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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Lockheed Martin Corp. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Price to Sales (P/S) since 2005
- Analysis of Debt
- Aggregate Accruals
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Economic Profit
Lockheed Martin Corp., 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 analysis of economic profit over the five-year period from 2021 to 2025 reveals a volatile but consistently positive trajectory. The organization has maintained its ability to generate value in excess of its cost of capital, although the magnitude of this value creation has experienced significant fluctuations.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrates a non-linear trend, beginning at 6,442 million in 2021 and reaching a peak of 6,983 million in 2023. A sharp contraction is observed in 2024, where profit declined to 5,464 million, followed by a recovery to 6,105 million in 2025. This volatility indicates inconsistent operating performance over the observed period.
- Cost of Capital and Invested Capital
- The cost of capital remained remarkably stable, oscillating within a narrow range between 6.91% and 7.05%. In contrast, invested capital showed an overall upward trajectory after a dip in 2022 to 26,603 million, eventually rising to 30,349 million by 2025. The steady increase in invested capital since 2022 suggests a sustained expansion of the asset base.
- Economic Profit Trends
- Economic profit closely mirrored the fluctuations of NOPAT, peaking in 2023 at 5,078 million and reaching a period low in 2024 at 3,474 million. The decline in 2024 is noteworthy because it occurred while invested capital was increasing, signifying a temporary reduction in capital efficiency. The recovery to 3,974 million in 2025 confirms the persistence of positive economic value added, although the 2025 level remains below the 2021 and 2023 benchmarks.
Net Operating Profit after Taxes (NOPAT)
Lockheed Martin Corp., 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 equity equivalents to net earnings.
3 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
4 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
5 Addition of after taxes interest expense to net earnings.
6 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
7 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) exhibited fluctuations over the five-year period. While generally tracking closely with net earnings, NOPAT demonstrated a slightly different trajectory, particularly in the earlier years. An initial observation reveals a period of growth followed by contraction and subsequent recovery.
- Overall Trend
- NOPAT began at US$6,442 million in 2021, experienced a slight decrease to US$5,745 million in 2022, then increased substantially to US$6,983 million in 2023. A subsequent decline to US$5,464 million occurred in 2024, followed by a recovery to US$6,105 million in 2025. This pattern suggests sensitivity to underlying operational factors and potentially external economic conditions.
- Comparison to Net Earnings
- In 2021 and 2022, NOPAT was marginally higher than net earnings. This difference narrowed in 2023, with NOPAT exceeding net earnings by US$63 million. In 2024, the difference widened again, with net earnings falling more significantly than NOPAT. By 2025, NOPAT surpassed net earnings by US$1,088 million, indicating a divergence in the factors impacting reported net income versus core operational profitability.
- Year-over-Year Changes
- The largest year-over-year increase in NOPAT occurred between 2022 and 2023, with a growth of US$1,238 million. The most substantial decrease was observed between 2023 and 2024, representing a decline of US$1,519 million. The final period, from 2024 to 2025, showed a positive change of US$641 million, indicating a return to growth after the 2024 dip.
The fluctuations in NOPAT warrant further investigation to determine the underlying drivers. Factors such as changes in revenue, operating expenses, and tax rates could contribute to these observed patterns. The increasing difference between NOPAT and net earnings in the later years also suggests a need to analyze non-operating items impacting net income.
Cash Operating Taxes
Lockheed Martin Corp., cash operating taxes calculation
US$ 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 federal and foreign income tax expense exhibited volatility over the five-year period. It decreased from US$1,235 million in 2021 to US$948 million in 2022, before increasing to US$1,178 million in 2023. A subsequent decline to US$884 million was noted in 2024, followed by a modest increase to US$905 million in 2025.
Cash operating taxes demonstrated a different pattern. An initial increase from US$1,500 million in 2021 to US$1,910 million in 2022 was observed. This was followed by a decrease to US$1,825 million in 2023 and a further reduction to US$1,662 million in 2024. A significant decrease occurred in 2025, with cash operating taxes falling to US$723 million.
- Trend Analysis - Cash Operating Taxes
- Cash operating taxes generally decreased over the period from 2022 to 2025. The most substantial decline occurred between 2024 and 2025, representing a reduction of approximately US$939 million. This suggests a potential shift in the timing of tax payments relative to reported income, or a change in underlying tax liabilities.
- Relationship between Tax Expense and Cash Taxes
- A consistent difference exists between federal and foreign income tax expense and cash operating taxes. Cash operating taxes were consistently higher than the reported tax expense from 2021 through 2024. However, in 2025, cash operating taxes fell below the reported tax expense. This divergence could be attributable to factors such as deferred tax assets, tax credits, or differences in accounting versus cash-based tax calculations.
- Potential Implications
- The substantial decrease in cash operating taxes in 2025 warrants further investigation. It could indicate improved tax efficiency, changes in tax legislation, or a temporary reduction in taxable income. The difference between reported tax expense and cash taxes should be examined to understand the underlying drivers and potential impact on future cash flows.
The fluctuations in both reported tax expense and cash operating taxes suggest a dynamic tax environment. Continued monitoring of these figures is recommended to assess the sustainability of observed trends and their impact on overall financial performance.
Invested Capital
Lockheed Martin Corp., invested capital calculation (financing approach)
US$ 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 equity equivalents to stockholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in progress.
6 Subtraction of marketable securities.
The composition of invested capital exhibits notable shifts over the five-year period. Total reported debt & leases consistently increased, while stockholders’ equity experienced a decline before stabilizing. These movements significantly influence the overall invested capital figure.
- Total Reported Debt & Leases
- A clear upward trend is observed in total reported debt & leases, increasing from US$13,076 million in 2021 to US$22,771 million in 2025. The rate of increase accelerated between 2021 and 2023, then moderated slightly in the subsequent two years. This suggests a growing reliance on debt financing.
- Stockholders’ Equity
- Stockholders’ equity demonstrated a substantial decrease from US$10,959 million in 2021 to US$6,333 million in 2023. A modest recovery is then seen, with equity reaching US$6,721 million in 2025. This decline and subsequent stabilization may be attributable to factors such as share repurchases, dividend payments, or retained earnings performance.
- Invested Capital
- Invested capital initially decreased from US$28,620 million in 2021 to US$26,603 million in 2022, coinciding with the decline in stockholders’ equity. It then experienced a gradual increase, reaching US$30,349 million in 2025. The increasing trend in debt appears to be the primary driver of this overall increase in invested capital in the later years, offsetting the earlier decline and the relatively flat equity position.
The interplay between debt and equity significantly shapes the invested capital base. The increasing debt levels, coupled with the initial decrease and subsequent stabilization of equity, suggest a changing capital structure. Further investigation into the reasons behind these trends would be beneficial for a comprehensive understanding of the company’s financial position.
Cost of Capital
Lockheed Martin Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (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 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (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 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (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 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (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 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Lockheed Martin Corp., 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 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| RTX Corp. | ||||||
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 financial performance from 2021 through 2025 is characterized by volatility in economic profit and a gradual expansion of the capital base. While a significant peak in value creation was achieved in 2023, subsequent years indicate a compression in the efficiency of capital utilization, as economic profit did not grow in tandem with the increasing invested capital.
- Economic Profit Trends
- Economic profit exhibited non-linear movement, starting at 4,444 million US$ in 2021 and declining to 3,870 million US$ in 2022. A substantial increase occurred in 2023, reaching a period high of 5,078 million US$, before dropping to its lowest point of 3,474 million US$ in 2024. A modest recovery is observed in 2025, with the figure rising to 3,974 million US$.
- Invested Capital Trajectory
- Following a decrease from 28,620 million US$ in 2021 to 26,603 million US$ in 2022, invested capital maintained a consistent upward trend. The capital base expanded to 27,427 million US$ in 2023 and continued to grow, reaching 28,784 million US$ in 2024 and peaking at 30,349 million US$ by the end of 2025.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrors the volatility of economic profit. The ratio declined from 15.53% in 2021 to 14.55% in 2022, followed by a peak of 18.52% in 2023. A sharp contraction occurred in 2024, with the ratio falling to 12.07%, representing the lowest efficiency level in the observed period. By 2025, the ratio showed a slight improvement to 13.09%, though it remained below the 2021 and 2022 levels.
Economic Profit Margin
Lockheed Martin Corp., 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 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| RTX Corp. | ||||||
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.
An analysis of the financial performance from 2021 to 2025 reveals a divergence between revenue growth and the generation of economic profit. While total sales exhibited a general upward trajectory over the period, the economic profit margin experienced significant volatility, indicating that revenue increases did not consistently translate into proportional gains in economic value added.
- Sales Trajectory
- Total sales remained relatively stable between 2021 and 2023, with a minor contraction in 2022 followed by a recovery. Starting in 2024, a more pronounced growth phase emerged, with sales increasing from 67,571 million US$ in 2023 to 75,048 million US$ by 2025.
- Economic Profit Volatility
- Economic profit demonstrated an inconsistent pattern, peaking in 2023 at 5,078 million US$ before suffering a sharp decline to 3,474 million US$ in 2024. Although a partial recovery occurred in 2025, reaching 3,974 million US$, the figure remained below the 2021 and 2023 levels despite the higher sales volume.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of absolute economic profit. The margin peaked at 7.52% in 2023, representing the period of highest capital efficiency. However, a significant compression occurred in 2024, where the margin fell to 4.89%, the lowest point in the analyzed period. The margin showed a slight improvement to 5.29% in 2025, yet it failed to return to the levels observed prior to 2024.
The data indicates a contraction in economic efficiency during the latter part of the period. The decrease in the economic profit margin between 2023 and 2025, occurring simultaneously with rising sales, suggests that the cost of capital or operational expenses increased at a rate that outpaced revenue growth, thereby eroding the net economic value created per dollar of sales.