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
Nike Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,060 – 16.26% × 21,555 = -444
The financial trajectory over the observed period reveals a significant erosion of economic value, characterized by a transition from consistent value creation to a state of value destruction in the final two years.
- Net Operating Profit After Taxes (NOPAT)
- A pronounced downward trend is evident in operational profitability. After maintaining stability between 2021 and 2022 at approximately US$ 5.6 billion, NOPAT experienced a gradual decline through 2024, followed by a severe contraction in 2025 to US$ 2,921 million. A marginal recovery is noted in 2026, though profitability remains substantially lower than the levels recorded at the start of the period.
- Capital Utilization and Cost of Capital
- Invested capital has fluctuated within a range of US$ 19.8 billion to US$ 22.1 billion, displaying no clear long-term growth or contraction trend. Simultaneously, the cost of capital has remained relatively stable, showing a slight downward trajectory from 17.56% in 2021 to 16.26% in 2026. The consistency of these figures suggests that the volatility in economic profit is primarily driven by operational earnings rather than shifts in the cost of funding or capital investment levels.
- Economic Profit and Value Creation
- The economic profit reflects a critical shift in the capacity to generate returns exceeding the cost of capital. From 2021 to 2024, the entity maintained positive economic profit, peaking at US$ 1,958 million in 2022. However, by May 31, 2025, economic profit turned negative to -US$ 468 million, and remained negative in 2026 at -US$ 444 million. This indicates that the return on invested capital fell below the required hurdle rate, leading to a period of economic value destruction.
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Net Operating Profit after Taxes (NOPAT)
Nike Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income.
3 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,091 × 3.60% = 111
4 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 339 × 21.00% = 71
5 Addition of after taxes interest expense to net income.
6 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 278 × 21.00% = 58
7 Elimination of after taxes investment income.
The financial performance exhibits a distinct bifurcation between a period of relative stability from 2021 to 2024 and a significant contraction in profitability starting in 2025. While the initial four-year window shows fluctuation, the subsequent years indicate a substantial reduction in both bottom-line earnings and core operational profitability.
- Net Income Trends
- Net income peaked in 2022 at 6,046 million US$, followed by a period of volatility. A sharp decline is observed beginning in 2025, where net income dropped to 3,219 million US$, representing a reduction of approximately 43.7% from the 2024 level. This downward trend persisted into 2026, with a further slight decrease to 3,108 million US$.
- Net Operating Profit After Taxes (NOPAT) Analysis
- NOPAT remained relatively consistent between 2021 and 2022, followed by a decline in 2023 and a marginal recovery in 2024 to 5,146 million US$. Similar to net income, NOPAT experienced a severe contraction in 2025, falling to 2,921 million US$. A slight recovery is noted in 2026, with NOPAT rising to 3,060 million US$, suggesting a potential stabilization of operational profitability.
- Operational Correlation and Insights
- A strong positive correlation is observed between net income and NOPAT throughout the analyzed period. The simultaneous decline in both metrics starting in 2025 indicates that the erosion of profitability is driven primarily by operational factors rather than non-operating expenses or financial structuring. The proximity of NOPAT to net income suggests that operating performance is the dominant driver of the overall financial outcome.
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Cash Operating Taxes
Nike Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
The analysis of tax-related outflows reveals a consistent divergence between accrual-based income tax expenses and actual cash operating taxes paid. While income tax expenses exhibit significant volatility, cash operating taxes remained relatively stable through the mid-period before experiencing a marked contraction in the final two years.
- Income Tax Expense Trends
- Income tax expenses demonstrate a non-linear trajectory, starting at US$ 934 million in 2021, dipping to US$ 605 million in 2022, and peaking at US$ 1,131 million in 2023. A subsequent downward trend is observed, with the expense falling to US$ 666 million by 2025 before a slight recovery to US$ 792 million in 2026.
- Cash Operating Tax Patterns
- Cash operating taxes remained elevated and relatively stable between 2021 and 2024, fluctuating between US$ 1,264 million and US$ 1,482 million. However, a significant reduction occurred starting in 2025, where cash payments dropped to US$ 951 million and further declined to US$ 901 million in 2026, representing a substantial decrease in actual cash outflows for taxes.
- Variance Between Accrual and Cash Taxes
- Throughout the analyzed period, cash operating taxes consistently exceeded the recorded income tax expense. This gap was most prominent in 2022, where cash payments were more than double the accounting expense. This recurring discrepancy suggests the presence of significant timing differences, the settlement of deferred tax liabilities, or specific tax jurisdictions where cash remittances do not align with the periodic income statement recognition.
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Invested Capital
Nike Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ equity.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction in process.
6 Subtraction of short-term investments.
The analysis of invested capital and its components from May 31, 2021, to May 31, 2026, reveals a strategic shift in the financing mix, characterized by a steady reduction in liabilities and fluctuations in equity levels. The overall invested capital exhibits a non-linear trend, reflecting the interplay between decreasing debt and variable shareholder equity.
- Total Reported Debt and Leases
- A consistent downward trajectory is observed in total reported debt and leases, declining from 12,811 million US$ in 2021 to 11,013 million US$ by 2025. This represents a sustained reduction in leverage and lease obligations over a five-year period, with a marginal stabilization occurring in 2026 at 11,033 million US$.
- Shareholders’ Equity
- Shareholders' equity demonstrates significant volatility. An initial increase is noted between 2021 and 2022, peaking at 15,281 million US$. This was followed by a period of fluctuation, including a decline to 13,213 million US$ in 2025, before rebounding to 14,865 million US$ in 2026. This variability suggests periodic shifts in retained earnings or capital distribution strategies.
- Total Invested Capital
- The total invested capital remains relatively stable between 2021 and 2023, before reaching a peak of 22,088 million US$ in 2024. A notable contraction occurs in 2025, where invested capital drops to its lowest point in the period at 19,851 million US$, driven by simultaneous lows in both debt and equity. A recovery is evident by 2026, with the figure rising to 21,555 million US$.
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Cost of Capital
Nike Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 63,449) | 63,449) | ÷ | 73,345) | = | 0.87 | 0.87 | × | 18.39% | = | 15.91% | ||
| Long-term debt, including current portion3 | 6,805) | 6,805) | ÷ | 73,345) | = | 0.09 | 0.09 | × | 3.14% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 3,091) | 3,091) | ÷ | 73,345) | = | 0.04 | 0.04 | × | 3.60% × (1 – 21.00%) | = | 0.12% | ||
| Total: | 73,345) | 1.00 | 16.26% | ||||||||||
Based on: 10-K (reporting date: 2026-05-31).
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 | 107,784) | 107,784) | ÷ | 117,509) | = | 0.92 | 0.92 | × | 18.39% | = | 16.87% | ||
| Long-term debt, including current portion3 | 6,673) | 6,673) | ÷ | 117,509) | = | 0.06 | 0.06 | × | 3.14% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 3,052) | 3,052) | ÷ | 117,509) | = | 0.03 | 0.03 | × | 3.10% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,509) | 1.00 | 17.07% | ||||||||||
Based on: 10-K (reporting date: 2025-05-31).
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 | 107,069) | 107,069) | ÷ | 117,743) | = | 0.91 | 0.91 | × | 18.39% | = | 16.72% | ||
| Long-term debt, including current portion3 | 7,631) | 7,631) | ÷ | 117,743) | = | 0.06 | 0.06 | × | 3.05% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 3,043) | 3,043) | ÷ | 117,743) | = | 0.03 | 0.03 | × | 2.90% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,743) | 1.00 | 16.94% | ||||||||||
Based on: 10-K (reporting date: 2024-05-31).
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 | 164,518) | 164,518) | ÷ | 175,618) | = | 0.94 | 0.94 | × | 18.39% | = | 17.23% | ||
| Long-term debt, including current portion3 | 7,889) | 7,889) | ÷ | 175,618) | = | 0.04 | 0.04 | × | 3.05% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 3,211) | 3,211) | ÷ | 175,618) | = | 0.02 | 0.02 | × | 2.50% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 175,618) | 1.00 | 17.37% | ||||||||||
Based on: 10-K (reporting date: 2023-05-31).
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 | 175,082) | 175,082) | ÷ | 187,212) | = | 0.94 | 0.94 | × | 18.39% | = | 17.20% | ||
| Long-term debt, including current portion3 | 8,933) | 8,933) | ÷ | 187,212) | = | 0.05 | 0.05 | × | 3.03% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 3,197) | 3,197) | ÷ | 187,212) | = | 0.02 | 0.02 | × | 2.30% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 187,212) | 1.00 | 17.34% | ||||||||||
Based on: 10-K (reporting date: 2022-05-31).
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 | 252,677) | 252,677) | ÷ | 266,350) | = | 0.95 | 0.95 | × | 18.39% | = | 17.45% | ||
| Long-term debt, including current portion3 | 10,275) | 10,275) | ÷ | 266,350) | = | 0.04 | 0.04 | × | 3.02% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 3,398) | 3,398) | ÷ | 266,350) | = | 0.01 | 0.01 | × | 2.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 266,350) | 1.00 | 17.56% | ||||||||||
Based on: 10-K (reporting date: 2021-05-31).
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
Nike Inc., economic spread ratio calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (444) | (468) | 1,404) | 1,476) | 1,958) | 1,936) | |
| Invested capital2 | 21,555) | 19,851) | 22,088) | 20,353) | 21,093) | 20,927) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -2.06% | -2.36% | 6.36% | 7.25% | 9.28% | 9.25% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| lululemon athletica inc. | 4.84% | 10.63% | 7.91% | 1.46% | 7.35% | -0.77% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -444 ÷ 21,555 = -2.06%
4 Click competitor name to see calculations.
A significant deterioration in economic performance is observed over the analyzed period ending May 31, 2026. While the initial years demonstrated a capacity to generate value exceeding the cost of capital, the latter portion of the period is characterized by a transition into economic value destruction.
- Economic Spread Ratio
- The economic spread ratio exhibited a consistent downward trajectory after peaking at 9.28% in 2022. A marked contraction occurred between 2022 and 2024, with the ratio falling to 6.36%, followed by a sharp decline into negative territory in 2025 (-2.36%) and 2026 (-2.06%). This trend indicates that the return on invested capital has fallen below the weighted average cost of capital.
- Economic Profit
- Economic profit mirrored the decline of the spread ratio. Positive value creation peaked at 1,958 million USD in 2022 but entered a steady decline thereafter. The transition to negative economic profit in 2025 (-468 million USD) and 2026 (-444 million USD) confirms that the company ceased creating economic value for its shareholders during the final two years of the period.
- Invested Capital
- Invested capital remained relatively stable, fluctuating within a range between 19,851 million USD and 22,088 million USD. The absence of a strong linear trend in the capital base suggests that the erosion of the economic spread ratio is primarily driven by a decrease in operational profitability rather than significant changes in the volume of capital deployed.
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Economic Profit Margin
Nike Inc., economic profit margin calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (444) | (468) | 1,404) | 1,476) | 1,958) | 1,936) | |
| Revenues | 46,398) | 46,309) | 51,362) | 51,217) | 46,710) | 44,538) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -0.96% | -1.01% | 2.73% | 2.88% | 4.19% | 4.35% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| lululemon athletica inc. | 3.03% | 6.53% | 4.89% | 0.81% | 4.55% | -0.63% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -444 ÷ 46,398 = -0.96%
3 Click competitor name to see calculations.
The financial trajectory from May 31, 2021, to May 31, 2026, exhibits a significant deterioration in value creation, characterized by a transition from positive economic profit to a state of economic loss.
- Economic Profit Margin Trends
- A consistent downward trend is observed in the economic profit margin, which declined from a peak of 4.35% in 2021 to -0.96% by 2026. The most acute contraction occurred between 2024 and 2025, where the margin shifted from a positive 2.73% to a negative 1.01%, signaling a shift from value creation to value destruction.
- Revenue and Profitability Divergence
- Between 2021 and 2024, revenues grew from 44,538 million US$ to a peak of 51,362 million US$. However, this revenue growth did not translate into increased economic profit, which fell from 1,936 million US$ in 2021 to 1,404 million US$ in 2024. This divergence suggests that the cost of capital or operating inefficiencies outpaced the gains from top-line expansion during this period.
- Analysis of Value Erosion
- The period ending May 31, 2025, marks a critical inflection point where both revenues and economic profit contracted sharply. Revenues fell to 46,309 million US$, and economic profit plummeted to -468 million US$. While 2026 shows a marginal recovery in both revenue (46,398 million US$) and economic profit (-444 million US$), the organization remains in a negative economic profit position, indicating that returns are insufficient to cover the cost of invested capital.
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