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
First Solar 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
= 1,542,086 – 22.14% × 7,840,426 = -194,086
The financial trajectory from 2019 to 2023 indicates a consistent narrowing of economic losses, reflecting a significant improvement in operational efficiency and profitability. Although economic profit remained negative throughout the period, there is a clear trend toward value creation as the gap between net operating profit after taxes (NOPAT) and the cost of capital charge continues to shrink.
- Net Operating Profit After Taxes (NOPAT)
- A substantial and accelerating growth trend is observed in NOPAT, which transitioned from a deficit of US$ 94.5 million in 2019 to a surplus of US$ 1.54 billion by 2023. This represents a consistent year-over-year increase, with the most significant jump occurring between 2022 and 2023, where operating profits nearly doubled.
- Cost of Capital
- The cost of capital has remained relatively stable, fluctuating within a narrow range between 20.75% and 22.58%. While there was a slight upward trend peaking in 2022, the rate normalized slightly to 22.14% in 2023. This stability indicates that the overall risk profile and funding costs have remained consistent despite significant changes in operational scale.
- Invested Capital
- Invested capital exhibited moderate growth between 2019 and 2021, followed by a slight contraction in 2022 to US$ 5.05 billion. However, a significant capital injection occurred in 2023, with invested capital rising to US$ 7.84 billion. This sharp increase suggests an aggressive expansion of the asset base to support the growth in operating profits.
- Economic Profit Convergence
- Economic profit has improved steadily from a loss of US$ 1.11 billion in 2019 to a loss of US$ 194.1 million in 2023. The reduction in economic loss is primarily driven by the rapid growth in NOPAT, which has outpaced the increase in the capital charge. While the company has not yet achieved a positive economic profit—meaning the return on invested capital remains below the cost of capital—the current trajectory suggests a convergence toward positive economic value added.
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Net Operating Profit after Taxes (NOPAT)
First Solar 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 credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in equity equivalents to net income (loss).
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 46,969 × 5.20% = 2,442
7 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 15,407 × 21.00% = 3,236
8 Addition of after taxes interest expense to net income (loss).
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 97,658 × 21.00% = 20,508
10 Elimination of after taxes investment income.
The financial performance of First Solar Inc. from 2019 to 2023 is characterized by a significant divergence between core operational profitability and net income. While net income has exhibited considerable volatility, the net operating profit after taxes (NOPAT) has demonstrated a consistent and strong upward trajectory over the five-year period.
- Net Operating Profit After Taxes (NOPAT) Trends
- A sustained growth pattern is evident in NOPAT, which increased from a negative US$ 94,458 thousand in 2019 to US$ 1,542,086 thousand by the end of 2023. The most significant acceleration occurred between 2022 and 2023, where NOPAT nearly doubled from US$ 826,891 thousand to US$ 1,542,086 thousand, indicating a substantial increase in the efficiency and profitability of core business operations.
- Net Income Volatility
- Net income experienced fluctuations, recording losses in 2019 (US$ 114,933 thousand) and 2022 (US$ 44,166 thousand). This volatility contrasts sharply with the steady growth of NOPAT. However, a strong recovery was observed in 2023, with net income reaching US$ 830,777 thousand, the highest value in the analyzed period.
- Operational versus Bottom-Line Divergence
- A notable discrepancy is observed in 2022, where net income fell into negative territory despite NOPAT continuing its growth to US$ 826,891 thousand. This suggests that the losses recorded in the net income for that period were driven by non-operating factors—such as financing costs, tax adjustments, or non-recurring items—rather than a decline in operational performance. The widening gap between NOPAT and net income underscores the strength of the core operational engine relative to overall accounting profit.
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Cash Operating Taxes
First Solar 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 cash flows and accounting expenses reveals a period of significant volatility followed by a phase of stabilization between 2019 and 2023. The relationship between accrual-based tax expenses and actual cash operating taxes shifted from substantial benefits to consistent outflows, indicating a transition in the entity's taxable position.
- Cash Operating Tax Volatility
- A significant fluctuation is observed in 2020, where cash operating taxes recorded a negative value of 119.2 million, representing a substantial cash benefit or tax refund. This represents a sharp reversal from 2019, where cash payments totaled 42.9 million. From 2021 onward, a recovery trend is evident, with cash payments returning to positive territory at 23.0 million and increasing to 56.5 million by the end of 2023.
- Accrual versus Cash Tax Divergence
- Income tax expenses largely mirrored the volatility seen in cash taxes during the 2019-2020 period, specifically with the significant benefit of 107.3 million recorded in 2020. However, a notable divergence occurred in 2021, where the income tax expense reached 103.5 million while the actual cash operating tax payment remained relatively low at 23.0 million. This indicates a period where accounting tax provisions significantly exceeded actual cash outflows.
- Convergence and Stabilization
- A trend toward convergence is observed in the final two years of the analyzed period. In 2022 and 2023, the figures for income tax expense (52.8 million and 60.5 million) and cash operating taxes (54.9 million and 56.5 million) aligned closely. This stabilization suggests that the accounting tax provisions have become more reflective of the actual cash taxes paid, pointing to a more predictable and steady tax environment.
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Invested Capital
First Solar 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 revenue.
5 Addition of product warranty liability.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities and restricted marketable securities.
The capital structure experienced significant shifts between 2019 and 2023, characterized by an initial period of deleveraging followed by a substantial expansion of the capital base in the final year.
- Total Reported Debt and Leases
- A consistent downward trend was observed from 2019 through 2022, with debt levels declining from 595,314 thousand US$ to a period low of 234,131 thousand US$. This trajectory reversed sharply in 2023, with debt increasing to 624,389 thousand US$, the highest level recorded in the five-year period.
- Stockholders' Equity
- Equity maintained a generally positive trajectory, rising from 5,096,767 thousand US$ in 2019 to 6,687,469 thousand US$ by 2023. Despite a slight contraction in 2022, the overall growth indicates a strengthening of the equity base over the long term.
- Invested Capital
- Invested capital grew steadily from 4,894,577 thousand US$ in 2019 to a peak of 5,692,249 thousand US$ in 2021. A contraction occurred in 2022, reducing the figure to 5,054,301 thousand US$, before a significant surge in 2023 brought the total to 7,840,426 thousand US$. This final increase suggests a substantial deployment of resources, driven by both the spike in debt and the increase in stockholders' equity.
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Cost of Capital
First Solar Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,492,026) | 15,492,026) | ÷ | 16,069,951) | = | 0.96 | 0.96 | × | 22.79% | = | 21.97% | ||
| Debt and finance lease liabilities3 | 530,956) | 530,956) | ÷ | 16,069,951) | = | 0.03 | 0.03 | × | 6.04% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 46,969) | 46,969) | ÷ | 16,069,951) | = | 0.00 | 0.00 | × | 5.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 16,069,951) | 1.00 | 22.14% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,031,862) | 18,031,862) | ÷ | 18,242,630) | = | 0.99 | 0.99 | × | 22.79% | = | 22.53% | ||
| Debt and finance lease liabilities3 | 160,986) | 160,986) | ÷ | 18,242,630) | = | 0.01 | 0.01 | × | 4.96% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 49,782) | 49,782) | ÷ | 18,242,630) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 18,242,630) | 1.00 | 22.58% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,040,959) | 8,040,959) | ÷ | 8,443,517) | = | 0.95 | 0.95 | × | 22.79% | = | 21.71% | ||
| Debt and finance lease liabilities3 | 243,865) | 243,865) | ÷ | 8,443,517) | = | 0.03 | 0.03 | × | 2.80% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 158,693) | 158,693) | ÷ | 8,443,517) | = | 0.02 | 0.02 | × | 2.80% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 8,443,517) | 1.00 | 21.81% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,587,018) | 8,587,018) | ÷ | 9,087,134) | = | 0.94 | 0.94 | × | 22.79% | = | 21.54% | ||
| Debt and finance lease liabilities3 | 297,076) | 297,076) | ÷ | 9,087,134) | = | 0.03 | 0.03 | × | 2.90% × (1 – 21.00%) | = | 0.07% | ||
| Operating lease liability4 | 203,040) | 203,040) | ÷ | 9,087,134) | = | 0.02 | 0.02 | × | 2.90% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 9,087,134) | 1.00 | 21.67% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,335,103) | 5,335,103) | ÷ | 5,962,933) | = | 0.89 | 0.89 | × | 22.79% | = | 20.39% | ||
| Debt and finance lease liabilities3 | 504,213) | 504,213) | ÷ | 5,962,933) | = | 0.08 | 0.08 | × | 4.30% × (1 – 21.00%) | = | 0.29% | ||
| Operating lease liability4 | 123,617) | 123,617) | ÷ | 5,962,933) | = | 0.02 | 0.02 | × | 4.30% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 5,962,933) | 1.00 | 20.75% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
First Solar 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 | (194,086) | (314,176) | (673,643) | (893,047) | (1,110,164) | |
| Invested capital2 | 7,840,426) | 5,054,301) | 5,692,249) | 5,111,222) | 4,894,577) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.48% | -6.22% | -11.83% | -17.47% | -22.68% | |
| 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 × -194,086 ÷ 7,840,426 = -2.48%
4 Click competitor name to see calculations.
The financial performance of First Solar Inc. between 2019 and 2023 demonstrates a consistent trajectory toward economic value creation. While the company operated with negative economic profit throughout the analyzed period, the magnitude of these losses decreased steadily, indicating a narrowing gap between the return on invested capital and the cost of capital.
- Economic Profit Trends
- A progressive reduction in economic losses is observed, with economic profit moving from -1,110,164 thousand US$ in 2019 to -194,086 thousand US$ in 2023. This continuous improvement suggests a sustained recovery in the company's ability to generate returns relative to its capital costs over the five-year window.
- Invested Capital Dynamics
- Invested capital exhibited a general upward trend, rising from 4,894,577 thousand US$ in 2019 to 7,840,426 thousand US$ in 2023. Despite a temporary contraction in 2022 to 5,054,301 thousand US$, a substantial increase occurred in 2023, indicating a significant expansion of the capital base in the final year of the period.
- Economic Spread Ratio Analysis
- The economic spread ratio showed a significant positive trend, improving from -22.68% in 2019 to -2.48% in 2023. This consistent contraction of the negative spread indicates that the company is approaching a break-even point where the return on invested capital equals the cost of capital, reflecting increased operational efficiency and better capital utilization.
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Economic Profit Margin
First Solar Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (194,086) | (314,176) | (673,643) | (893,047) | (1,110,164) | |
| Net sales | 3,318,602) | 2,619,319) | 2,923,377) | 2,711,332) | 3,063,117) | |
| Add: Increase (decrease) in deferred revenue | 797,243) | 910,129) | 64,079) | (160,923) | 216,886) | |
| Adjusted net sales | 4,115,845) | 3,529,448) | 2,987,456) | 2,550,409) | 3,280,003) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -4.72% | -8.90% | -22.55% | -35.02% | -33.85% | |
| 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 sales
= 100 × -194,086 ÷ 4,115,845 = -4.72%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2019 to 2023 reveals a consistent trajectory toward economic profitability. While the company has operated with a negative economic profit throughout the period, there is a significant and steady reduction in the magnitude of these losses, suggesting a strengthening of the underlying economic value generation.
- Economic Profit Trend
- A sustained improvement in economic profit is observed, with losses narrowing from -1,110,164 thousand USD in 2019 to -194,086 thousand USD by 2023. This trend indicates a progressive reduction in the gap between the net operating profit after tax and the cost of capital employed.
- Adjusted Net Sales Performance
- Adjusted net sales exhibited a volatile but generally upward trend. After a contraction in 2020 to 2,550,409 thousand USD, sales grew consistently each subsequent year, reaching 4,115,845 thousand USD in 2023. This represents a recovery and expansion of the revenue base, which has supported the improvement in economic value.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates a marked recovery, moving from -33.85% in 2019 to -4.72% in 2023. The most significant margin compression occurred between 2021 and 2023, where the margin improved from -22.55% to -4.72%. This suggests that the company is becoming significantly more efficient at generating returns relative to its sales volume, moving closer to the economic break-even point.
The convergence of increasing adjusted net sales and a sharply improving economic profit margin indicates a positive shift in financial efficiency. The reduction in economic losses over the five-year period reflects a strategic alignment where the returns on invested capital are increasingly approaching the required cost of capital.
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