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:
- Analysis of Reportable Segments
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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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 period under review demonstrates fluctuating economic performance. Net operating profit after taxes (NOPAT) initially decreased, then recovered, exhibiting volatility over the five-year span. The cost of capital experienced a gradual increase, while invested capital consistently rose. Consequently, economic profit, a key indicator of value creation, displayed significant variation, including a period of negative economic profit.
- NOPAT Trend
- NOPAT decreased from US$29,903 million in 2021 to US$28,039 million in 2022, representing a decline. A more substantial decrease was observed in 2023, falling to US$19,450 million. However, NOPAT rebounded in 2024 to US$24,675 million and continued to increase in 2025, reaching US$25,872 million. This suggests potential operational improvements or favorable market conditions in the later years of the period.
- Cost of Capital Trend
- The cost of capital showed a slight decrease from 7.29% in 2021 to 7.04% in 2022. It then increased steadily over the remaining years, reaching 7.37% in 2025. This increase could be attributed to rising interest rates or changes in the company’s risk profile.
- Invested Capital Trend
- Invested capital consistently increased throughout the period, moving from US$290,004 million in 2021 to US$329,613 million in 2025. This indicates ongoing investment in the business, potentially through capital expenditures or acquisitions.
- Economic Profit Trend
- Economic profit followed a declining trend from US$8,768 million in 2021 to US$6,825 million in 2022. In 2023, economic profit turned negative, reaching -US$2,340 million, indicating that returns did not exceed the cost of capital. A significant recovery occurred in 2024, with economic profit reaching US$2,485 million, and a further, albeit smaller, increase to US$1,575 million in 2025. The negative economic profit in 2023 warrants further investigation to understand the underlying causes.
The interplay between NOPAT, cost of capital, and invested capital significantly influenced economic profit. While invested capital consistently grew, the fluctuations in NOPAT and the increasing cost of capital created volatility in the company’s ability to generate economic profit. The return to positive economic profit in 2024 and 2025 suggests a positive shift in performance, but continued monitoring is recommended.
Net Operating Profit after Taxes (NOPAT)
Verizon Communications Inc., NOPAT calculation
US$ 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 economic spread ratio exhibited a declining trend from 2021 to 2023, followed by a recovery in subsequent years. This movement correlates with fluctuations in economic profit and invested capital over the observed period.
- Economic Spread Ratio Trend
- In 2021, the economic spread ratio stood at 3.02%. It decreased to 2.26% in 2022, indicating a diminishing spread between return on invested capital and the cost of capital. A significant decline occurred in 2023, with the ratio falling to -0.77%, signifying that the company’s return on invested capital was less than its cost of capital. The ratio then rebounded to 0.81% in 2024 and further to 0.48% in 2025, suggesting an improving, though still modest, spread.
- Relationship with Economic Profit
- The economic spread ratio’s trajectory closely mirrors the changes in economic profit. The decrease in the ratio from 2021 to 2023 aligns with the reduction in economic profit, culminating in a negative economic profit in 2023. The subsequent increase in the ratio from 2024 onwards corresponds with the return to positive economic profit values.
- Impact of Invested Capital
- Invested capital consistently increased throughout the period, from US$290,004 million in 2021 to US$329,613 million in 2025. While the increase in invested capital would typically exert downward pressure on the economic spread ratio, the recovery in economic profit from 2024 onwards partially offset this effect, leading to the observed ratio improvements.
The negative economic spread ratio in 2023 warrants further investigation to understand the underlying factors contributing to the shortfall in returns relative to the cost of capital. The subsequent recovery, while positive, indicates that the spread remains below the level observed in 2021.
Economic Profit Margin
Verizon Communications Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 economic profit margin exhibited considerable fluctuation over the five-year period. Initial profitability declined, followed by a period of negative economic profit, and then a recovery, though not to initial levels. A detailed examination of the economic profit margin and its underlying components reveals key trends in financial performance.
- Economic Profit Margin
- The economic profit margin began at 6.56% in 2021, indicating a substantial economic profit relative to operating revenues. This margin decreased to 4.99% in 2022, suggesting a reduction in the efficiency of capital allocation or a decline in profitability. A significant shift occurred in 2023, with the margin turning negative at -1.75%, signifying that the company’s economic profit was less than zero. The margin then rebounded to 1.84% in 2024, demonstrating an improvement in economic profit generation. The upward trend continued, albeit at a slower pace, with the margin reaching 1.14% in 2025.
The economic profit margin’s trajectory closely mirrors the changes in economic profit. The decline in margin from 2021 to 2022 corresponds with the decrease in economic profit from US$8,768 million to US$6,825 million. The substantial negative margin in 2023 is directly attributable to the negative economic profit of US$-2,340 million. The subsequent positive margins in 2024 and 2025 align with the return to positive economic profit, though the magnitude of the profit remained below the 2021 level.
Operating revenues demonstrated a generally increasing trend, rising from US$133,613 million in 2021 to US$138,191 million in 2025. However, revenue growth alone did not translate into consistent economic profit margin improvement. The period of revenue growth in 2022 was accompanied by a decrease in economic profit margin, and the revenue decline in 2023 coincided with a substantial negative margin. This suggests that factors beyond revenue, such as cost of capital or operational efficiency, significantly impacted economic profit generation.
The recovery in economic profit margin observed in 2024 and 2025, despite relatively modest revenue increases, indicates successful efforts to improve profitability or manage capital costs. However, the margin remained below the 2021 peak, suggesting that further improvements are possible.