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
Enphase Energy Inc., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 521,640 – 21.87% × 1,302,318 = 236,770
The financial trajectory from 2019 to 2023 reflects a period of volatility followed by substantial value creation. While the period was marked by a temporary dip into negative economic profit, the overall trend demonstrates a significant expansion in the ability to generate returns exceeding the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A fluctuating but generally upward trend is observed in NOPAT. After a decline in 2020 to US$ 132.8 million, NOPAT experienced accelerated growth, peaking at US$ 575.8 million in 2022 before a slight correction to US$ 521.6 million in 2023. This growth indicates a strong increase in core operational profitability over the five-year period.
- Cost of Capital and Invested Capital
- The cost of capital remained remarkably stable, fluctuating narrowly between 21.85% and 22.75%. Concurrently, invested capital grew from US$ 528.9 million in 2019 to US$ 1.30 billion by 2023. Despite a temporary reduction in invested capital in 2021, the long-term trend shows an expansion of the capital base to support operational scaling.
- Economic Profit
- Economic profit exhibited significant volatility, shifting from a positive US$ 47.8 million in 2019 to a deficit of US$ 78.2 million in 2020, signifying a period of value destruction where NOPAT failed to cover the capital charge. A strong recovery followed, with economic profit surging to a peak of US$ 291.9 million in 2022. Although there was a moderate decline to US$ 236.8 million in 2023, the company maintained a positive economic profit, confirming the creation of shareholder value.
The synthesis of these metrics reveals that the increase in economic profit was primarily driven by the rapid growth in NOPAT, which outpaced the expansion of invested capital and the relatively stagnant cost of capital. The transition from negative to strongly positive economic profit suggests an improvement in capital efficiency and operational leverage.
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Net Operating Profit after Taxes (NOPAT)
Enphase Energy Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in warranty obligations.
5 Addition of increase (decrease) in liabilities related to restructuring activities.
6 Addition of increase (decrease) in equity equivalents to net income.
7 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 24,022 × 7.00% = 1,682
8 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 10,521 × 21.00% = 2,209
9 Addition of after taxes interest expense to net income.
10 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 69,728 × 21.00% = 14,643
11 Elimination of after taxes investment income.
The financial performance from 2019 to 2023 demonstrates a general upward trajectory in both profitability metrics, despite an initial contraction in 2020. Significant expansion is evident between 2021 and 2022, indicating a period of rapid growth in both operational and net earnings.
- Net Income Trends
- Net income experienced a decrease in 2020, falling to 133,995 thousand USD. A robust recovery followed, with a substantial surge in 2022 to 397,362 thousand USD and a further increase to 438,936 thousand USD by the end of 2023. This represents an overall growth trend characterized by accelerating gains in the latter half of the analyzed period.
- Net Operating Profit After Taxes (NOPAT) Performance
- NOPAT mirrored the 2020 decline, dropping to 132,831 thousand USD. A sharp acceleration began in 2021, with NOPAT reaching a peak of 575,824 thousand USD in 2022. Unlike net income, NOPAT observed a moderate decline in 2023, decreasing to 521,640 thousand USD.
- Operating vs. Net Profitability Divergence
- A notable divergence occurred between 2022 and 2023. While net income continued to grow during this interval, NOPAT decreased. This suggests that the 2023 increase in net income was influenced by non-operating factors, whereas the peak of core operating profitability was achieved in 2022.
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Cash Operating Taxes
Enphase Energy Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
The analysis of tax-related outflows from 2019 to 2023 reveals a significant transition in the financial profile, characterized by a shift from tax-benefit positions to substantial cash tax obligations. There is a clear and accelerating upward trend in both the accounting provision for income taxes and the actual cash taxes paid during operations.
- Cash Operating Taxes Growth
- A consistent and exponential increase in cash operating taxes is observed over the five-year period. Payments grew from US$ 3,653 thousand in 2019 to US$ 108,957 thousand by December 31, 2023. The most pronounced acceleration occurred between 2021 and 2023, where cash outflows increased from US$ 16,301 thousand to over US$ 108 million, reflecting a sharp rise in taxable cash-generating activities.
- Income Tax Provision Transition
- The income tax provision underwent a fundamental reversal between 2019 and 2023. From 2019 through 2021, the company recorded tax benefits, with the largest benefit of US$ 71,034 thousand occurring in 2019. This trend reversed in 2022, as the company began recording positive tax provisions, which reached US$ 74,203 thousand in 2023, signaling a transition to sustained accounting profitability.
- Correlation Between Provisions and Cash Outflows
- A notable divergence is observed between the accrual-based tax provision and actual cash payments. While the company recorded tax benefits in the income statement from 2019 to 2021, cash operating taxes remained positive, albeit at lower levels. By 2023, cash operating taxes significantly exceeded the income tax provision, with cash payments reaching US$ 108,957 thousand against a provision of US$ 74,203 thousand, indicating that cash tax obligations surpassed the current year's accounting expense.
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Invested Capital
Enphase Energy Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2019-12-31).
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 deferred revenues.
5 Addition of warranty obligations.
6 Addition of liabilities related to restructuring activities.
7 Addition of equity equivalents to stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in process.
10 Subtraction of marketable securities.
The total invested capital exhibited a significant overall growth trajectory from 2019 to 2023, expanding from 528.9 million US dollars to 1.3 billion US dollars. This expansion indicates a substantial increase in the capital base utilized to generate economic value, though the growth pattern was characterized by a period of volatility between 2020 and 2022.
- Debt and Lease Obligations
- A rapid escalation in total reported debt and leases is observed, growing from 118.3 million US dollars in 2019 to 1.3 billion US dollars by the end of 2023. The most aggressive increase occurred between 2020 and 2021, during which debt obligations more than tripled. By 2023, the growth in debt had largely stabilized, showing minimal change from the 2022 level.
- Stockholders' Equity
- Equity grew from 272.2 million US dollars in 2019 to 983.6 million US dollars in 2023. A slight contraction was noted in 2021, where equity decreased to 430.2 million US dollars from 484.0 million US dollars the previous year. However, this was followed by a sharp recovery and growth phase in 2022 and 2023, nearly doubling the equity base between 2021 and 2023.
- Invested Capital Dynamics
- Invested capital followed a non-linear progression. After an initial surge to 951.5 million US dollars in 2020, a contraction to 779.2 million US dollars occurred in 2021. This decline is notable as it happened despite a concurrent increase in total debt, suggesting a significant shift in the underlying capital structure or balance sheet adjustments. The capital base then expanded rapidly to reach 1.3 billion US dollars by 2023, driven by simultaneous increases in both debt and equity during the 2022 period.
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Cost of Capital
Enphase Energy Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,626,446) | 16,626,446) | ÷ | 17,878,768) | = | 0.93 | 0.93 | × | 23.24% | = | 21.61% | ||
| Debt3 | 1,228,300) | 1,228,300) | ÷ | 17,878,768) | = | 0.07 | 0.07 | × | 4.64% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 24,022) | 24,022) | ÷ | 17,878,768) | = | 0.00 | 0.00 | × | 7.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 17,878,768) | 1.00 | 21.87% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,015,256) | 29,015,256) | ÷ | 30,840,481) | = | 0.94 | 0.94 | × | 23.24% | = | 21.87% | ||
| Debt3 | 1,800,777) | 1,800,777) | ÷ | 30,840,481) | = | 0.06 | 0.06 | × | 4.64% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 24,448) | 24,448) | ÷ | 30,840,481) | = | 0.00 | 0.00 | × | 6.50% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 30,840,481) | 1.00 | 22.09% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,513,074) | 19,513,074) | ÷ | 21,010,462) | = | 0.93 | 0.93 | × | 23.24% | = | 21.59% | ||
| Debt3 | 1,481,638) | 1,481,638) | ÷ | 21,010,462) | = | 0.07 | 0.07 | × | 4.63% × (1 – 21.00%) | = | 0.26% | ||
| Operating lease liability4 | 15,750) | 15,750) | ÷ | 21,010,462) | = | 0.00 | 0.00 | × | 7.40% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 21,010,462) | 1.00 | 21.85% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,965,624) | 24,965,624) | ÷ | 26,464,798) | = | 0.94 | 0.94 | × | 23.24% | = | 21.93% | ||
| Debt3 | 1,479,423) | 1,479,423) | ÷ | 26,464,798) | = | 0.06 | 0.06 | × | 5.70% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 19,751) | 19,751) | ÷ | 26,464,798) | = | 0.00 | 0.00 | × | 7.70% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 26,464,798) | 1.00 | 22.18% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 7,278,663) | 7,278,663) | ÷ | 7,491,633) | = | 0.97 | 0.97 | × | 23.24% | = | 22.58% | ||
| Debt3 | 200,258) | 200,258) | ÷ | 7,491,633) | = | 0.03 | 0.03 | × | 7.57% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 12,712) | 12,712) | ÷ | 7,491,633) | = | 0.00 | 0.00 | × | 8.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 7,491,633) | 1.00 | 22.75% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Enphase Energy Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 236,770) | 291,942) | 85,306) | (78,230) | 47,787) | |
| Invested capital2 | 1,302,318) | 1,285,383) | 779,239) | 951,473) | 528,927) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 18.18% | 22.71% | 10.95% | -8.22% | 9.03% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -29.12% | -28.73% | 27.84% | — | — | |
| Analog Devices Inc. | -10.08% | -11.45% | -14.69% | -9.63% | — | |
| Applied Materials Inc. | 13.17% | 23.15% | 18.63% | 6.98% | — | |
| Broadcom Inc. | 4.82% | 3.57% | -5.66% | -10.88% | — | |
| Intel Corp. | -19.94% | -13.15% | 3.44% | — | — | |
| KLA Corp. | 20.05% | 22.45% | 10.91% | — | — | |
| Lam Research Corp. | 2.15% | 17.18% | 12.51% | — | — | |
| Marvell Technology Inc. | -22.31% | -25.08% | -26.81% | — | — | |
| Micron Technology Inc. | -38.30% | -10.78% | -15.51% | — | — | |
| NVIDIA Corp. | -16.34% | 25.86% | 6.34% | — | — | |
| Qualcomm Inc. | 0.15% | 26.59% | 23.99% | 9.06% | — | |
| Texas Instruments Inc. | 12.32% | 32.90% | 31.53% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 236,770 ÷ 1,302,318 = 18.18%
4 Click competitor name to see calculations.
An analysis of the company's economic value creation from 2019 to 2023 reveals a period of initial volatility followed by a substantial increase in capital efficiency and absolute economic profit.
- Economic Profit Trends
- Economic profit exhibited significant fluctuations, starting at $47.79 million in 2019 before falling to a deficit of $78.23 million in 2020. A strong recovery followed, with profit increasing to $85.31 million in 2021 and peaking at $291.94 million in 2022. A slight moderation occurred in 2023, with profit ending at $236.77 million, though this remains significantly above the levels observed at the start of the period.
- Invested Capital Dynamics
- The capital base expanded considerably over the five-year period. Invested capital rose from $528.93 million in 2019 to $1.30 billion by 2023. While a temporary contraction was observed in 2021, the overall trend indicates a sustained increase in the scale of investments utilized to support operations.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects a volatile but ultimately positive trajectory. After a decline to -8.22% in 2020, indicating that the return on capital was below the cost of capital, the ratio rebounded to 10.95% in 2021 and reached a peak of 22.71% in 2022. The 2023 ratio of 18.18% demonstrates a continued ability to generate returns well above the cost of capital, despite the moderate decrease from the prior year's high.
The correlation between the growth in invested capital and the surge in the economic spread ratio suggests that the capital deployments between 2020 and 2022 were highly effective in driving value creation. The transition from a negative spread in 2020 to a peak in 2022 indicates a successful shift from value destruction to high-efficiency wealth generation.
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Economic Profit Margin
Enphase Energy Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 236,770) | 291,942) | 85,306) | (78,230) | 47,787) | |
| Net revenues | 2,290,786) | 2,330,853) | 1,382,049) | 774,425) | 624,333) | |
| Add: Increase (decrease) in deferred revenues | 115,112) | 122,504) | 76,718) | (8,849) | 71,957) | |
| Adjusted net revenues | 2,405,898) | 2,453,357) | 1,458,767) | 765,576) | 696,290) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 9.84% | 11.90% | 5.85% | -10.22% | 6.86% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -74.32% | -71.26% | 10.49% | — | — | |
| Analog Devices Inc. | -36.21% | -42.90% | -94.37% | -31.30% | — | |
| Applied Materials Inc. | 8.83% | 13.37% | 11.89% | 5.31% | — | |
| Broadcom Inc. | 8.44% | 6.68% | -13.34% | -30.05% | — | |
| Intel Corp. | -33.86% | -18.50% | 3.85% | — | — | |
| KLA Corp. | 15.93% | 18.98% | 10.75% | — | — | |
| Lam Research Corp. | 1.89% | 12.68% | 10.09% | — | — | |
| Marvell Technology Inc. | -75.41% | -111.94% | -82.30% | — | — | |
| Micron Technology Inc. | -130.14% | -18.25% | -25.63% | — | — | |
| NVIDIA Corp. | -12.92% | 17.34% | 4.95% | — | — | |
| Qualcomm Inc. | 0.13% | 17.71% | 14.45% | 6.83% | — | |
| Texas Instruments Inc. | 15.89% | 28.85% | 28.21% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × 236,770 ÷ 2,405,898 = 9.84%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a period of volatility followed by significant expansion and a subsequent moderation. Between 2019 and 2023, the organization transitioned from positive economic profit to a deficit, followed by a phase of rapid value creation that peaked in 2022 before experiencing a slight contraction in 2023.
- Economic Profit Trends
- Economic profit shifted from US$ 47.79 million in 2019 to a deficit of US$ 78.23 million in 2020. A sharp recovery occurred thereafter, with profit ascending to US$ 85.31 million in 2021 and reaching a peak of US$ 291.94 million in 2022. By the end of 2023, economic profit moderated to US$ 236.77 million.
- Adjusted Net Revenue Growth
- Revenues exhibited a strong upward trajectory from 2019 to 2022, increasing from US$ 696.29 million to a peak of US$ 2.45 billion. This substantial expansion of the operational scale suggests aggressive market growth, which stabilized in 2023 with a marginal decrease to US$ 2.41 billion.
- Economic Profit Margin Analysis
- The economic profit margin highlights the efficiency of value generation relative to revenue. After a decline to -10.22% in 2020, the margin recovered to 5.85% in 2021 and reached its highest point of 11.90% in 2022. The subsequent decline to 9.84% in 2023 indicates a reduction in the rate of value creation per dollar of revenue, aligning with the plateau in adjusted net revenues.
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