Economic Value Added (EVA)
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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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Eli Lilly & Co. pages available for free this week:
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Capital Asset Pricing Model (CAPM)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Eli Lilly & Co., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) and invested capital both experienced volatility, impacting the overall economic profit generated. The cost of capital remained relatively stable, increasing slightly over the observed timeframe.
- NOPAT Trend
- Net operating profit after taxes decreased from US$6.36 billion in 2020 to US$3.09 billion in 2023, representing a significant decline. However, a substantial recovery occurred in 2024, with NOPAT increasing to US$8.47 billion. This suggests a potential turnaround or the impact of specific events in the latest year.
- Cost of Capital Trend
- The cost of capital exhibited a gradual increase from 9.16% in 2020 to 9.62% in 2023, before stabilizing at 9.60% in 2024. This incremental rise indicates a slightly increasing cost of funding operations over the period, though the change is moderate.
- Invested Capital Trend
- Invested capital increased from US$24.56 billion in 2020 to US$26.14 billion in 2021, then decreased to US$24.30 billion in 2022. A subsequent increase was observed in 2023, reaching US$29.38 billion, followed by a further increase to US$35.80 billion in 2024. This pattern suggests strategic capital allocation or significant investment activity.
- Economic Profit Trend
- Economic profit mirrored the NOPAT trend, declining from US$4.11 billion in 2020 to US$263.12 million in 2023. The substantial increase in NOPAT in 2024 resulted in a corresponding increase in economic profit to US$5.03 billion. The low economic profit in 2023 indicates that returns on invested capital were barely exceeding the cost of capital during that year.
Overall, the economic profit demonstrates a cyclical pattern. The significant improvement in 2024 suggests a positive shift in the company’s ability to generate returns exceeding its cost of capital, potentially driven by increased profitability and efficient capital management. The fluctuations in invested capital warrant further investigation to understand the underlying drivers of these changes.
Net Operating Profit after Taxes (NOPAT)
Eli Lilly & Co., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 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.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) over the five-year period ending in 2024.
- Net Income
-
Net income displayed a downward trend from 2020 to 2023, decreasing from 6,193,700 thousand US dollars in 2020 to 5,240,400 thousand US dollars in 2023. However, in 2024, net income surged significantly to 10,590,000 thousand US dollars, almost doubling the previous year’s figure. This sharp increase suggests an exceptional improvement in profitability during the final reported year.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT exhibited a consistent decline throughout the period from 2020 through 2023, beginning at 6,357,340 thousand US dollars in 2020 and dropping steadily to 3,090,452 thousand US dollars in 2023. This represents a reduction of more than 50% over these years. However, in 2024, NOPAT rebounded strongly, rising to 8,466,038 thousand US dollars, indicating a considerable recovery in operating profitability after taxes.
- Overall Insights
-
The downward trend in both net income and NOPAT from 2020 to 2023 may reflect operational challenges or increased costs impacting profitability. The significant rebound in 2024 for both metrics suggests a positive turnaround, possibly as a result of improved operational efficiency, cost management, or increased revenues. The divergence in magnitude between net income and NOPAT in 2024, with net income showing a larger increase, may imply changes in non-operating factors, tax strategies, or extraordinary items affecting the net income figure.
Cash Operating Taxes
Eli Lilly & Co., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
- Income Taxes
- The amount of income taxes showed a declining trend from 2020 to 2022, decreasing from approximately 1,036,200 thousand USD in 2020 to 561,600 thousand USD in 2022. This represents almost a halving over this period. However, starting in 2023, there was a significant increase in income taxes, rising sharply to about 1,314,200 thousand USD and continuing upward to 2,090,400 thousand USD in 2024. This reversal suggests a change in taxable income or tax strategy leading to a more than threefold increase from the 2022 low.
- Cash Operating Taxes
- Cash operating taxes exhibited a consistent year-over-year increase across the entire period. Beginning at roughly 1,244,662 thousand USD in 2020, the amount rose to 1,446,213 thousand USD in 2021. This upward trend accelerated considerably starting in 2022, with cash operating taxes reaching 2,811,147 thousand USD, then 3,731,159 thousand USD in 2023, and finally 4,911,605 thousand USD in 2024. The steady and strong growth in this metric indicates increasing operational tax expenses, potentially reflecting higher operating profits or changes in tax regulations impacting cash tax outflows.
- Summary of Trends
- Overall, while income taxes initially declined before a sharp increase in later years, cash operating taxes steadily increased every year with accelerating growth. This divergence suggests that while reporting or accrual-based tax expenses (income taxes) fluctuated, the actual cash tax payments consistently rose, implying increasing operational profitability or other factors driving higher taxation cash flows. The pronounced rise from 2022 onwards in both categories signals a significant change in the tax or operational landscape during this more recent period.
Invested Capital
Eli Lilly & Co., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 LIFO reserve. See details »
5 Addition of equity equivalents to total Eli Lilly and Company shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of investments.
The financial data over the five-year period reveals notable trends regarding the company’s debt levels, equity, and invested capital.
- Total reported debt & leases
- This figure remained relatively stable from 2020 through 2022, fluctuating slightly around 17 billion US dollars. However, there was a significant increase starting in 2023, rising sharply to approximately 26.3 billion and further increasing to around 34.8 billion by the end of 2024. This upward trajectory indicates a substantial rise in debt and lease obligations in the most recent years.
- Total Eli Lilly and Company shareholders’ equity
- Shareholders’ equity showed a consistent upward trend throughout the period. It increased from about 5.6 billion in 2020 to nearly 9.0 billion in 2021, followed by further growth to approximately 10.6 billion in 2022. Although there was only a modest increase in 2023, equity rose notably again in 2024 to approximately 14.2 billion. This pattern reflects overall strengthening in the company’s equity base over the period.
- Invested capital
- Invested capital exhibited some volatility but generally increased over the five-year span. After a rise from about 24.6 billion in 2020 to 26.1 billion in 2021, it declined to 24.3 billion in 2022, suggesting some contraction or divestment activities. Subsequently, invested capital expanded significantly in the last two years, reaching approximately 29.4 billion in 2023 and 35.8 billion in 2024. This uptrend indicates increased allocation of resources, possibly for growth or expansion purposes.
In summary, the company’s financial structure demonstrates a rising reliance on debt from 2023 onward, accompanied by steady gains in shareholders’ equity. The invested capital reflects initial contraction followed by substantial growth, consistent with strategic investments or asset acquisitions. The combined trends suggest an aggressive capital deployment strategy supported by increased leverage and equity growth.
Cost of Capital
Eli Lilly & Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Eli Lilly & Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited considerable fluctuation between 2020 and 2024. Initial values were relatively high, declining significantly before recovering to a level comparable to the initial period. This suggests evolving profitability relative to capital employed.
- Economic Spread Ratio Trend
- In 2020, the economic spread ratio stood at 16.73%. A noticeable decrease occurred in 2021, falling to 10.03%, and continued downward in 2022, reaching 8.26%. The ratio experienced a substantial drop in 2023, registering at only 0.90%. A strong recovery was then observed in 2024, with the ratio increasing to 14.04%.
The economic spread ratio’s decline from 2020 to 2023 indicates a diminishing ability to generate returns exceeding the cost of capital. The substantial recovery in 2024 suggests improved efficiency in capital allocation or increased profitability. This movement warrants further investigation into the underlying drivers of both the decline and subsequent improvement.
- Relationship to Economic Profit
- The economic spread ratio’s trajectory generally aligns with the fluctuations in economic profit. The decrease in the ratio from 2020 to 2023 corresponds with a decline in economic profit, while the significant increase in both metrics in 2024 suggests a strong correlation. However, the magnitude of change in economic profit appears greater than that of the economic spread ratio, particularly in 2024.
The invested capital also experienced changes over the period. It increased from 2020 to 2021, decreased in 2022, and then increased substantially in both 2023 and 2024. The interplay between invested capital and economic profit is crucial in understanding the observed trends in the economic spread ratio.
- Invested Capital Impact
- The increase in invested capital in 2023 and 2024, coupled with the recovery in economic profit, contributed to the improved economic spread ratio in 2024. The earlier declines in the ratio were likely influenced by both decreasing economic profit and fluctuations in invested capital.
Overall, the economic spread ratio demonstrates a volatile pattern, indicating shifts in the company’s ability to generate value from its invested capital. The recent recovery is a positive sign, but continued monitoring is necessary to assess the sustainability of this trend.
Economic Profit Margin
Eli Lilly & Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited considerable fluctuation between 2020 and 2024. Initial values were strong, followed by a period of decline, and then a substantial recovery. Revenue demonstrated a consistent upward trajectory throughout the same period.
- Economic Profit
- Economic profit peaked in 2020 at approximately US$4.11 billion before decreasing to US$2.62 billion in 2021 and further declining to US$2.01 billion in 2022. A significant drop was observed in 2023, with economic profit falling to US$263.12 million. However, a strong rebound occurred in 2024, with economic profit reaching US$5.03 billion.
- Revenue
- Revenue increased steadily from US$24.54 billion in 2020 to US$28.32 billion in 2021 and US$28.54 billion in 2022. Growth accelerated in 2023, reaching US$34.12 billion, and continued strongly into 2024, with revenue reaching US$45.04 billion. This represents a substantial increase over the five-year period.
- Economic Profit Margin
- The economic profit margin mirrored the trends in economic profit. It began at 16.74% in 2020, decreased to 9.26% in 2021, and continued to fall to 7.04% in 2022. The margin experienced a sharp decline in 2023, reaching 0.77%. A notable recovery was seen in 2024, with the margin increasing to 11.16%. The margin’s volatility suggests a sensitivity to changes in both profitability and revenue.
The divergence between revenue and economic profit margin in 2023 and 2024 is particularly noteworthy. While revenue continued to grow, the economic profit margin experienced a dramatic decrease in 2023 before recovering in 2024. This suggests that the cost of generating revenue increased significantly in 2023, impacting overall economic profitability, but was subsequently mitigated in 2024.