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
Target Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
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
= 4,141 – 15.47% × 37,821 = -1,709
The analysis of economic profit over the period from January 2021 to January 2026 reveals a pattern of sustained value destruction, punctuated by a single year of positive economic value added. The overall trend indicates that the organization has struggled to generate operating returns that exceed its cost of capital, with the gap widening in the final projected year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, reaching a peak of US$ 7,872 million in January 2022. Following this peak, a sharp contraction occurred in 2023, falling to US$ 3,821 million. Although a partial recovery was observed in 2024, the figure trended downward again through 2026, ending at US$ 4,141 million. This instability in operating profit suggests difficulty in maintaining consistent margins or operational efficiency over the long term.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable between 2021 and 2023, hovering around US$ 30 billion. However, a distinct upward trend emerged starting in February 2024, with capital increasing to US$ 37,821 million by January 2026. Concurrently, the cost of capital remained high, fluctuating between 15.21% and 17.35%. The combination of an expanding capital base and a consistently high hurdle rate has placed increased pressure on the company's ability to generate a positive economic profit.
- Economic Profit Trends
- Economic profit remained negative for five of the six years analyzed. The only instance of value creation occurred in January 2022, where an economic profit of US$ 2,642 million was achieved, driven by the surge in NOPAT. Since that period, economic profit has returned to negative territory. While there was a brief improvement in 2024, the trend shifted toward deeper value destruction by January 2026, reaching a period low of negative US$ 1,709 million.
The divergence between rising invested capital and stagnant or declining NOPAT indicates a diminishing return on investment. The increase in capital expenditure or funding since 2024 has not yielded a commensurate increase in operating profit, thereby accelerating the erosion of economic value.
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Net Operating Profit after Taxes (NOPAT)
Target Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net earnings.
3 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,834 × 4.61% = 177
4 2026 Calculation
Tax benefit of net interest expense = Adjusted net interest expense × Statutory income tax rate
= 622 × 21.00% = 131
5 Addition of after taxes interest expense to net earnings.
Net operating profit after taxes (NOPAT) exhibited significant fluctuation over the observed period. Initial values were strong, followed by a substantial decline, and then a partial recovery. A comparison with net earnings reveals some divergence in performance trends.
- Overall NOPAT Trend
- NOPAT began at US$5,024 million in January 2021, increasing substantially to US$7,872 million in January 2022. This represents a growth of approximately 57.2%. However, a marked decrease occurred in January 2023, with NOPAT falling to US$3,821 million. Subsequent years show a recovery, reaching US$4,953 million in February 2024, US$4,376 million in February 2025, and US$4,141 million in January 2026. While recovering, NOPAT did not return to the peak observed in 2022.
- Relationship to Net Earnings
- In January 2021, NOPAT exceeded net earnings by approximately US$656 million. This difference widened in January 2022, with NOPAT exceeding net earnings by approximately US$926 million. However, the gap narrowed considerably in January 2023, with NOPAT exceeding net earnings by only US$41 million. In February 2024, NOPAT exceeded net earnings by US$815 million, and this difference continued in subsequent years, reaching US$666 million in February 2025 and US$436 million in January 2026. The fluctuating difference suggests changes in non-operating items or tax impacts affecting net earnings relative to core operational profitability.
- Recent Performance
- The most recent two periods (February 2025 and January 2026) demonstrate a slight downward trend in NOPAT, decreasing from US$4,376 million to US$4,141 million. This represents a decline of approximately 5.6%. This recent deceleration warrants further investigation to determine the underlying causes.
The observed volatility in NOPAT suggests sensitivity to external factors or internal operational changes. Further analysis, including a breakdown of the components contributing to NOPAT, is recommended to understand the drivers behind these fluctuations and inform future strategic decisions.
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Cash Operating Taxes
Target Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
The provision for income taxes and cash operating taxes exhibited fluctuating behavior over the observed period. A notable divergence between the two metrics is apparent, suggesting factors beyond standard income tax accounting are influencing cash tax payments.
- Provision for Income Taxes
- The provision for income taxes began at US$1,178 million in 2021, increased significantly to US$1,961 million in 2022, then decreased substantially to US$638 million in 2023. A subsequent rise to US$1,159 million occurred in 2024, followed by a slight increase to US$1,170 million in 2025, and a minor decrease to US$1,062 million in 2026. This pattern indicates considerable volatility, potentially linked to changes in pre-tax income, tax rate adjustments, or the recognition of deferred tax assets or liabilities.
- Cash Operating Taxes
- Cash operating taxes started at US$1,585 million in 2021 and decreased to US$1,546 million in 2022. A dramatic decline to US$178 million was observed in 2023, representing a significant reduction in cash outflow for taxes. The value then increased to US$998 million in 2024, followed by a substantial rise to US$1,474 million in 2025, and a moderate decrease to US$1,248 million in 2026. The fluctuations in cash taxes are more pronounced than those in the provision for income taxes.
- Relationship between Provision and Cash Taxes
- In 2021 and 2022, cash operating taxes were relatively close to the provision for income taxes. However, beginning in 2023, a significant difference emerged. Cash operating taxes were considerably lower than the provision for income taxes in 2023, suggesting potential benefits from tax loss carryforwards, tax credits, or timing differences related to deductible items. The gap narrowed in 2024 and 2025 as cash taxes increased, but remained notable. This divergence implies that the company’s actual cash tax payments do not directly correlate with its accounting income tax expense.
The observed trends suggest that the company’s effective tax rate and cash tax payments are subject to considerable variability. Further investigation into the specific drivers of these fluctuations, such as changes in tax legislation, utilization of tax credits, and the impact of deferred tax items, would be beneficial for a comprehensive understanding of the company’s tax position.
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Invested Capital
Target Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ investment.
4 Removal of accumulated other comprehensive income.
5 Subtraction of construction-in-progress.
The reported invested capital demonstrates a generally increasing trend over the observed period. However, the components contributing to invested capital – total reported debt & leases and shareholders’ investment – exhibit differing patterns. An initial assessment reveals fluctuations in both debt and equity financing, impacting the overall capital structure.
- Total Reported Debt & Leases
- Total reported debt & leases consistently increased from US$15,109 million in January 2021 to US$20,290 million in January 2026. The rate of increase was most pronounced between January 2022 and January 2023, growing by US$2,606 million. Subsequent increases were more moderate, suggesting a potential stabilization in debt financing strategies after 2023.
- Shareholders’ Investment
- Shareholders’ investment experienced a decline from US$14,440 million in January 2021 to a low of US$11,232 million in January 2023. A recovery began in January 2024, with the investment reaching US$16,165 million by January 2026. This indicates a period of reduced equity financing followed by renewed investor confidence or strategic capital raising activities.
- Invested Capital
- Despite the fluctuations in its components, invested capital remained relatively stable between January 2021 and January 2023, fluctuating around the US$30 billion mark. A significant increase occurred between January 2023 and February 2024, reaching US$34,307 million. This growth continued through January 2026, reaching US$37,821 million, driven by the combined effect of increasing debt and recovering shareholders’ investment. The overall trend suggests a growing capital base, potentially supporting expansion or strategic initiatives.
The interplay between debt and equity financing suggests a dynamic capital structure management approach. The initial decline in shareholders’ investment was largely offset by increased debt, maintaining a consistent level of invested capital. The subsequent recovery in shareholders’ investment, coupled with continued debt financing, resulted in a more substantial increase in the overall invested capital base in the later years of the period.
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Cost of Capital
Target Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 53,790) | 53,790) | ÷ | 73,469) | = | 0.73 | 0.73 | × | 19.92% | = | 14.59% | ||
| Long-term debt and other borrowings, including current portion3 | 15,845) | 15,845) | ÷ | 73,469) | = | 0.22 | 0.22 | × | 4.05% × (1 – 21.00%) | = | 0.69% | ||
| Operating lease liability4 | 3,834) | 3,834) | ÷ | 73,469) | = | 0.05 | 0.05 | × | 4.61% × (1 – 21.00%) | = | 0.19% | ||
| Total: | 73,469) | 1.00 | 15.47% | ||||||||||
Based on: 10-K (reporting date: 2026-01-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 48,874) | 48,874) | ÷ | 67,923) | = | 0.72 | 0.72 | × | 19.92% | = | 14.34% | ||
| Long-term debt and other borrowings, including current portion3 | 15,114) | 15,114) | ÷ | 67,923) | = | 0.22 | 0.22 | × | 3.77% × (1 – 21.00%) | = | 0.66% | ||
| Operating lease liability4 | 3,935) | 3,935) | ÷ | 67,923) | = | 0.06 | 0.06 | × | 4.51% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 67,923) | 1.00 | 15.21% | ||||||||||
Based on: 10-K (reporting date: 2025-02-01).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 76,950) | 76,950) | ÷ | 96,038) | = | 0.80 | 0.80 | × | 19.92% | = | 15.96% | ||
| Long-term debt and other borrowings, including current portion3 | 15,480) | 15,480) | ÷ | 96,038) | = | 0.16 | 0.16 | × | 3.85% × (1 – 21.00%) | = | 0.49% | ||
| Operating lease liability4 | 3,608) | 3,608) | ÷ | 96,038) | = | 0.04 | 0.04 | × | 4.22% × (1 – 21.00%) | = | 0.13% | ||
| Total: | 96,038) | 1.00 | 16.58% | ||||||||||
Based on: 10-K (reporting date: 2024-02-03).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 75,274) | 75,274) | ÷ | 93,968) | = | 0.80 | 0.80 | × | 19.92% | = | 15.96% | ||
| Long-term debt and other borrowings, including current portion3 | 15,760) | 15,760) | ÷ | 93,968) | = | 0.17 | 0.17 | × | 3.84% × (1 – 21.00%) | = | 0.51% | ||
| Operating lease liability4 | 2,934) | 2,934) | ÷ | 93,968) | = | 0.03 | 0.03 | × | 3.52% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 93,968) | 1.00 | 16.56% | ||||||||||
Based on: 10-K (reporting date: 2023-01-28).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 99,882) | 99,882) | ÷ | 117,512) | = | 0.85 | 0.85 | × | 19.92% | = | 16.93% | ||
| Long-term debt and other borrowings, including current portion3 | 14,883) | 14,883) | ÷ | 117,512) | = | 0.13 | 0.13 | × | 3.50% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 2,747) | 2,747) | ÷ | 117,512) | = | 0.02 | 0.02 | × | 3.28% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 117,512) | 1.00 | 17.35% | ||||||||||
Based on: 10-K (reporting date: 2022-01-29).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 89,043) | 89,043) | ÷ | 106,113) | = | 0.84 | 0.84 | × | 19.92% | = | 16.72% | ||
| Long-term debt and other borrowings, including current portion3 | 14,641) | 14,641) | ÷ | 106,113) | = | 0.14 | 0.14 | × | 3.70% × (1 – 21.00%) | = | 0.40% | ||
| Operating lease liability4 | 2,429) | 2,429) | ÷ | 106,113) | = | 0.02 | 0.02 | × | 3.54% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 106,113) | 1.00 | 17.19% | ||||||||||
Based on: 10-K (reporting date: 2021-01-30).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and other borrowings, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Target Corp., economic spread ratio calculation, comparison to benchmarks
| Jan 31, 2026 | Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,709) | (1,114) | (735) | (1,183) | 2,642) | (217) | |
| Invested capital2 | 37,821) | 36,107) | 34,307) | 30,226) | 30,151) | 30,495) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -4.52% | -3.09% | -2.14% | -3.91% | 8.76% | -0.71% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | — | 5.75% | 6.44% | 1.64% | 5.72% | 4.12% | |
| Walmart Inc. | 4.32% | 2.48% | 1.01% | -1.40% | -0.86% | 0.61% | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,709 ÷ 37,821 = -4.52%
4 Click competitor name to see calculations.
The financial trajectory from 2021 to 2026 indicates a persistent struggle to generate economic value, characterized by a diverging trend between an expanding capital base and consistently negative economic profits. Except for a solitary peak in 2022, the organization has failed to earn returns exceeding its cost of capital.
- Economic Profit Volatility
- Economic profit remained predominantly negative throughout the analyzed period. A significant anomaly occurred in 2022, where profit surged to 2,642 million USD. However, this was followed by a return to negative values, with a deepening deficit reaching -1,709 million USD by January 2026. This trend suggests that the drivers behind the 2022 performance were not sustainable and that operational returns have failed to keep pace with capital costs.
- Invested Capital Expansion
- Invested capital remained relatively stable between 2021 and 2023, fluctuating around the 30 billion USD mark. Starting in 2024, a consistent upward trend is observed, with capital increasing to 37,821 million USD by 2026. This expansion of the asset base has occurred despite the simultaneous decline in economic profit, indicating that additional capital infusions have not translated into value creation.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of economic profit, peaking at 8.76% in 2022 before falling back into negative territory. While a slight recovery to -2.14% was noted in 2024, the ratio subsequently deteriorated to -4.52% by 2026. The widening negative spread signifies an increasing inefficiency in capital utilization and a growing disparity between the return on invested capital and the required cost of capital.
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Economic Profit Margin
Target Corp., economic profit margin calculation, comparison to benchmarks
| Jan 31, 2026 | Feb 1, 2025 | Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,709) | (1,114) | (735) | (1,183) | 2,642) | (217) | |
| Net sales | 104,780) | 106,566) | 107,412) | 109,120) | 106,005) | 93,561) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -1.63% | -1.05% | -0.68% | -1.08% | 2.49% | -0.23% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | — | 0.81% | 0.85% | 0.24% | 0.81% | 0.61% | |
| Walmart Inc. | 1.07% | 0.59% | 0.24% | -0.35% | -0.24% | 0.18% | |
Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-02-01), 10-K (reporting date: 2024-02-03), 10-K (reporting date: 2023-01-28), 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -1,709 ÷ 104,780 = -1.63%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant volatility, characterized by a singular peak in performance followed by a sustained decline in economic profitability. While net sales experienced an initial growth phase, they have since entered a contraction period, coinciding with a negative economic profit margin.
- Economic Profit Performance
- Economic profit exhibited a sharp increase in 2022, reaching 2,642 million US$, representing the only period of positive value creation within the analyzed timeframe. This peak was followed by a reversal into negative territory starting in 2023. The deficit has trended downward over the final three years, reaching its lowest point of -1,709 million US$ by January 31, 2026.
- Net Sales Trajectory
- Revenue grew steadily from 93,561 million US$ in 2021 to a peak of 109,120 million US$ in 2023. Subsequent to this peak, a consistent downward trajectory is observed, with net sales declining annually to 104,780 million US$ by 2026. The correlation suggests that the contraction in sales volume has contributed to the inability to generate positive economic value.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility seen in absolute economic profit. Following a low of -0.23% in 2021, the margin peaked at 2.49% in 2022. From 2023 onward, the margin remained negative, fluctuating slightly before deteriorating to -1.63% in 2026. This widening negative margin indicates that the returns on capital have failed to exceed the cost of capital, leading to an erosion of economic value over the most recent four-year period.
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