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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Thermo Fisher Scientific Inc. pages available for free this week:
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Thermo Fisher Scientific Inc., economic profit calculation
US$ in millions
| 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 financial data from the analyzed periods reveals several notable trends and patterns.
- Net Operating Profit After Taxes (NOPAT)
- The company's NOPAT demonstrated a fluctuating trend over the five-year span. It increased from 6,545 million USD in 2020 to a peak of 7,465 million USD in 2021. Subsequently, it declined significantly to 6,425 million USD in 2022, followed by further decreases to 5,117 million USD in 2023. A slight recovery to 5,400 million USD is observed in 2024, though the value remains below the 2020 and 2021 levels.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period, moving marginally between 10.81% and 11.21%. There is no significant volatility, indicating consistent capital expenses over time, with a slight upward tendency towards 2024 (from 11.09% to 11.18%).
- Invested Capital
- Invested capital showed an overall increasing trend from 61,158 million USD in 2020 to a high of 85,573 million USD in 2023. However, a decrease is noted in 2024, where it dropped to 82,071 million USD. This suggests that the company was increasing its capital investment significantly until 2023, followed by a modest reduction in the most recent year.
- Economic Profit
- Economic profit remained negative throughout all years and deteriorated notably over time, indicating that the returns did not exceed the cost of capital. Starting at -308 million USD in 2020, economic profit declined progressively to -4,370 million USD in 2023, before a slight improvement to -3,779 million USD in 2024. This persistent negative spread signals that the company struggled to generate value over its invested capital during the period under review.
In summary, the company experienced a peak in profitability early in the period followed by declining operating profits and persistently negative economic profit, despite relatively stable cost of capital and increased invested capital. These factors reflect challenges in generating returns above capital costs, highlighting areas for potential operational or strategic improvements.
Net Operating Profit after Taxes (NOPAT)
Thermo Fisher Scientific Inc., NOPAT calculation
US$ in millions
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 accrued restructuring costs.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Thermo Fisher Scientific Inc..
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to Thermo Fisher Scientific Inc..
9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Income Attributable to Thermo Fisher Scientific Inc.
- The net income shows an overall fluctuating trend during the analyzed period. It increased significantly from 6375 million US dollars in 2020 to a peak of 7725 million US dollars in 2021. However, this was followed by a decline over the next two years, reaching 5995 million US dollars in 2023. A modest recovery is observed in 2024, with net income rising to 6335 million US dollars, though it remains below the 2021 peak.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT values illustrate a pattern consistent with net income, with initial growth from 6545 million US dollars in 2020 to 7465 million US dollars in 2021. Subsequently, there is a notable decrease to 6425 million US dollars in 2022, followed by a sharper decline to 5117 million US dollars in 2023. A recovery phase occurs in 2024, where NOPAT increases to 5400 million US dollars, yet it still remains considerably lower than the earlier years.
- Summary of Trends
- The financial performance, as measured by both net income and NOPAT, peaked in 2021 and then experienced a downward adjustment for two consecutive years. Despite some recovery in 2024, neither metric returned to the highs seen in 2021. This pattern suggests a period of robust profitability followed by challenges that impacted the company’s earnings and operating efficiency, with partial improvement toward the end of the period.
Cash Operating Taxes
Thermo Fisher Scientific Inc., cash operating taxes calculation
US$ in millions
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).
The financial data reveals notable fluctuations in tax-related expenses over the five-year period ending in 2024. Two key categories, provision for income taxes and cash operating taxes, demonstrate distinct trends.
- Provision for Income Taxes
- The provision for income taxes exhibits significant volatility. Starting at 850 million USD in 2020, it increased sharply to 1,109 million USD in 2021. However, in 2022, the provision decreased substantially to 703 million USD, followed by a further decline to 284 million USD in 2023. A notable rebound occurs in 2024, with the provision rising again to 657 million USD. This pattern suggests variability in the company's tax liabilities or effective tax rate, possibly influenced by changes in pre-tax earnings, tax regulations, or one-time adjustments.
- Cash Operating Taxes
- Cash operating taxes show a generally upward trend with some minor fluctuations. Beginning at 1,227 million USD in 2020, these taxes increased substantially to 1,866 million USD in 2021. The level then remained relatively stable through 2022 at 1,806 million USD and slightly decreased to 1,701 million USD in 2023. In 2024, cash operating taxes resumed growth, reaching 1,946 million USD, the highest in the observed period. This steady increase indicates rising cash outflows for tax payments, which may reflect higher taxable income, changes in tax rates, or both.
In summary, while cash operating taxes demonstrate a mostly consistent upward trajectory, the provision for income taxes is marked by pronounced variability. The divergence in trends between these two items could imply timing differences between tax expenses recorded and actual cash paid or adjustments related to deferred taxes or tax planning strategies.
Invested Capital
Thermo Fisher Scientific Inc., invested capital calculation (financing approach)
US$ in millions
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 accrued restructuring costs.
6 Addition of equity equivalents to total Thermo Fisher Scientific Inc. shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of investments measured at fair value on a recurring basis.
- Total Reported Debt & Leases
- The total reported debt and leases showed a significant increase from 22,545 million USD at the end of 2020 to 36,339 million USD in 2021. Subsequently, it remained relatively stable, with slight fluctuations around the 36,000 million USD mark through 2023, before decreasing to 32,775 million USD by the end of 2024. This pattern suggests a major debt acquisition or lease increase occurred between 2020 and 2021, followed by stabilization and moderate deleveraging in the final year observed.
- Total Shareholders’ Equity
- Shareholders’ equity demonstrated a consistent upward trend throughout the period, increasing from 34,507 million USD in 2020 to 49,584 million USD in 2024. The growth rate appears steady year-over-year, indicating sustained value creation and possible retained earnings or capital injections contributing to strengthening the equity base.
- Invested Capital
- Invested capital experienced a marked increase from 61,158 million USD at the end of 2020 to a peak of 85,573 million USD in 2023. However, in 2024, it declined to 82,071 million USD. The growth in invested capital through most of the period indicates expansion or investment activities, while the slight downturn in the final year could reflect divestitures, asset write-downs, or a moderation in capital expenditures.
Cost of Capital
Thermo Fisher Scientific Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations3 | ÷ | = | × | × (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 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations3 | ÷ | = | × | × (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 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations3 | ÷ | = | × | × (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 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations3 | ÷ | = | × | × (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 Debt obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Thermo Fisher Scientific Inc., 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals 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.
- Economic Profit
- The economic profit demonstrated a consistent and significant decline over the five-year period, moving from a negative value of -308 million US dollars in 2020 to a progressively larger negative figure reaching -4,370 million US dollars in 2023 before slightly improving to -3,779 million US dollars in 2024. This suggests persistent challenges in generating returns above the cost of capital, with the deepest negative impact recorded in 2023.
- Invested Capital
- The invested capital exhibited an upward trend from 61,158 million US dollars in 2020 to a peak of 85,573 million US dollars in 2023, indicating substantial capital allocation into the business. However, in 2024, there was a decline to 82,071 million US dollars, which could suggest a strategic shift or capital optimization after several years of growth.
- Economic Spread Ratio
- The economic spread ratio, which reflects the difference between the return on invested capital and the cost of capital, showed a negative and deteriorating trend throughout the period. Starting at -0.5% in 2020, it worsened to -5.11% in 2023 before a slight recovery to -4.6% in 2024, indicating sustained underperformance relative to capital cost despite marginal improvement in the last year observed.
- Overall Insights
- The combined trends suggest that despite increasing capital investment, the company struggled to achieve returns exceeding its capital cost, resulting in persistent economic losses. The peak negative economic profit and spread in 2023 highlight a period of considerable financial inefficiency, while the improvements in 2024 may indicate initial efforts towards better capital utilization or profitability enhancement. Continuous negative economic spread warns of ongoing value destruction that requires strategic attention.
Economic Profit Margin
Thermo Fisher Scientific Inc., 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals 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 ÷ Revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Revenues
- Revenues exhibited a positive growth trend from 2020 to 2022, increasing from approximately 32.2 billion US dollars in 2020 to about 44.9 billion US dollars in 2022. However, in 2023, revenues experienced a decline to approximately 42.9 billion US dollars and then stabilized around the same level in 2024.
- Economic Profit
- The economic profit displayed a progressively worsening trend over the five-year period. Starting with a negative value of 308 million US dollars in 2020, the economic loss increased sharply in 2021 and 2022, reaching a low of about -4.37 billion US dollars in 2023. Although there was a slight improvement in 2024, the economic profit remained substantially negative at approximately -3.78 billion US dollars.
- Economic Profit Margin
- The economic profit margin, which reflects economic profit relative to revenues, also worsened during the period. It declined from -0.96% in 2020 to a low of -10.2% in 2023, before improving slightly to -8.81% in 2024. This trend indicates increasing inefficiency or rising costs relative to income, although with a marginal recovery in the final year.
- Overall Analysis
- The financial data reveal a scenario of revenue growth peaking in 2022, followed by a minor decline and stabilization. Despite growing or stabilized revenues, the economic profit and related margin deteriorated markedly, pointing to rising operational costs, expenses, or other economic factors negatively impacting profitability. The slight improvements in 2024 suggest some corrective measures or changes that mitigated economic losses but did not fully reverse the adverse trend.