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.
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First Solar Inc. pages available for free this week:
- Common-Size Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Total Asset Turnover since 2006
- Price to Earnings (P/E) since 2006
- Price to Sales (P/S) since 2006
- Analysis of Revenues
- Aggregate Accruals
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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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
-
The net operating profit after taxes exhibited a significant positive trend over the analyzed period. Initially, there was a substantial loss of approximately 94.5 million US dollars in 2019. However, in the subsequent years, the company reversed this negative performance and showed continuous improvement. By 2020, the NOPAT turned positive at around 214.3 million US dollars, followed by a steady increase each year, reaching over 1.54 billion US dollars in 2023. This indicates a strong enhancement in operating profitability after taxes over five years.
- Invested Capital
-
The invested capital values showed a moderate upward trend from 2019 through 2021, increasing from approximately 4.89 billion to 5.69 billion US dollars. In 2022, there was a decline to around 5.05 billion US dollars, possibly reflecting divestments, asset sales, or reduced investments in capital. In 2023, the invested capital sharply increased to about 7.84 billion US dollars, marking a significant capital infusion or asset base expansion in the final year of the period.
- Return on Invested Capital (ROIC)
-
The return on invested capital improved substantially across the period. It started with a negative return of -1.93% in 2019, corresponding with the negative NOPAT. From 2020 onwards, ROIC increased steadily each year, reaching 4.19% in 2020, then close to 10% in 2021, and further accelerating to 16.36% in 2022. The peak observed was 19.67% in 2023. This trend suggests increasing efficiency and profitability in using the invested capital to generate operating earnings.
- Summary of Observations
-
Over the five-year period, the company demonstrated marked improvement in operating profitability and capital efficiency. The transition from a negative operating profit to consistently increasing positive figures indicates enhanced operational performance. Although invested capital fluctuated, the substantial increase in 2023, coupled with the highest ROIC, implies effective deployment of capital resources and stronger returns on investments. These patterns illustrate a positive trajectory in financial health and operational effectiveness.
Decomposition of ROIC
First Solar Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × |
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 »
- Operating Profit Margin (OPM)
- The operating profit margin showed consistent improvement over the five-year period. It started with a negative margin of -1.57% in 2019, turned positive in 2020 at 3.73%, and then increased significantly to 19.78% in 2021. The upward trend continued, reaching 24.98% in 2022 and peaking at 38.84% in 2023. This indicates enhanced operational efficiency and profitability over time.
- Turnover of Capital (TO)
- The turnover of capital exhibited some variability without a clear directional trend. It declined from 0.67 in 2019 to 0.5 in 2020, followed by a modest increase to 0.52 in 2021. In 2022, the ratio rose further to 0.7, suggesting improved utilization of capital assets that year. However, this increase was not sustained, as the value dropped back to 0.52 in 2023.
- 1 – Effective Cash Tax Rate (CTR)
- The value of 1 minus the effective cash tax rate fluctuated considerably, with an anomalous spike in 2020 at 225.42%, which is unusually high and suggests irregular tax events or adjustments in that year. Excluding this outlier, the metric remained relatively stable, with percentages close to 100% in the other years (2019: 100%, 2021: 96.1%, 2022: 93.77%, 2023: 96.47%). This stability indicates a consistent effective cash tax rate over the majority of the period.
- Return on Invested Capital (ROIC)
- The return on invested capital experienced a positive progression through the analyzed timeframe. From a negative return of -1.93% in 2019, it increased to 4.19% in 2020, more than doubling to 9.98% in 2021, then rising further to 16.36% in 2022, and reaching 19.67% in 2023. This trend reflects improvements in the efficiency with which the company employs its invested capital to generate returns.
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 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited a strong upward trend over the five-year period. Starting from a negative value of -51,523 thousand USD in 2019, it shifted to a positive value of 95,079 thousand USD in 2020, marking a significant recovery. This positive trajectory continued with substantial increases in the following years, reaching 591,028 thousand USD in 2021, 881,819 thousand USD in 2022, and peaking at 1,598,558 thousand USD in 2023. This indicates a marked improvement in operational profitability over the timeframe analyzed.
- Adjusted Net Sales
- Adjusted net sales showed some fluctuations, beginning at 3,280,003 thousand USD in 2019 and declining to 2,550,409 thousand USD in 2020. Following this dip, sales rebounded to 2,987,456 thousand USD in 2021 and continued to increase consistently through 2022 and 2023, reaching 3,529,448 thousand USD and 4,115,845 thousand USD, respectively. This upward movement in later years suggests recovery and growth in revenue generation capacity.
- Operating Profit Margin (OPM)
- The operating profit margin demonstrated a significant and steady improvement throughout the period. Starting from a negative margin of -1.57% in 2019, it rose to 3.73% in 2020, indicating the transition to profitability. The margin further increased substantially to 19.78% in 2021, followed by 24.98% in 2022, and then to a notably high 38.84% in 2023. This increase reflects enhanced operational efficiency and better cost management relative to sales.
- Summary
- Overall, the data indicates a strong recovery and growth trend in the company's financial performance from 2019 to 2023. The transition from negative to positive operating profit and the consistent growth in adjusted net sales demonstrate improved market conditions and effective operational strategies. The substantial rise in operating profit margin further reinforces the company's increasing profitability and operational leverage over time.
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 | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Sales
- The adjusted net sales demonstrate a fluctuating yet overall increasing trend over the five-year period. Starting at approximately 3.28 billion in 2019, sales declined in 2020 to about 2.55 billion, reflecting a downturn. Subsequently, sales recovered and grew steadily, reaching approximately 4.12 billion in 2023, which represents a significant increase compared to the 2019 baseline.
- Invested Capital
- The invested capital shows variability with an overall upward movement. Initially at around 4.89 billion in 2019, it increased moderately to just above 5.11 billion in 2020 and further to around 5.69 billion in 2021. However, a reduction occurred in 2022, bringing the figure down to approximately 5.05 billion. In 2023, invested capital rose substantially to about 7.84 billion, marking its highest level in the observed period.
- Turnover of Capital (TO)
- The turnover of capital ratio indicates the efficiency in generating sales from the invested capital. The ratio decreased from 0.67 in 2019 to 0.50 in 2020, suggesting a reduced efficiency. It slightly improved to 0.52 in 2021. There was a significant increase in 2022 to 0.70, the highest value in the dataset, indicating improved asset utilization that year. However, the ratio declined again to 0.52 in 2023, indicating a lower turnover relative to the previous year.
- Summary
- The data reveals a complex performance trajectory. Despite an initial drop in sales in 2020, sales volumes recovered and exceeded previous levels by 2023. Invested capital has generally increased, peaking substantially in 2023, which could suggest expanded investment or asset accumulation during the last year. However, the turnover of capital ratio shows volatility, with efficient capital use peaking in 2022 but declining afterward, suggesting potential challenges in maintaining asset turnover or integration of new investments. The divergence between the invested capital trend and turnover ratio in the latest year may warrant further investigation into capital allocation and operational efficiency.
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 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes exhibit significant variability over the analyzed period. Initially, in 2019, the value is positive at 42,935 thousand US dollars. However, it sharply declines to a negative amount of -119,248 thousand US dollars in 2020, indicating a potential tax rebate or credit received during that year. Subsequently, cash operating taxes return to positive territory, with amounts of 23,041, 54,928, and 56,472 thousand US dollars for 2021, 2022, and 2023 respectively. This trend suggests a recovery and stabilization in tax payments after the anomalous year 2020.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes demonstrates a marked and consistent upward trajectory over the five-year period. Starting from a negative figure of -51,523 thousand US dollars in 2019, the company transitions to positive profitability in 2020 with 95,079 thousand US dollars. This growth accelerates dramatically in subsequent years, rising to 591,028 thousand in 2021, 881,819 thousand in 2022, and culminating at 1,598,558 thousand US dollars in 2023. The pattern reflects substantial improvements in operating profitability, indicating increased operational efficiency, sales growth, or both.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate fluctuates significantly across the period. There is an absence of a reported value in 2019. It then turns negative at -125.42% in 2020, consistent with the negative cash operating taxes observed, possibly due to tax credits or adjustments. In the following years, the rate normalizes to low positive values, specifically 3.9% in 2021, 6.23% in 2022, and 3.53% in 2023. These low tax rates relative to operating profits suggest effective tax planning or the impact of tax incentives affecting the company’s tax burden.