Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Enphase Energy Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 521,640) | 575,824) | 255,560) | 132,831) | 168,136) | |
| Invested capital2 | 1,302,318) | 1,285,383) | 779,239) | 951,473) | 528,927) | |
| Performance Ratio | ||||||
| ROIC3 | 40.05% | 44.80% | 32.80% | 13.96% | 31.79% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -0.35% | -0.24% | 56.77% | — | — | |
| Analog Devices Inc. | 7.11% | 5.76% | 2.37% | 6.95% | — | |
| Applied Materials Inc. | 36.75% | 46.34% | 41.96% | 29.68% | — | |
| Broadcom Inc. | 23.04% | 20.75% | 10.98% | 4.78% | — | |
| Intel Corp. | -1.60% | 4.14% | 22.03% | — | — | |
| KLA Corp. | 40.63% | 42.51% | 31.64% | — | — | |
| Lam Research Corp. | 27.10% | 41.68% | 37.13% | — | — | |
| Marvell Technology Inc. | 0.17% | -1.91% | -2.75% | — | — | |
| Micron Technology Inc. | -11.18% | 17.39% | 13.01% | — | — | |
| NVIDIA Corp. | 10.91% | 53.12% | 33.44% | — | — | |
| Qualcomm Inc. | 18.69% | 45.12% | 42.56% | 27.48% | — | |
| Texas Instruments Inc. | 28.83% | 49.74% | 48.28% | — | — | |
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 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 521,640 ÷ 1,302,318 = 40.05%
4 Click competitor name to see calculations.
The financial trajectory between 2019 and 2023 indicates a period of significant expansion in both operational profitability and capital deployment, resulting in a generally positive trend in capital efficiency.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited substantial growth over the period, rising from 168,136 thousand US$ in 2019 to a peak of 575,824 thousand US$ in 2022. Despite a moderate decline to 521,640 thousand US$ in 2023, the five-year trend reflects a significant increase in the company's ability to generate operating earnings.
- Invested Capital
- The capital base expanded from 528,927 thousand US$ in 2019 to 1,302,318 thousand US$ by the end of 2023. A temporary contraction was observed in 2021, where invested capital decreased to 779,239 thousand US$, followed by a rapid increase in 2022 and 2023, suggesting a strategic scaling of the investment base to support operational growth.
- Return on Invested Capital (ROIC)
- ROIC demonstrated notable volatility followed by a strong recovery. A sharp decline to 13.96% in 2020 was reversed by a significant ascent, peaking at 44.80% in 2022. The 2023 figure of 40.05% indicates a slight normalization from the 2022 peak, yet remains substantially higher than the 2019 baseline of 31.79%.
The correlation between the increase in NOPAT and the expansion of invested capital suggests that the growth in the capital base was effectively leveraged to drive higher returns, particularly during the 2021 to 2022 period. The maintenance of an ROIC above 40% in the final two years indicates a high level of efficiency in converting invested capital into operating profit.
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Decomposition of ROIC
Enphase Energy Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
Return on invested capital (ROIC) exhibited significant volatility between 2019 and 2023, characterized by a sharp contraction in 2020 followed by a period of substantial expansion. After falling from 31.79% to 13.96%, ROIC recovered aggressively, peaking at 44.80% in 2022 before adjusting to 40.05% by the end of 2023.
- Operating Profit Margin
- Profitability experienced a decline in 2020 and 2021, with margins dropping to 18.24% and 18.64%, respectively. A strong recovery occurred in 2022, with the margin expanding to 25.68% and further increasing to 26.21% in 2023, indicating strengthened operational efficiency and improved cost management over the latter half of the period.
- Turnover of Capital
- Capital efficiency was the primary driver of the 2020 ROIC decline, as the turnover ratio fell sharply to 0.80. This was followed by a rapid acceleration in 2021 to 1.87, signaling a significantly more efficient utilization of invested capital to generate revenue. Turnover remained relatively stable and elevated through 2023, concluding at 1.85.
- Tax Effect
- The tax-adjusted component of the return decomposition shows a consistent downward trend. The value of 1 minus the effective cash tax rate decreased steadily from 97.87% in 2019 to 82.72% in 2023, indicating an increasing effective tax burden that has acted as a persistent headwind to total ROIC.
The synthesis of these components reveals that the surge in ROIC post-2020 was driven primarily by the combined impact of enhanced capital turnover and recovered operating margins. While tax efficiency declined consistently throughout the five-year period, the gains in operational productivity and asset utilization were sufficient to offset these headwinds and maintain a high level of return on invested capital.
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Operating Profit Margin (OPM)
Enphase Energy Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 521,640) | 575,824) | 255,560) | 132,831) | 168,136) | |
| Add: Cash operating taxes2 | 108,957) | 54,271) | 16,301) | 6,809) | 3,653) | |
| Net operating profit before taxes (NOPBT) | 630,598) | 630,095) | 271,861) | 139,640) | 171,789) | |
| 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) | |
| Profitability Ratio | ||||||
| OPM3 | 26.21% | 25.68% | 18.64% | 18.24% | 24.67% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 2.02% | 5.31% | 22.70% | — | — | |
| Analog Devices Inc. | 32.00% | 27.59% | 20.52% | 26.98% | — | |
| Applied Materials Inc. | 29.22% | 30.32% | 30.54% | 25.67% | — | |
| Broadcom Inc. | 45.19% | 42.94% | 30.96% | 17.06% | — | |
| Intel Corp. | -0.86% | 13.58% | 28.05% | — | — | |
| KLA Corp. | 39.78% | 41.73% | 36.39% | — | — | |
| Lam Research Corp. | 28.38% | 35.59% | 34.25% | — | — | |
| Marvell Technology Inc. | 4.55% | -7.16% | -8.08% | — | — | |
| Micron Technology Inc. | -36.91% | 31.43% | 23.10% | — | — | |
| NVIDIA Corp. | 15.97% | 37.99% | 28.45% | — | — | |
| Qualcomm Inc. | 21.48% | 35.06% | 30.10% | 24.17% | — | |
| Texas Instruments Inc. | 44.51% | 51.22% | 49.60% | — | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Adjusted net revenues
= 100 × 630,598 ÷ 2,405,898 = 26.21%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by substantial growth in both scale and operational efficiency, despite a period of margin compression in the early part of the window.
- Revenue Expansion
- Adjusted net revenues increased from 696.3 million USD in 2019 to a peak of 2.45 billion USD in 2022, representing a significant scaling of operations. A slight contraction occurred in 2023, with revenues adjusting to 2.41 billion USD.
- Net Operating Profit Growth
- Net operating profit before taxes (NOPBT) demonstrated an overall upward trajectory, rising from 171.8 million USD in 2019 to 630.6 million USD by 2023. A temporary decline was noted in 2020, where profit fell to 139.6 million USD, followed by a period of rapid acceleration between 2021 and 2022.
- Operating Profit Margin (OPM) Dynamics
- The operating profit margin experienced a notable decline from 24.67% in 2019 to 18.24% in 2020, remaining relatively stagnant at 18.64% in 2021. However, a strong recovery followed, with the margin expanding to 25.68% in 2022 and reaching 26.21% in 2023. This trend indicates that operational efficiency improved significantly in the latter years, allowing for the maintenance of record-high NOPBT levels even as revenues slightly decreased in the final year.
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Turnover of Capital (TO)
Enphase Energy Inc., TO 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) | ||||||
| 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) | |
| Invested capital1 | 1,302,318) | 1,285,383) | 779,239) | 951,473) | 528,927) | |
| Efficiency Ratio | ||||||
| TO2 | 1.85 | 1.91 | 1.87 | 0.80 | 1.32 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Advanced Micro Devices Inc. | 0.39 | 0.40 | 2.65 | — | — | |
| Analog Devices Inc. | 0.28 | 0.27 | 0.16 | 0.31 | — | |
| Applied Materials Inc. | 1.49 | 1.73 | 1.57 | 1.31 | — | |
| Broadcom Inc. | 0.57 | 0.53 | 0.42 | 0.36 | — | |
| Intel Corp. | 0.59 | 0.71 | 0.89 | — | — | |
| KLA Corp. | 1.26 | 1.18 | 1.01 | — | — | |
| Lam Research Corp. | 1.14 | 1.35 | 1.24 | — | — | |
| Marvell Technology Inc. | 0.30 | 0.22 | 0.33 | — | — | |
| Micron Technology Inc. | 0.29 | 0.59 | 0.61 | — | — | |
| NVIDIA Corp. | 1.26 | 1.49 | 1.28 | — | — | |
| Qualcomm Inc. | 1.14 | 1.50 | 1.66 | 1.33 | — | |
| Texas Instruments Inc. | 0.78 | 1.14 | 1.12 | — | — | |
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 Invested capital. See details »
2 2023 Calculation
TO = Adjusted net revenues ÷ Invested capital
= 2,405,898 ÷ 1,302,318 = 1.85
3 Click competitor name to see calculations.
An analysis of the financial performance between 2019 and 2023 reveals a significant expansion in revenue generation relative to the invested capital base, despite an initial period of volatility in capital efficiency.
- Adjusted Net Revenues
- A strong upward trajectory is observed from 2019 to 2022, with revenues increasing from US$ 696,290 thousand to a peak of US$ 2,453,357 thousand. This represents a substantial growth phase, followed by a slight contraction in 2023 to US$ 2,405,898 thousand, indicating a stabilization of top-line growth.
- Invested Capital
- The capital base experienced significant fluctuations. After an initial increase from US$ 528,927 thousand in 2019 to US$ 951,473 thousand in 2020, a contraction occurred in 2021 to US$ 779,239 thousand. Subsequently, invested capital rose sharply to US$ 1,285,383 thousand in 2022 and remained relatively stable at US$ 1,302,318 thousand by the end of 2023.
- Turnover of Capital (TO)
- The capital turnover ratio exhibits a non-linear trend. A notable decline is observed in 2020, where the ratio dropped to 0.80, coinciding with a surge in invested capital that outpaced revenue growth. However, a sharp recovery occurred in 2021, with the ratio climbing to 1.87. Efficiency peaked in 2022 at 1.91, demonstrating a high capacity to generate revenue from the employed capital. By 2023, the ratio moderated slightly to 1.85, reflecting the marginal decline in adjusted net revenues against a stable capital base.
The overall trend suggests that after a period of capital adjustment in 2020, the organization successfully scaled its operations, achieving a significantly higher level of asset productivity from 2021 onwards compared to the 2019 baseline.
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Effective Cash Tax Rate (CTR)
Enphase Energy Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 521,640) | 575,824) | 255,560) | 132,831) | 168,136) | |
| Add: Cash operating taxes2 | 108,957) | 54,271) | 16,301) | 6,809) | 3,653) | |
| Net operating profit before taxes (NOPBT) | 630,598) | 630,095) | 271,861) | 139,640) | 171,789) | |
| Tax Rate | ||||||
| CTR3 | 17.28% | 8.61% | 6.00% | 4.88% | 2.13% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 143.92% | 111.01% | 5.73% | — | — | |
| Analog Devices Inc. | 20.23% | 21.73% | 25.70% | 16.31% | — | |
| Applied Materials Inc. | 15.68% | 11.76% | 12.33% | 12.01% | — | |
| Broadcom Inc. | 10.78% | 9.59% | 16.50% | 22.68% | — | |
| Intel Corp. | — | 57.13% | 12.07% | — | — | |
| KLA Corp. | 18.86% | 13.88% | 14.30% | — | — | |
| Lam Research Corp. | 16.15% | 13.55% | 12.57% | — | — | |
| Marvell Technology Inc. | 87.58% | — | — | — | — | |
| Micron Technology Inc. | — | 6.35% | 6.93% | — | — | |
| NVIDIA Corp. | 45.94% | 6.28% | 8.10% | — | — | |
| Qualcomm Inc. | 23.51% | 14.27% | 14.84% | 14.19% | — | |
| Texas Instruments Inc. | 16.49% | 14.83% | 12.93% | — | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 108,957 ÷ 630,598 = 17.28%
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2019 to 2023 reveals a systemic and accelerating increase in the effective cash tax rate (CTR), which rose from 2.13% to 17.28%. This trajectory indicates a substantial increase in the cash tax burden relative to the generated operating profits over the five-year period.
- Cash Operating Taxes Trend
- Cash operating taxes experienced exponential growth, increasing from US$ 3,653 thousand in 2019 to US$ 108,957 thousand in 2023. The most aggressive expansion occurred between 2021 and 2023, during which cash tax payments increased by approximately 570%.
- Net Operating Profit Before Taxes (NOPBT) Dynamics
- NOPBT exhibited a general upward trend, growing from US$ 171,789 thousand in 2019 to US$ 630,598 thousand in 2023. While there was a slight contraction in 2020, the figure saw a sharp ascent through 2022, after which profit growth plateaued, remaining nearly stagnant between the 2022 and 2023 fiscal years.
- Effective Cash Tax Rate (CTR) Correlation
- The CTR demonstrated a steady climb from 2019 through 2022, moving from 2.13% to 8.61%. A critical divergence is observed in 2023; while NOPBT remained virtually unchanged compared to the previous year, cash operating taxes nearly doubled. This resulted in a sharp spike in the CTR to 17.28%, suggesting that the growth in tax outflows has decoupled from the growth in operating profitability.
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