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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Verizon Communications Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Aggregate Accruals
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Economic Profit
Verizon Communications Inc., economic profit calculation
US$ in millions
| 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 analysis of economic value added reveals a period of significant volatility in value creation, characterized by a sharp contraction in economic profit reaching a trough in 2023, followed by a partial recovery and a subsequent downward trend. While operating profits have stabilized in recent years, the continuous expansion of the invested capital base has placed downward pressure on the company's ability to generate economic profit above its cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A notable decline in NOPAT occurred between 2021 and 2023, falling from $29,903 million to $19,450 million. A recovery trend is observed from 2024 through 2025, with NOPAT increasing to $25,872 million. Despite this rebound, the operating profit for 2025 remains approximately 13.7% lower than the 2021 peak.
- Invested Capital and Cost of Capital
- Invested capital exhibited a consistent upward trajectory throughout the period, increasing from $290,004 million in 2021 to $329,613 million by 2025. The cost of capital remained relatively stable, fluctuating within a narrow corridor between 7.17% and 7.52%. The gradual increase in the cost of capital since 2022 has effectively raised the financial hurdle required to achieve a positive economic profit.
- Economic Profit Trends
- Economic profit experienced a severe contraction, plummeting from $8,345 million in 2021 to a deficit of -$2,752 million in 2023, indicating that the return on invested capital fell below the cost of capital during that year. Although a return to positive economic profit was achieved in 2024 at $2,054 million, a further decline to $1,092 million is observed in 2025. This suggests that the incremental growth in NOPAT is insufficient to offset the combined impact of a larger capital base and a rising cost of capital.
Net Operating Profit after Taxes (NOPAT)
Verizon Communications Inc., NOPAT calculation
US$ 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 attributable to Verizon.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to Verizon.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
Net income attributable to Verizon and Net Operating Profit After Taxes (NOPAT) both exhibited fluctuations over the five-year period. NOPAT generally tracked above net income, as expected, reflecting the adjustments made to arrive at an operating profit figure. A notable decline in both metrics occurred between 2021 and 2023, followed by recoveries in subsequent years.
- NOPAT Trend
- NOPAT decreased from US$29,903 million in 2021 to US$19,450 million in 2023, representing a substantial reduction. This decline suggests a weakening in core operational profitability during this period. However, NOPAT rebounded in 2024 to US$24,675 million and continued to increase to US$25,872 million in 2025, indicating a recovery in operating performance. The 2024 and 2025 values, while improved, did not reach the levels observed in 2021.
- Relationship between NOPAT and Net Income
- The difference between NOPAT and net income attributable to Verizon varied across the period. In 2021, NOPAT exceeded net income by approximately US$7,838 million. This difference narrowed in 2022 to around US$6,783 million. The gap widened significantly in 2023, with NOPAT exceeding net income by US$7,836 million, likely due to the more pronounced decline in net income. In 2024, the difference was approximately US$7,129 million, and in 2025, it was around US$8,698 million. These variations suggest changes in non-operating items or tax impacts influencing the disparity between the two profit measures.
The recovery in NOPAT during 2024 and 2025 is a positive sign, but the levels remain below the 2021 peak. Further investigation would be required to understand the drivers behind the initial decline and the subsequent recovery in NOPAT, including analysis of revenue growth, operating expenses, and tax rates.
Cash Operating Taxes
Verizon Communications Inc., cash operating taxes calculation
US$ 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 income tax provision and cash operating taxes exhibited distinct trends over the five-year period. While the income tax provision generally decreased then stabilized, cash operating taxes demonstrated more volatility.
- Income Tax Provision
- The income tax provision decreased from US$6,802 million in 2021 to US$6,523 million in 2022, representing a 4.1% decline. A more substantial decrease was observed in 2023, falling to US$4,892 million. This trend reversed slightly in 2024, with the provision increasing to US$5,030 million, and continued with a further increase to US$5,064 million in 2025. Overall, the income tax provision shows an initial decline followed by a period of relative stability.
- Cash Operating Taxes
- Cash operating taxes increased significantly from US$3,436 million in 2021 to US$4,451 million in 2022, a rise of 29.6%. This was followed by a decrease to US$3,774 million in 2023. A substantial increase occurred in 2024, reaching US$5,750 million, before decreasing to US$4,273 million in 2025. The fluctuations in cash operating taxes suggest potential impacts from changes in tax laws, deferred tax asset realization, or timing differences between book and tax accounting.
The divergence between the income tax provision and cash operating taxes is notable. The income tax provision, representing the accounting expense, decreased initially and then stabilized, while cash operating taxes experienced larger swings. This difference suggests that non-cash components of the income tax provision, such as deferred taxes, play a significant role in the overall tax expense recognition. The increase in cash operating taxes in 2024, followed by a decrease in 2025, warrants further investigation to understand the underlying drivers of these changes.
- Relationship between Items
- In 2021, cash operating taxes were approximately 50.5% of the income tax provision. This percentage increased to 68.2% in 2022, decreased to 77.1% in 2023, rose to 114.3% in 2024, and then decreased to 84.3% in 2025. These shifts in the ratio indicate a changing relationship between reported tax expense and actual cash outflows for taxes.
Invested Capital
Verizon Communications Inc., invested capital calculation (financing approach)
US$ 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 attributable to Verizon.
5 Removal of accumulated other comprehensive income.
6 Subtraction of work in progress.
7 Subtraction of marketable securities.
The reported invested capital exhibited an overall increasing trend between December 31, 2021, and December 31, 2025. However, this progression was not consistently upward, with some fluctuations observed during the period.
- Invested Capital Trend
- Invested capital began at US$290,004 million in 2021 and increased to US$301,478 million in 2022, representing a growth of approximately 3.9%. A further, albeit smaller, increase was noted in 2023, reaching US$304,400 million. The upward trend continued in 2024, with invested capital reaching US$307,881 million. A more substantial increase occurred between 2024 and 2025, with invested capital rising to US$329,613 million, marking the highest value within the observed timeframe.
- Debt & Leases
- Total reported debt and leases generally decreased from US$177,930 million in 2021 to US$168,357 million in 2024. However, an increase was observed in 2025, with debt and leases rising to US$181,643 million. This suggests a potential shift in financing strategy or increased borrowing activity towards the end of the period.
- Equity Attributable to Verizon
- Equity attributable to Verizon demonstrated consistent growth throughout the period. Starting at US$81,790 million in 2021, equity increased to US$91,144 million in 2022, US$92,430 million in 2023, US$99,237 million in 2024, and ultimately reached US$104,460 million in 2025. This consistent increase in equity likely contributed to the overall growth in invested capital.
The combined effect of fluctuations in debt and consistent growth in equity contributed to the overall trend in invested capital. The significant increase in invested capital between 2024 and 2025 warrants further investigation to determine the underlying drivers, potentially including significant capital expenditures or acquisitions.
Cost of Capital
Verizon Communications Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term and long-term debt, including finance leases3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Verizon Communications 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
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 analysis of economic value added metrics indicates a period of significant volatility in value creation relative to a steadily expanding capital base. While the company consistently increased its invested capital, the ability to generate returns above the cost of capital diminished over the observed period, characterized by a sharp decline in the early years and a fragile recovery thereafter.
- Economic Spread Ratio Trends
- The economic spread ratio exhibited a downward trajectory from 2.88% in 2021 to a negative peak of -0.90% in 2023. A modest recovery was observed in 2024 as the ratio returned to 0.67%, followed by a subsequent decline to 0.33% in 2025. This volatility suggests inconsistent efficiency in generating excess returns on invested capital.
- Economic Profit Performance
- Economic profit mirrored the spread ratio, starting at 8,345 million US dollars in 2021 and falling to a deficit of 2,752 million US dollars by 2023. Although profitability returned to positive territory in 2024 and 2025, the figures remained significantly lower than the 2021-2022 levels, ending at 1,092 million US dollars in 2025.
- Invested Capital Expansion
- Invested capital showed a consistent and uninterrupted increase over the five-year period, growing from 290,004 million US dollars in 2021 to 329,613 million US dollars in 2025. The divergence between the growing capital base and the fluctuating economic profit indicates that the additional capital deployed did not consistently result in proportional increases in economic value.
Economic Profit Margin
Verizon Communications 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 | ||||||
| Operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
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 ÷ Operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of significant volatility in value creation, characterized by a general decline in the ability to generate returns exceeding the cost of capital despite relatively stable operating revenues.
- Economic Profit Margin Trajectory
- A marked downward trend is observed in the economic profit margin over the five-year period. Starting at a peak of 6.25% in 2021, the margin contracted to 4.68% in 2022 before falling into negative territory in 2023 at -2.05%. While a recovery occurred in 2024 with a margin of 1.52%, the figure declined again to 0.79% by 2025, indicating a long-term erosion of economic efficiency.
- Revenue Stability vs. Economic Profit Volatility
- Operating revenues remained remarkably consistent, fluctuating within a narrow range between US$ 133,613 million and US$ 138,191 million. In contrast, economic profit exhibited extreme variance, shifting from a high of US$ 8,345 million in 2021 to a deficit of US$ 2,752 million in 2023. This divergence suggests that the decline in economic profit is not driven by a loss of top-line revenue, but rather by increasing costs of capital or diminishing operational efficiency relative to the invested capital base.
- Analysis of the 2023 Economic Deficit
- The year 2023 represents a critical inflection point where the company failed to generate an economic profit, resulting in a negative margin of -2.05%. This indicates a period where the net operating profit after tax was insufficient to cover the cost of the capital employed. Although the company returned to positive economic profit in 2024 and 2025, the levels remained substantially lower than those recorded in the 2021-2022 period.
- Recent Value Creation Trends
- Between 2024 and 2025, a secondary decline is observable. Despite a growth in operating revenues from US$ 134,788 million to US$ 138,191 million, economic profit fell from US$ 2,054 million to US$ 1,092 million. This suggests that recent revenue growth has not been sufficient to offset the costs associated with the capital required to generate that growth, leading to a further compression of the economic profit margin.