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 Short-term (Operating) Activity Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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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
= – × =
Analysis of economic profit reveals a period of significant volatility between 2021 and 2025. Economic profit experienced a sharp decline from a peak of 8,655 million in 2021 to a deficit of 2,451 million in 2023, marking a transition from value creation to value destruction. While the company returned to positive economic profit in 2024 and 2025, these levels remain substantially lower than the results observed at the start of the period.
- Net Operating Profit After Taxes (NOPAT)
- A notable contraction in NOPAT occurred between 2021 and 2023, with values falling from 29,903 million to a low of 19,450 million. A recovery trend emerged in 2024 and 2025, with NOPAT rising to 25,872 million, although it has not yet returned to 2021 levels.
- Invested Capital and Cost of Capital
- Invested capital showed a consistent upward trajectory, growing from 290,004 million in 2021 to 329,613 million in 2025. During this same period, the cost of capital remained relatively stable, fluctuating within a tight range between 7.07% and 7.41%, indicating a consistent cost of financing despite operational volatility.
- Economic Value Added Dynamics
- The combination of steadily increasing invested capital and fluctuating NOPAT created a downward pressure on economic profit. The deficit recorded in 2023 indicates that the operating profit was insufficient to cover the imputed cost of capital. Furthermore, a divergence is observed in 2025; despite an increase in NOPAT, economic profit declined from 2,369 million to 1,446 million, suggesting that the expansion of the capital base is outpacing the growth in operational returns.
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 creation from 2021 through 2025 reveals a period of significant volatility in profitability contrasted with a consistent expansion of the capital base. While invested capital has grown steadily, the ability to generate economic profit above the cost of capital has fluctuated, resulting in a compressed economic spread ratio over the five-year period.
- Invested Capital Trends
- A consistent upward trajectory in invested capital is observed, rising from US$ 290,004 million in 2021 to US$ 329,613 million by 2025. This represents a steady increase in the total resources deployed into the business, indicating ongoing capital expenditure or acquisitions despite fluctuating returns.
- Economic Profit Volatility
- Economic profit exhibited a sharp decline from a high of US$ 8,655 million in 2021 to a deficit of US$ -2,451 million in 2023. Although a recovery occurred in 2024 with a return to positive territory at US$ 2,369 million, this gain was partially erased by 2025, where profit declined again to US$ 1,446 million. The 2023 deficit marks a critical point where the company failed to cover its cost of capital.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the excess return over the cost of capital, closely mirrors the trend of economic profit. The ratio peaked at 2.98% in 2021 and contracted to -0.81% in 2023, indicating a period of value destruction. While the ratio recovered to 0.77% in 2024, it subsequently dropped to 0.44% in 2025. The overall trend indicates a long-term compression of the spread, suggesting that returns on invested capital are not keeping pace with the growth of the capital base.
In summary, the data demonstrates a diminishing capacity to generate economic value relative to the scale of investment. The transition from a 2.98% spread in 2021 to 0.44% in 2025, coupled with a significant dip into negative territory in 2023, highlights an increasing challenge in maintaining efficient capital utilization.
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 creation from 2021 to 2025 reveals a period of significant volatility in economic profit and margin, despite a relatively stable operating revenue base. A notable decline in value creation occurred between 2021 and 2023, followed by a partial recovery and a subsequent moderation in efficiency.
- Economic Profit Margin Trends
- A substantial downward trajectory is observed from 2021 to 2023, with the economic profit margin falling from 6.48% to a low of -1.83%. This negative margin in 2023 indicates that the company failed to generate returns exceeding its cost of capital during that fiscal year. While a recovery occurred in 2024, reaching 1.76%, the margin contracted again to 1.05% by the end of 2025, suggesting a struggle to maintain consistent economic value added.
- Operating Revenue Performance
- Operating revenues remained comparatively stable throughout the five-year period, fluctuating between a low of US$ 133,613 million in 2021 and a peak of US$ 138,191 million in 2025. The lack of strong correlation between revenue growth and economic profit suggests that the volatility in value creation was driven by factors other than top-line growth, such as changes in capital costs, asset utilization, or operating expenses.
- Economic Profit Volatility
- Economic profit experienced a sharp contraction from US$ 8,655 million in 2021 to a deficit of US$ 2,451 million in 2023. The subsequent return to positive territory in 2024 (US$ 2,369 million) and 2025 (US$ 1,446 million) confirms a restoration of value creation, although the absolute levels remain significantly lower than those recorded at the start of the analyzed period.