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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Linde plc pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Linde plc, 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 financial performance, as measured by economic profit, indicates a consistent shortfall between returns generated and the cost of capital employed over the five-year period. While net operating profit after taxes (NOPAT) demonstrates an increasing trend, it has not been sufficient to overcome the cost of capital given the growth in invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits a positive trend, increasing from US$3,800 million in 2021 to US$7,182 million in 2025. The most significant increase occurred between 2022 and 2023, with a rise of approximately 66.7%. Growth moderated in subsequent years, suggesting a potential stabilization of operational profitability.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, fluctuating between 13.91% and 14.21%. A slight decrease is observed in 2025, potentially reflecting changes in market conditions or the company’s capital structure. However, these fluctuations were not substantial enough to significantly impact economic profit.
- Invested Capital
- Invested capital increased consistently from US$72,560 million in 2021 to US$80,195 million in 2025. This growth, while indicative of investment in the business, contributed to the persistent negative economic profit. The rate of increase in invested capital accelerated between 2023 and 2025.
- Economic Profit
- Economic profit remained negative throughout the analyzed period, ranging from -US$6,319 million in 2021 to -US$3,732 million in 2024, before increasing to -US$3,971 million in 2025. While the magnitude of the loss decreased between 2021 and 2024, the increase in 2025 suggests that the growing invested capital is outpacing the gains in NOPAT. The trend indicates that the company is not generating returns exceeding its cost of capital.
In summary, despite increasing NOPAT, the company’s economic profit remains negative due to a larger increase in invested capital and a relatively stable cost of capital. Continued monitoring of the relationship between NOPAT, invested capital, and the cost of capital is recommended to assess future performance and potential strategies for value creation.
Net Operating Profit after Taxes (NOPAT)
Linde plc, NOPAT calculation
US$ 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 expected credit losses.
3 Addition of increase (decrease) in cost reduction programs.
4 Addition of increase (decrease) in equity equivalents to net income, Linde plc.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income, Linde plc.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
10 Elimination of discontinued operations.
Net income and net operating profit after taxes (NOPAT) exhibited positive trends over the five-year period. Both metrics demonstrate consistent growth, with a notable acceleration in later years. The difference between net income and NOPAT remains relatively small throughout the period, suggesting limited impact from financing or non-operating activities.
- NOPAT Trend
- NOPAT increased from US$3,800 million in 2021 to US$7,182 million in 2025. The growth was moderate between 2021 and 2022, with an increase of approximately 0.87%. A significant jump occurred between 2022 and 2023, with NOPAT rising to US$6,386 million, representing a growth of approximately 66.7%. This upward trajectory continued from 2023 to 2025, with increases of approximately 6.8% and 12.5% respectively.
- Relationship between Net Income and NOPAT
- The values for net income and NOPAT are closely aligned across all reported years. In 2021, NOPAT was US$3,800 million, compared to net income of US$3,826 million. This difference of US$26 million remained relatively consistent in 2022 (US$3,833 million NOPAT vs. US$4,147 million net income, a difference of US$314 million). The gap widened slightly in 2023 (US$6,386 million NOPAT vs. US$6,199 million net income) and continued to widen in 2024 (US$6,814 million NOPAT vs. US$6,565 million net income) and 2025 (US$7,182 million NOPAT vs. US$6,898 million net income). These differences suggest increasing non-operating items or financing costs as a percentage of overall profitability.
The consistent growth in NOPAT indicates improving core operational profitability. The increasing divergence between NOPAT and net income warrants further investigation to understand the drivers of these differences, potentially related to interest expense, taxes, or other non-operating items. Overall, the trend in NOPAT is positive and suggests strong underlying business performance.
Cash Operating Taxes
Linde plc, cash operating taxes calculation
US$ 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 provision for income taxes and cash operating taxes both demonstrate an increasing trend over the five-year period. However, the magnitude of increase differs between the two items, and both exhibit some fluctuation in growth rate.
- Provision for Income Taxes
- The provision for income taxes increased from US$1,262 million in 2021 to US$1,814 million in 2023, representing a substantial rise. Growth slowed in 2024 to US$2,002 million, and then decreased slightly to US$1,989 million in 2025. This suggests a potential stabilization or minor reduction in tax obligations after a period of significant growth.
- Cash Operating Taxes
- Cash operating taxes exhibited a consistent increase throughout the period, rising from US$1,537 million in 2021 to US$2,516 million in 2025. The increase from 2021 to 2022 was US$298 million, while the increase from 2024 to 2025 was US$311 million, indicating a relatively consistent absolute increase in cash tax payments. The growth rate, however, decelerated slightly over time.
- Relationship between Provision and Cash Taxes
- Cash operating taxes consistently exceeded the provision for income taxes in each year. The difference between the two items varied between approximately US$275 million and US$527 million. This difference suggests the presence of timing differences between accounting income and taxable income, or potentially deferred tax assets/liabilities. The gap narrowed slightly between 2021 and 2023, then widened again in 2024 and 2025, indicating a changing dynamic in these timing differences.
Overall, the company experienced increasing tax obligations, both from an accounting perspective (provision for income taxes) and a cash flow perspective (cash operating taxes). The consistent difference between the two items warrants further investigation to understand the underlying causes and potential implications for future cash flows and financial reporting.
Invested Capital
Linde plc, invested capital calculation (financing approach)
US$ 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 cost reduction programs.
5 Addition of equity equivalents to total Linde plc shareholders’ equity.
6 Removal of accumulated other comprehensive income.
Analysis of the presented financial information reveals trends in the company’s capital structure and invested capital over a five-year period. Total reported debt and leases demonstrate a consistent upward trajectory, while total shareholders’ equity exhibits more fluctuation. Invested capital generally increases throughout the period, though its growth appears to be influenced by both debt and equity movements.
- Debt & Leases
- Total reported debt and leases increased steadily from US$15,216 million in 2021 to US$28,069 million in 2025. The rate of increase accelerated in later years, with a substantial rise between 2024 and 2025. This suggests an increasing reliance on debt financing.
- Shareholders’ Equity
- Total Linde plc shareholders’ equity decreased from US$44,035 million in 2021 to US$38,092 million in 2024, before experiencing a slight increase to US$38,245 million in 2025. This initial decline could be attributed to share repurchases, dividend payments, or unrealized losses. The stabilization in 2025 suggests a potential bottoming out of equity reduction.
- Invested Capital
- Invested capital remained relatively stable between 2021 and 2023, fluctuating around US$72-73 billion. A noticeable increase occurred in 2024, reaching US$74,884 million, and continued into 2025, reaching US$80,195 million. This growth in invested capital correlates with the increasing debt levels, indicating that debt financing is contributing to capital expansion. The slight dip in invested capital between 2021 and 2022 is likely due to the decrease in shareholders’ equity offsetting the increase in debt.
The combined effect of rising debt and fluctuating equity results in a generally increasing trend in invested capital. The company appears to be actively employing debt to fund its operations and growth initiatives, particularly in the later years of the observed period. Further investigation into the specific uses of the increased debt would be beneficial to assess the efficiency and effectiveness of these capital allocation decisions.
Cost of Capital
Linde plc, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Linde plc, 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 | ||||||
| Sherwin-Williams Co. | ||||||
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 consistent, though moderating, improvement over the five-year period. While economic profit remained negative throughout, the magnitude of the loss decreased, coinciding with changes in the economic spread ratio and invested capital.
- Economic Spread Ratio
- The economic spread ratio began at -8.71% in 2021 and decreased in absolute terms to -4.95% by 2025. This indicates a narrowing gap between the company’s return on invested capital and its weighted average cost of capital. The largest improvement occurred between 2021 and 2023, with a decrease of 3.20 percentage points. Subsequent improvements were smaller, at 0.53 percentage points between 2023 and 2024, and 0.03 percentage points between 2024 and 2025, suggesting diminishing returns from efforts to improve profitability relative to the cost of capital.
- Economic Profit
- Economic profit remained negative across the observed period, ranging from a loss of US$6,319 million in 2021 to a loss of US$3,971 million in 2025. The most substantial reduction in the loss occurred between 2021 and 2023, decreasing by US$2,276 million. The reduction in loss slowed between 2023 and 2024 (US$311 million) and experienced a slight increase in the loss between 2024 and 2025 (US$239 million).
- Invested Capital
- Invested capital generally increased over the period, rising from US$72,560 million in 2021 to US$80,195 million in 2025. A slight decrease was observed between 2021 and 2022 (US$219 million), but subsequent years showed consistent growth. The largest increase occurred between 2024 and 2025, with an increase of US$5,311 million. This growth in invested capital occurred alongside improvements in the economic spread ratio, but did not fully offset the negative economic profit.
The observed trends suggest that while the company is improving its efficiency in generating returns on its invested capital, it is still not achieving a positive economic profit. The increasing invested capital base, coupled with continued negative economic profit, warrants further investigation into the drivers of capital allocation and profitability.
Economic Profit Margin
Linde plc, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Sherwin-Williams Co. | ||||||
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 ÷ Sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance, as indicated by economic profit and its margin, demonstrates a consistent pattern of negative economic profit over the five-year period from 2021 to 2025. However, the magnitude of the economic loss appears to be decreasing, alongside an improving economic profit margin.
- Economic Profit
- Economic profit exhibits a negative value each year. The largest economic loss occurred in 2021 and 2022, at approximately US$6.3 billion. A reduction in the absolute value of the loss is observed in subsequent years, reaching US$4.0 billion in 2023 and fluctuating around US$3.8 to US$4.0 billion in 2024 and 2025. This suggests a gradual improvement in the company’s ability to generate returns exceeding its cost of capital, although it remains negative overall.
- Sales
- Sales revenue increased from US$30.8 billion in 2021 to US$33.4 billion in 2025. Growth was most pronounced between 2021 and 2022, with a more moderate increase in subsequent years. Sales remained relatively stable between 2023 and 2024, before experiencing a further increase in 2025. The increase in sales does not appear to be fully translating into positive economic profit.
- Economic Profit Margin
- The economic profit margin is consistently negative throughout the period, ranging from -20.52% in 2021 to -11.69% in 2025. A clear upward trend is evident, indicating that the company is becoming more efficient in converting sales into economic profit, even though the profit remains negative. The margin improved by approximately 8.83 percentage points between 2021 and 2025. This suggests that while the company is still destroying economic value, the rate of destruction is slowing down.
In summary, while the company continues to report negative economic profit, the trend suggests a positive development in operational efficiency and profitability. The improving economic profit margin, coupled with increasing sales, indicates a potential pathway towards generating positive economic profit in the future, contingent upon continued improvements in cost management and capital allocation.