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.
Economic Profit
Freeport-McMoRan Inc., economic profit 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 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
= 4,755 – 20.98% × 40,693 = -3,782
The analysis of economic profit from 2021 to 2025 reveals a consistent trend of value erosion, as economic profit remained negative throughout the entire period. This indicates that the net operating profit after taxes (NOPAT) was insufficient to cover the required return on invested capital, resulting in a sustained failure to create economic value.
- Net Operating Profit After Taxes (NOPAT)
- A downward trend is observed from 2021 to 2024, with NOPAT declining from 6,188 million to 4,538 million. A slight recovery occurred in 2025, with the figure rising to 4,755 million, although it remained significantly below 2021 levels.
- Cost of Capital
- The cost of capital remained relatively stagnant between 20.14% and 20.23% from 2021 through 2024. In 2025, a notable increase to 20.98% is observed, which heightened the financial burden of the invested capital base.
- Invested Capital
- Invested capital showed a slight overall decrease between 2021 and 2024, moving from 35,043 million to 33,889 million. However, a substantial increase occurred in 2025, with invested capital rising to 40,693 million, representing a significant expansion of the capital base.
- Economic Profit Performance
- Economic profit shifted from a deficit of 873 million in 2021 to a maximum deficit of 3,782 million in 2025. The deterioration accelerated in 2025, driven by the combined impact of an increased cost of capital and a larger capital investment, which heavily outweighed the modest gains in operating profit.
Overall, the data suggests a widening gap between the returns generated by operations and the cost of the capital employed. The sharp decline in economic profit in the final year indicates a decrease in capital efficiency as the company expanded its invested capital base during a period of rising capital costs.
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Net Operating Profit after Taxes (NOPAT)
Freeport-McMoRan 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 deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common stockholders.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,113 × 5.00% = 56
5 2025 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 425 × 21.00% = 89
6 Addition of after taxes interest expense to net income attributable to common stockholders.
Net income attributable to common stockholders and net operating profit after taxes (NOPAT) exhibited distinct performance patterns between 2021 and 2025. NOPAT demonstrated relative stability compared to net income, while both metrics experienced fluctuations over the five-year period.
- NOPAT Trend
- NOPAT began at US$6,188 million in 2021, representing the highest value within the observed timeframe. A decline was noted in 2022, falling to US$5,116 million. This downward trend continued, albeit at a slower pace, reaching US$4,632 million in 2023. A slight decrease was observed in 2024, with NOPAT at US$4,538 million. Finally, NOPAT increased to US$4,755 million in 2025, indicating a potential stabilization or modest recovery.
- Net Income Trend
- Net income attributable to common stockholders started at US$4,306 million in 2021. A substantial decrease occurred in 2022, with net income reported at US$3,468 million. This decline was more pronounced in 2023, reaching US$1,848 million. A slight recovery was seen in 2024, with net income at US$1,889 million, followed by a further increase to US$2,204 million in 2025.
- Relationship between NOPAT and Net Income
- While both metrics moved in similar directions, the magnitude of change differed. The decrease in net income from 2021 to 2023 was more significant than the corresponding decrease in NOPAT. This suggests that factors beyond core operating profitability, such as financing costs or non-operating items, played a substantial role in influencing net income. The relative stabilization of NOPAT in the later years, coupled with the recovery in net income, indicates a potential improvement in the efficiency of translating operating profits into earnings attributable to common stockholders.
Overall, the period demonstrates a challenging environment initially, followed by signs of potential stabilization and recovery in the later years, particularly as evidenced by the 2025 figures for both NOPAT and net income.
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Cash Operating Taxes
Freeport-McMoRan Inc., cash operating taxes calculation
US$ 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 provision for income taxes and cash operating taxes exhibited fluctuations over the five-year period. While both metrics generally remained within a relatively narrow range, notable shifts occurred in specific years, particularly in 2024.
- Provision for Income Taxes
- The provision for income taxes remained relatively stable between 2021 and 2023, fluctuating around the $2,200 million to $2,300 million mark. A discernible increase was observed in 2024, reaching $2,523 million, before decreasing to $2,221 million in 2025. This suggests potential impacts from changes in tax regulations or profitability in 2024, followed by a partial reversion in the subsequent year.
- Cash Operating Taxes
- Cash operating taxes demonstrated a decreasing trend from 2021 to 2023, declining from $2,217 million to $2,009 million. Similar to the provision for income taxes, a substantial increase occurred in 2024, with cash operating taxes rising to $2,672 million. This was followed by a decrease to $2,057 million in 2025, mirroring the pattern observed in the provision for income taxes. The correlation between the two metrics suggests that changes in reported income taxes are largely reflected in actual cash outflows for taxes.
- Relationship between Provision and Cash Taxes
- The difference between the provision for income taxes and cash operating taxes remained relatively consistent across the period, generally ranging between $80 million and $200 million. This difference likely represents deferred tax items, such as changes in tax loss carryforwards or temporary differences between book and tax accounting methods. The consistency in this difference indicates a stable tax position regarding these deferred items.
- 2024 Anomaly
- The year 2024 stands out due to the significant increases in both the provision for income taxes and cash operating taxes. Further investigation would be required to determine the underlying drivers of this increase, such as a substantial rise in pre-tax income, changes in applicable tax rates, or the recognition of previously unrealized tax liabilities. The subsequent decrease in 2025 suggests the factors driving the 2024 increase were not sustained.
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Invested Capital
Freeport-McMoRan Inc., invested capital calculation (financing approach)
US$ 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 deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investment securities.
The reported invested capital exhibited a generally stable pattern over the five-year period, with fluctuations observed. Total reported debt & leases and stockholders’ equity both contributed to the overall invested capital figure, and their individual trends influenced the invested capital’s trajectory.
- Invested Capital Trend
- Invested capital increased from US$35.043 billion in 2021 to US$36.035 billion in 2022, representing a growth of approximately 2.8%. A slight decrease followed in 2023, with invested capital reaching US$35.126 billion. This was further reduced in 2024 to US$33.889 billion, marking the lowest value within the observed period. However, a significant increase occurred in 2025, with invested capital rising to US$40.693 billion.
- Debt & Leases
- Total reported debt & leases increased from US$9.769 billion in 2021 to US$10.952 billion in 2022, a rise of approximately 12.1%. It then decreased in both 2023 and 2024, reaching US$9.853 billion and US$9.738 billion respectively. A subsequent increase was noted in 2025, with debt & leases reaching US$10.492 billion. The fluctuations in debt levels likely influenced the invested capital calculations.
- Stockholders’ Equity
- Stockholders’ equity demonstrated a consistent upward trend throughout the period. It increased from US$13.980 billion in 2021 to US$15.555 billion in 2022, US$16.693 billion in 2023, US$17.581 billion in 2024, and finally to US$18.899 billion in 2025. This continuous growth in equity contributed positively to the overall invested capital, particularly offsetting the decline observed in 2024.
The substantial increase in invested capital in 2025 is primarily attributable to the combined effect of a moderate increase in debt & leases and a more significant increase in stockholders’ equity. The decrease in invested capital in 2024 appears to be driven by a reduction in both debt and equity, although the decrease in debt was less pronounced.
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Cost of Capital
Freeport-McMoRan Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 90,314) | 90,314) | ÷ | 100,920) | = | 0.89 | 0.89 | × | 22.96% | = | 20.55% | ||
| Long-term debt, including current portion3 | 9,493) | 9,493) | ÷ | 100,920) | = | 0.09 | 0.09 | × | 5.23% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 1,113) | 1,113) | ÷ | 100,920) | = | 0.01 | 0.01 | × | 5.00% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 100,920) | 1.00 | 20.98% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 56,721) | 56,721) | ÷ | 66,318) | = | 0.86 | 0.86 | × | 22.96% | = | 19.64% | ||
| Long-term debt, including current portion3 | 8,807) | 8,807) | ÷ | 66,318) | = | 0.13 | 0.13 | × | 5.23% × (1 – 21.00%) | = | 0.55% | ||
| Operating lease liability4 | 790) | 790) | ÷ | 66,318) | = | 0.01 | 0.01 | × | 4.90% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 66,318) | 1.00 | 20.23% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 55,698) | 55,698) | ÷ | 65,493) | = | 0.85 | 0.85 | × | 22.96% | = | 19.53% | ||
| Long-term debt, including current portion3 | 9,364) | 9,364) | ÷ | 65,493) | = | 0.14 | 0.14 | × | 5.18% × (1 – 21.00%) | = | 0.59% | ||
| Operating lease liability4 | 431) | 431) | ÷ | 65,493) | = | 0.01 | 0.01 | × | 4.70% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 65,493) | 1.00 | 20.14% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 60,533) | 60,533) | ÷ | 70,962) | = | 0.85 | 0.85 | × | 22.96% | = | 19.59% | ||
| Long-term debt, including current portion3 | 10,097) | 10,097) | ÷ | 70,962) | = | 0.14 | 0.14 | × | 5.04% × (1 – 21.00%) | = | 0.57% | ||
| Operating lease liability4 | 332) | 332) | ÷ | 70,962) | = | 0.00 | 0.00 | × | 4.10% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 70,962) | 1.00 | 20.17% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 63,530) | 63,530) | ÷ | 74,479) | = | 0.85 | 0.85 | × | 22.96% | = | 19.58% | ||
| Long-term debt, including current portion3 | 10,630) | 10,630) | ÷ | 74,479) | = | 0.14 | 0.14 | × | 4.88% × (1 – 21.00%) | = | 0.55% | ||
| Operating lease liability4 | 319) | 319) | ÷ | 74,479) | = | 0.00 | 0.00 | × | 4.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 74,479) | 1.00 | 20.15% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Freeport-McMoRan Inc., economic spread ratio calculation
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 × -3,782 ÷ 40,693 = -9.29%
The analysis of economic value added indicators reveals a sustained period of value erosion from 2021 through 2025. The negative trajectory of economic profit, coupled with a widening negative economic spread, indicates that returns have consistently failed to meet the cost of capital.
- Economic Profit Trends
- Economic profit remained negative throughout the analyzed period, exhibiting a significant downward trend. From a deficit of US$ 873 million in 2021, losses expanded to US$ 2,441 million by 2023. While a marginal improvement occurred in 2024 with losses narrowing to US$ 2,319 million, the figure declined sharply to US$ 3,782 million in 2025, marking a substantial increase in the destruction of economic value.
- Invested Capital Movements
- Invested capital remained relatively stable between 2021 and 2024, fluctuating between US$ 33,889 million and US$ 36,035 million. However, a notable increase occurred in 2025, with invested capital rising to US$ 40,693 million. This expansion in the capital base occurred simultaneously with the most significant drop in economic profit, suggesting that the increased investment did not generate a sufficient return to cover its cost.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative for the entire duration of the period, signaling that the return on invested capital was consistently below the cost of capital. The ratio deteriorated from -2.49% in 2021 to -6.95% in 2023. Following a slight stabilization at -6.84% in 2024, the ratio fell to -9.29% in 2025. This deepening negative spread highlights a growing inefficiency in capital utilization and a widening gap between actual performance and the required rate of return.
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Economic Profit Margin
Freeport-McMoRan Inc., economic profit margin calculation
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 ÷ Adjusted revenues
= 100 × -3,782 ÷ 25,930 = -14.58%
The analysis of economic value added over the five-year period reveals a consistent inability to generate economic profit, with the deficit widening significantly by the end of the period. While adjusted revenues demonstrated a general growth trajectory, particularly between 2023 and 2025, this top-line expansion failed to offset the costs of capital, resulting in a persistent destruction of economic value.
- Economic Profit Trends
- Economic profit remained negative throughout the entire duration, starting at -873 million in 2021 and reaching a peak deficit of -3,782 million by 2025. Although a slight recovery was observed in 2024, where the deficit narrowed to -2,319 million, this was followed by a substantial decline in 2025, indicating an inability to reach a break-even economic state.
- Adjusted Revenue Performance
- Revenues remained relatively stagnant between 2021 and 2023, fluctuating between 22,665 million and 22,971 million. A positive shift occurred in 2024 and 2025, with revenues climbing to 25,385 million and 25,930 million, respectively. The failure of these revenue gains to translate into positive economic profit suggests that operational costs or the weighted average cost of capital grew at a rate exceeding revenue growth.
- Economic Profit Margin Analysis
- The economic profit margin reflects a deteriorating trend in value creation efficiency. The margin widened from -3.80% in 2021 to -10.64% in 2023. Despite a marginal improvement to -9.13% in 2024, the margin deteriorated to its lowest point of -14.58% in 2025. This pattern confirms that the economic loss relative to revenue increased over the observed period.
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