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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Abbott Laboratories pages available for free this week:
- Income Statement
- Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
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Economic Profit
Abbott Laboratories, 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
= – × =
Between 2021 and 2025, a consistent trend of negative economic profit is observed, indicating that the company failed to generate sufficient net operating profit after taxes (NOPAT) to cover its cost of capital throughout the period. The most significant erosion of economic value occurred in 2023, followed by a partial recovery by the end of 2025.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, declining from 7,014 million US$ in 2021 to a period low of 5,289 million US$ in 2023. A recovery trend followed, with NOPAT increasing to 5,543 million US$ in 2024 and reaching 7,106 million US$ in 2025, representing the highest operating profit within the analyzed timeframe.
- Cost of Capital and Invested Capital
- The cost of capital followed a gradual upward trajectory, rising from 13.28% in 2021 to a peak of 13.75% in 2024, before slightly moderating to 13.67% in 2025. Invested capital remained relatively stable, experiencing a slight contraction to 59,651 million US$ in 2023 before expanding back to 62,400 million US$ by 2025.
- Economic Profit Dynamics
- Economic profit remained in negative territory for all five years, signifying that the return on invested capital stayed below the cost of capital. The deficit widened from -1,228 million US$ in 2021 to a peak loss of -2,804 million US$ in 2023, a decline driven by the simultaneous drop in NOPAT and the increase in the cost of capital hurdle. A reversal is observed starting in 2024, with the economic profit narrowing to -1,424 million US$ in 2025, primarily due to the substantial increase in NOPAT.
Net Operating Profit after Taxes (NOPAT)
Abbott Laboratories, 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 doubtful accounts.
3 Addition of increase (decrease) in restructuring Plans, accrued balance.
4 Addition of increase (decrease) in equity equivalents to net earnings.
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 earnings.
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.
Net operating profit after taxes (NOPAT) exhibited fluctuations over the five-year period. While generally tracking with net earnings, distinct patterns emerge upon closer examination. Initial declines were followed by a significant increase and then a subsequent decrease.
- Overall Trend
- NOPAT began at US$7,014 million in 2021 and decreased to US$5,289 million in 2023. A substantial increase was then observed in 2024, reaching US$5,543 million, followed by a further increase to US$7,106 million in 2025. This indicates a period of profitability challenges followed by recovery and growth.
- Year-over-Year Changes
- From 2021 to 2022, NOPAT decreased by US$296 million, representing a roughly 4.2% decline. The decrease from 2022 to 2023 was more pronounced, with a reduction of US$429 million, or approximately 6.4%. However, 2024 saw an increase of US$254 million, a 4.6% rise. The largest year-over-year change occurred between 2024 and 2025, with NOPAT increasing by US$1,563 million, or 28.2%.
- Relationship to Net Earnings
- NOPAT closely mirrored the trend of net earnings. Both metrics decreased from 2021 to 2023, experienced a large jump in 2024, and then decreased in 2025. The difference between net earnings and NOPAT remained relatively consistent throughout the period, suggesting a stable capital structure and financing costs. The slight differences observed could be attributed to non-operating items impacting net earnings.
The substantial increase in NOPAT in 2025 warrants further investigation to determine the underlying drivers, such as revenue growth, cost reductions, or changes in operational efficiency. The dip in 2023 also merits attention to understand the factors contributing to the reduced profitability during that year.
Cash Operating Taxes
Abbott Laboratories, cash operating taxes calculation
US$ 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 values for taxes on earnings and cash operating taxes exhibit distinct patterns over the five-year period. Cash operating taxes demonstrate relative stability, while taxes on earnings fluctuate significantly, including a substantial negative value in 2024.
- Cash Operating Taxes
- Cash operating taxes increased from US$1,759 million in 2021 to US$2,118 million in 2022, representing a growth of approximately 20.4%. A subsequent decrease to US$1,463 million was observed in 2023. Values then rose to US$1,626 million in 2024 and concluded at US$1,550 million in 2025. Overall, the trend suggests a moderate level of volatility around the US$1,600 million mark, with no consistent upward or downward trajectory.
- Taxes on Earnings
- Taxes on earnings began at US$1,140 million in 2021 and increased to US$1,373 million in 2022. A decline to US$941 million followed in 2023. The most notable change occurred in 2024, with a reported negative value of -US$6,389 million. This suggests a significant tax benefit or accounting adjustment occurred during that year. The value recovered to US$1,942 million in 2025, exceeding the 2022 level. The substantial fluctuation indicates a sensitivity to factors impacting reported earnings and applicable tax rates.
The divergence between taxes on earnings and cash operating taxes is particularly pronounced in 2024. The negative taxes on earnings, contrasted with positive cash operating taxes, suggests the presence of deferred tax assets being realized, or other non-cash tax effects impacting reported earnings. Further investigation into the components of taxes on earnings is warranted to understand the drivers behind the 2024 anomaly.
- Relationship between Metrics
- In 2021, 2022, and 2023, cash operating taxes were consistently higher than taxes on earnings. This difference could be attributed to timing differences between when taxes are accrued for financial reporting purposes and when they are actually paid in cash. The 2024 and 2025 periods demonstrate a reversal of this pattern, with taxes on earnings exceeding cash operating taxes in 2025, and being significantly negative in 2024.
Invested Capital
Abbott Laboratories, invested capital calculation (financing approach)
US$ 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 restructuring Plans, accrued balance.
5 Addition of equity equivalents to total Abbott shareholders’ investment.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of marketable securities.
The composition of invested capital demonstrates notable shifts over the five-year period. Total reported debt & leases consistently decreased, while total shareholders’ investment generally increased. These movements have influenced the overall trend in invested capital.
- Total Reported Debt & Leases
- A clear downward trend is observed in total reported debt & leases, decreasing from US$19,251 million in 2021 to US$14,136 million in 2025. The largest single-year decrease occurred between 2021 and 2022, with a reduction of US$1,305 million. Subsequent annual decreases were more moderate, suggesting a consistent, but slowing, debt reduction strategy.
- Total Abbott Shareholders’ Investment
- Total shareholders’ investment exhibited an overall increasing trend, rising from US$35,802 million in 2021 to US$52,130 million in 2025. A significant increase is apparent between 2023 and 2024, with an addition of US$8,961 million. This suggests substantial equity financing or retained earnings accumulation during that period. The increase from 2024 to 2025, while still positive, was smaller at US$4,466 million.
- Invested Capital
- Invested capital initially decreased from US$62,076 million in 2021 to US$59,651 million in 2023, reflecting the greater reduction in debt compared to the increase in shareholders’ investment. However, it stabilized and slightly increased in 2024 to US$60,086 million, and continued to rise to US$62,400 million in 2025. This stabilization and subsequent increase indicate a shift towards utilizing more capital, potentially for growth initiatives, despite the continued reduction in debt. The overall change in invested capital from 2021 to 2025 was a modest increase of US$324 million.
The interplay between decreasing debt and increasing shareholders’ investment suggests a strategic shift in capital structure. The company appears to be reducing its reliance on debt financing while simultaneously strengthening its equity base. The recent stabilization and slight growth in invested capital, coupled with these changes, warrants further investigation into the company’s capital allocation decisions and their impact on future performance.
Cost of Capital
Abbott Laboratories, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current maturities3 | ÷ | = | × | × (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 Long-term debt, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Abbott Laboratories, 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 | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 indicators reveals a period of consistent value destruction, as economic profit remained negative throughout the five-year period from 2021 to 2025. While there is evidence of a recovery trend beginning in 2024, the returns on invested capital have failed to exceed the cost of capital across all observed years.
- Economic Spread Ratio
- A downward trend is observed from 2021 to 2023, with the ratio declining from -1.98% to a trough of -4.70%. This indicates a widening gap between the return on invested capital and the weighted average cost of capital. However, a reversal is noted in the subsequent two years, with the ratio improving to -4.53% in 2024 and further recovering to -2.28% by 2025, suggesting a narrowing of the economic deficit.
- Economic Profit
- The absolute economic profit exhibits a similar trajectory to the spread ratio. Losses expanded from -1,228 million US$ in 2021 to a peak deficit of -2,804 million US$ in 2023. A notable recovery phase followed, with the deficit reducing to -2,719 million US$ in 2024 and improving significantly to -1,424 million US$ in 2025, returning to levels comparable to the start of the period.
- Invested Capital
- Invested capital remained relatively stable throughout the period, fluctuating within a narrow range between 59,651 million US$ and 62,400 million US$. The slight contraction observed between 2021 and 2023 did not offset the decline in operational performance, while the subsequent increase in capital through 2025 coincided with an improvement in the economic spread ratio.
Economic Profit Margin
Abbott Laboratories, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 through 2025 is characterized by a persistent inability to generate positive economic profit, indicating that returns on invested capital remained below the required cost of capital throughout the period. While there was a significant deterioration in value creation metrics peaking in 2023, a recovery trend emerged in the subsequent two years.
- Economic Profit Trends
- Economic profit remained negative for the entire duration of the analysis. The loss expanded from -1,228 million US$ in 2021 to a peak deficit of -2,804 million US$ in 2023. Following this trough, the economic loss narrowed to -2,719 million US$ in 2024 and further improved to -1,424 million US$ by December 31, 2025.
- Net Sales Performance
- Revenue exhibited volatility over the five-year span. After a slight increase in 2022, net sales experienced a contraction in 2023, falling to 40,109 million US$. A recovery phase followed, with sales growing to 41,950 million US$ in 2024 and reaching a period high of 44,328 million US$ in 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the trajectory of the absolute economic profit. The margin compressed from -2.85% in 2021 to its lowest point of -6.99% in 2023, reflecting a period of significant value erosion. This trend reversed starting in 2024, with the margin improving to -6.48% and eventually returning to -3.21% by the end of 2025.
Overall, the data indicates a cyclic trend where the most severe economic losses coincided with the dip in net sales in 2023. The subsequent recovery in sales correlated with a reduction in the economic profit deficit, although the company did not return to positive economic value added by the end of the observed period.