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)
First Solar 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 | 1,542,086) | 826,891) | 567,988) | 214,327) | (94,458) | |
| Invested capital2 | 7,840,426) | 5,054,301) | 5,692,249) | 5,111,222) | 4,894,577) | |
| Performance Ratio | ||||||
| ROIC3 | 19.67% | 16.36% | 9.98% | 4.19% | -1.93% | |
| 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 × 1,542,086 ÷ 7,840,426 = 19.67%
4 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 demonstrates a consistent and significant improvement in capital efficiency, characterized by a steady ascent in the Return on Invested Capital (ROIC).
- Net Operating Profit After Taxes (NOPAT)
- A strong positive trend is observed in NOPAT, which transitioned from a deficit of 94.46 million USD in 2019 to a surplus of 1.54 billion USD by 2023. The growth accelerated notably in the final year of the period, where NOPAT nearly doubled compared to 2022 levels.
- Invested Capital
- Invested capital exhibited moderate growth and some volatility between 2019 and 2022, fluctuating within the 4.8 billion to 5.7 billion USD range. A substantial expansion occurred in 2023, with invested capital increasing to 7.84 billion USD, suggesting a significant deployment of resources to support operational growth.
- Return on Invested Capital (ROIC)
- ROIC shifted from a negative return of -1.93% in 2019 to a positive 19.67% in 2023. The consistent annual increase indicates that the growth in operational profitability has significantly outpaced the increase in the capital base. Even with the sharp rise in invested capital in 2023, the simultaneous surge in NOPAT ensured that the overall rate of return continued to climb.
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Decomposition of ROIC
First Solar 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 »
The Return on Invested Capital (ROIC) exhibits a consistent and significant upward trajectory over the five-year period, transitioning from a negative value of -1.93% in 2019 to 19.67% by the end of 2023. This expansion indicates a substantial improvement in the company's ability to generate returns from its invested capital base.
- Operating Profit Margin (OPM)
- The operating profit margin serves as the primary catalyst for the increase in ROIC. A strong growth pattern is observed, moving from a deficit of -1.57% in 2019 to a peak of 38.84% in 2023. The most aggressive expansion occurred between 2020 and 2021, where the margin increased from 3.73% to 19.78%, reflecting a significant enhancement in operational efficiency and pricing power.
- Turnover of Capital (TO)
- In contrast to the profit margin, the turnover of capital demonstrates a fluctuating and non-linear trend. The ratio decreased from 0.67 in 2019 to 0.50 in 2020, experienced a moderate peak of 0.70 in 2022, and returned to 0.52 in 2023. This stability suggests that the overall increase in ROIC was not driven by increased asset utilization or higher sales volume relative to the capital base, but rather by profitability per unit of sale.
- Effective Cash Tax Rate (CTR) Impact
- The factor representing 1 minus the effective cash tax rate remained relatively stable between 93.77% and 96.47% for the majority of the period. A notable anomaly occurred in 2020, where the value reached 225.42%, suggesting significant tax credits or deferred tax assets that temporarily inflated the after-tax return. Despite this volatility in 2020, the tax component had a secondary impact on the long-term ROIC trend compared to operating performance.
- ROIC Decomposition Summary
- The decomposition reveals that the growth in ROIC is almost exclusively driven by the expansion of the operating profit margin. While capital turnover remained stagnant or volatile and the tax effect remained largely neutral after 2020, the dramatic shift from negative to high positive operating margins shifted the ROIC from a value-destructive state to a value-creative state.
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Operating Profit Margin (OPM)
First Solar 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 | 1,542,086) | 826,891) | 567,988) | 214,327) | (94,458) | |
| Add: Cash operating taxes2 | 56,472) | 54,928) | 23,041) | (119,248) | 42,935) | |
| Net operating profit before taxes (NOPBT) | 1,598,558) | 881,819) | 591,028) | 95,079) | (51,523) | |
| 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) | |
| Profitability Ratio | ||||||
| OPM3 | 38.84% | 24.98% | 19.78% | 3.73% | -1.57% | |
| 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 sales
= 100 × 1,598,558 ÷ 4,115,845 = 38.84%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by a significant transition from operational losses to substantial profitability. This period reflects a strong upward trajectory in both absolute profit figures and efficiency ratios, indicating a successful scaling of operations and an improvement in cost management.
- Net Operating Profit Before Taxes (NOPBT)
- A consistent and aggressive growth trend is observed in NOPBT. Starting from a deficit of 51.5 million USD in 2019, the figure turned positive in 2020 and experienced exponential growth thereafter, reaching approximately 1.6 billion USD by 2023. The most pronounced acceleration occurred between 2020 and 2021, where profit increased more than sixfold.
- Adjusted Net Sales
- Revenue patterns show initial volatility followed by steady growth. After a decline from 3.28 billion USD in 2019 to 2.55 billion USD in 2020, adjusted net sales recovered and grew consistently over the next three years, ending at 4.12 billion USD in 2023. This suggests a recovery of market position and an expansion of the top line.
- Operating Profit Margin (OPM)
- The OPM demonstrates a continuous and sharp expansion, moving from a negative 1.57% in 2019 to 38.84% in 2023. The margin improved by more than 40 percentage points over the five-year period. The fact that the OPM grew at a significantly faster rate than net sales indicates substantial gains in operational efficiency, better pricing power, or a reduction in the relative cost of goods sold.
In summary, the data reveals a high degree of operational leverage. The capacity to convert increasing sales into disproportionately higher operating profits has resulted in a profound strengthening of the company's profitability profile.
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Turnover of Capital (TO)
First Solar 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 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) | |
| Invested capital1 | 7,840,426) | 5,054,301) | 5,692,249) | 5,111,222) | 4,894,577) | |
| Efficiency Ratio | ||||||
| TO2 | 0.52 | 0.70 | 0.52 | 0.50 | 0.67 | |
| 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 sales ÷ Invested capital
= 4,115,845 ÷ 7,840,426 = 0.52
3 Click competitor name to see calculations.
The capital turnover ratio demonstrates significant volatility over the observed five-year period, reflecting a fluctuating relationship between the growth of adjusted net sales and the scale of invested capital. While revenue has followed a generally positive growth trajectory since 2020, the efficiency of capital utilization has not trended linearly, resulting in a cyclical pattern of efficiency gains and losses.
- Revenue Generation Trends
- Adjusted net sales experienced a contraction in 2020, falling to US$ 2,550,409 thousand from US$ 3,280,003 thousand in 2019. However, a consistent recovery and expansion phase followed, with sales increasing annually to reach a peak of US$ 4,115,845 thousand by December 31, 2023. This represents a substantial increase in top-line performance over the final four years of the period.
- Invested Capital Dynamics
- Invested capital showed a general upward trend, with a notable exception in 2022. After increasing from US$ 4,894,577 thousand in 2019 to US$ 5,692,249 thousand in 2021, capital decreased to US$ 5,054,301 thousand in 2022. This was followed by a sharp expansion in 2023, where invested capital rose to US$ 7,840,426 thousand, indicating a significant increase in the asset base or funding requirements.
- Turnover of Capital Analysis
- The turnover of capital ratio fluctuated between a low of 0.50 and a high of 0.70. A peak in efficiency was observed in 2022, where the ratio reached 0.70; this was driven by the simultaneous increase in net sales and a reduction in invested capital. Conversely, the ratio declined to 0.52 in 2023. This decrease is attributed to the fact that the growth in invested capital significantly outpaced the growth in adjusted net sales, thereby reducing the overall turnover efficiency of the deployed capital.
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Effective Cash Tax Rate (CTR)
First Solar 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 | 1,542,086) | 826,891) | 567,988) | 214,327) | (94,458) | |
| Add: Cash operating taxes2 | 56,472) | 54,928) | 23,041) | (119,248) | 42,935) | |
| Net operating profit before taxes (NOPBT) | 1,598,558) | 881,819) | 591,028) | 95,079) | (51,523) | |
| Tax Rate | ||||||
| CTR3 | 3.53% | 6.23% | 3.90% | -125.42% | — | |
| 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 × 56,472 ÷ 1,598,558 = 3.53%
4 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 is characterized by a substantial increase in profitability and a stabilization of the effective cash tax rate following a period of significant volatility. While net operating profit before taxes experienced exponential growth, the actual cash tax burden remained relatively low and detached from the scale of profit increases.
- Net Operating Profit Before Taxes (NOPBT) Trend
- A strong upward trajectory is observed in profitability, transitioning from a loss of US$ 51.5 million in 2019 to a peak of US$ 1.6 billion by the end of 2023. The most aggressive growth occurred between 2020 and 2023, with NOPBT expanding from US$ 95.1 million to US$ 1.6 billion, indicating a significant scaling of operational efficiency or market demand.
- Cash Operating Taxes Volatility
- Cash tax payments exhibited instability in the early period, specifically in 2020 when a negative cash tax position of US$ 119.2 million was recorded, suggesting a substantial tax refund or the realization of deferred tax assets. From 2021 onward, cash taxes returned to positive values, gradually increasing from US$ 23.0 million to US$ 56.5 million in 2023.
- Effective Cash Tax Rate (CTR) Analysis
- The effective cash tax rate underwent a drastic correction after 2020, where it stood at -125.42%. Between 2021 and 2023, the CTR remained consistently low, fluctuating between 3.53% and 6.23%. Notably, in 2023, the CTR decreased to 3.53% despite NOPBT nearly doubling from the previous year, indicating that the cash tax burden did not scale proportionally with operating profits.
The divergence between the rapid growth in NOPBT and the modest increase in cash operating taxes results in a suppressed effective cash tax rate. This pattern suggests the utilization of significant tax shields, credits, or incentives that effectively decoupled the company's taxable cash outflows from its operational earnings growth.
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