | = | 0.10 | 0.10 | × | 3.58% × (1 – 21.00%) | = | 0.29% | ||
| Operating lease liability4 | 3,859) | 3,859) | ÷ | 175,300) | = | 0.02 | 0.02 | × | 2.32% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 175,300) | 1.00 | 16.67% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance leases, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 181,886) | 181,886) | ÷ | 210,607) | = | 0.86 | 0.86 | × | 18.69% | = | 16.14% | ||
| Long-term debt and finance leases, including current maturities3 | 25,108) | 25,108) | ÷ | 210,607) | = | 0.12 | 0.12 | × | 3.46% × (1 – 21.00%) | = | 0.33% | ||
| Operating lease liability4 | 3,613) | 3,613) | ÷ | 210,607) | = | 0.02 | 0.02 | × | 1.94% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 210,607) | 1.00 | 16.49% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance leases, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
United Parcel Service Inc., 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 millions) | ||||||
| Economic profit1 | (1,212) | (935) | 349) | 5,260) | 7,802) | |
| Invested capital2 | 50,644) | 48,150) | 45,460) | 44,780) | 44,396) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.39% | -1.94% | 0.77% | 11.75% | 17.57% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.78% | -7.97% | -6.50% | -6.13% | -3.58% | |
| Uber Technologies Inc. | 14.08% | 6.22% | -3.60% | -73.60% | -22.77% | |
| Union Pacific Corp. | -2.58% | -3.25% | -3.35% | -1.44% | -2.30% | |
| United Airlines Holdings Inc. | -2.57% | -1.75% | 0.91% | -3.31% | -10.24% | |
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 × -1,212 ÷ 50,644 = -2.39%
4 Click competitor name to see calculations.
A significant deterioration in economic value creation is observed over the five-year period from 2021 to 2025. The financial trajectory indicates a transition from substantial value generation to a state of value destruction, as the returns on invested capital failed to keep pace with the cost of capital.
- Economic Profit
- A severe downward trend is evident, with economic profit plummeting from US$ 7,802 million in 2021 to a negative US$ 1,212 million by 2025. The most critical decline occurred between 2022 and 2023, where economic profit dropped by approximately 93%, eventually shifting into negative territory in 2024.
- Invested Capital
- Invested capital shows a consistent and steady increase throughout the period, rising from US$ 44,396 million in 2021 to US$ 50,644 million in 2025. This continuous growth in the capital base occurred despite the simultaneous collapse in economic profit, suggesting that capital expansion did not yield proportional returns.
- Economic Spread Ratio
- The economic spread ratio exhibits a sharp contraction, falling from a high of 17.57% in 2021 to -2.39% in 2025. The ratio approached a break-even point in 2023 at 0.77% before becoming negative in 2024. This reversal confirms that the company's return on invested capital has fallen below its weighted average cost of capital, resulting in a systemic loss of economic value.
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Economic Profit Margin
United Parcel Service Inc., 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 millions) | ||||||
| Economic profit1 | (1,212) | (935) | 349) | 5,260) | 7,802) | |
| Revenue | 88,661) | 91,070) | 90,958) | 100,338) | 97,287) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.37% | -1.03% | 0.38% | 5.24% | 8.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -5.42% | -6.39% | -5.01% | -4.36% | -2.74% | |
| Uber Technologies Inc. | 4.27% | 2.11% | -1.51% | -37.73% | -20.97% | |
| Union Pacific Corp. | -6.71% | -8.32% | -8.55% | -3.46% | -6.15% | |
| United Airlines Holdings Inc. | -2.18% | -1.51% | 0.76% | -3.02% | -21.56% | |
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 ÷ Revenue
= 100 × -1,212 ÷ 88,661 = -1.37%
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 reflects a severe erosion of economic value creation. A consistent transition is observed from generating substantial economic profit to a state of economic value destruction, indicating that the returns generated are no longer sufficient to cover the cost of capital.
- Economic Profit Trends
- Economic profit experienced a precipitous decline, falling from 7,802 million USD in 2021 to a deficit of 1,212 million USD by 2025. The most significant contraction occurred between 2022 and 2023, where the value dropped from 5,260 million USD to 349 million USD, representing a near-total collapse of economic surplus before the figures turned negative in 2024.
- Revenue Performance
- Revenue peaked in 2022 at 100,338 million USD, followed by a downward trend that resulted in 88,661 million USD by 2025. While revenue decreased by approximately 9.2% from its peak, the collapse in economic profit was far more aggressive, suggesting that the decline in value creation was driven by factors beyond simple top-line contraction, such as increasing operational costs or higher capital charges.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates a continuous and sharp deterioration, falling from 8.02% in 2021 to -1.37% in 2025. The transition to a negative margin between 2023 and 2024 marks the critical threshold where the company shifted from creating economic value to destroying it.
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