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
Microchip Technology Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,620,172 – 20.23% × 11,963,600 = -799,844
Analysis of the economic value added indicates a persistent failure to generate a positive economic profit over the six-year period from 2017 to 2022. Although a notable improvement is observed in the final fiscal year, the company consistently operated below its cost of capital throughout the timeframe.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory in NOPAT is evident, increasing from US$ 180.6 million in 2017 to US$ 1.62 billion in 2022. While a temporary contraction occurred in 2020, the subsequent growth culminated in a substantial surge in 2022, marking the strongest operational performance of the period.
- Invested Capital and Cost of Capital
- Invested capital underwent a significant expansion in 2019, rising sharply from US$ 5.15 billion to US$ 14.72 billion. Since 2019, there has been a gradual reduction in invested capital, descending to US$ 11.96 billion by 2022. The cost of capital remained relatively high and stable, fluctuating within a range of 16.21% to 20.23%, which created a high threshold for achieving positive economic value.
- Economic Profit Performance
- Economic profit remained negative for all six years, indicating that the company did not generate sufficient returns to cover its cost of capital. The economic deficit deepened significantly following the 2019 capital increase, reaching a maximum loss of US$ 2.00 billion in 2021. However, 2022 shows a strong recovery trend, with the economic loss narrowing to US$ 799.8 million, driven primarily by the significant increase in NOPAT despite a rising cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Microchip Technology Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in liability for restructuring and other exit costs.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 162,700 × 4.23% = 6,882
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 263,882 × 21.00% = 55,415
8 Addition of after taxes interest expense to net income.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 500 × 21.00% = 105
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
Financial performance between fiscal years 2017 and 2022 demonstrates a general upward trajectory in profitability, although growth patterns for operating and net results diverged during the middle of the period.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited substantial growth over the six-year period, increasing from 180,568 thousand US dollars in 2017 to 1,620,172 thousand US dollars by 2022. A peak was observed in 2019 at 695,844 thousand US dollars, followed by a contraction in 2020 to 455,414 thousand US dollars. The period concluded with an exponential increase in 2022, representing the highest operating profit level in the analyzed timeframe.
- Net Income Trajectory
- Net income rose from 164,639 thousand US dollars in 2017 to 1,285,500 thousand US dollars in 2022. Unlike NOPAT, net income climbed consistently through 2020, reaching 570,600 thousand US dollars, before experiencing a significant decline to 349,400 thousand US dollars in 2021. A sharp recovery and surge occurred in 2022, mirroring the trend seen in operating profits.
- Comparative Analysis of Operating vs. Net Profit
- A distinct divergence is observed in 2020, where net income increased while NOPAT decreased. This indicates that the growth in net profit during that fiscal year was likely driven by non-operating gains or tax adjustments rather than core operational performance. In most other years, NOPAT remained higher than net income, most notably in 2022, suggesting that operating profitability consistently exceeded the final bottom-line earnings after the impact of financial costs and other non-operating items.
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Cash Operating Taxes
Microchip Technology Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
The financial data reveals a significant divergence between accounting tax provisions and actual cash tax outflows over the six-year period ending March 31, 2022. While the income tax provision exhibits extreme volatility and frequently results in tax benefits, the cash operating taxes reflect the actual liquidity impact, remaining positive throughout the entire period despite substantial fluctuations.
- Cash Operating Tax Trends
- A sharp increase in cash tax payments occurred in 2018, peaking at 492,538 thousand US$, representing the highest cash outflow in the observed period. This was followed by a precipitous decline in 2019 to 17,593 thousand US$. From 2020 through 2022, a consistent upward trajectory is observed, with cash taxes rising from 175,290 thousand US$ to 244,410 thousand US$.
- Income Tax Provision Volatility
- The income tax provision demonstrates an unstable pattern, alternating between provisions and benefits. Tax benefits were recorded in four of the six years analyzed, with the most significant benefit appearing in 2020 at -420,200 thousand US$. Provisions were only recorded in 2018 (481,900 thousand US$) and 2022 (197,000 thousand US$), indicating a high level of non-cash tax adjustments or deferred tax movements.
- Relationship Between Cash Taxes and Tax Provisions
- There is a notable decoupling between the accrual-based tax provision and the cash-based tax payment. In 2019, 2020, and 2021, the company recognized accounting tax benefits while simultaneously maintaining positive cash outflows for operating taxes. This divergence suggests that deferred tax assets or liabilities played a substantial role in the reported financial results, whereas the cash operating taxes provided a more stable, albeit fluctuating, measure of actual tax liquidity requirements.
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Invested Capital
Microchip Technology Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
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 liability for restructuring and other exit costs.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of projects in process.
9 Subtraction of available-for-sale investments and marketable equity securities.
The analysis of invested capital reveals a distinct two-phase trajectory characterized by a massive expansion in 2019 followed by a period of gradual contraction and deleveraging through 2022.
- Total Debt and Lease Obligations
- A substantial increase in debt and lease obligations is observed between March 31, 2018, and March 31, 2019, where the balance rose from US$ 3,129,768 thousand to US$ 10,449,998 thousand. Following this peak, a consistent downward trend is evident, as the company reduced its debt load annually to US$ 7,850,100 thousand by March 31, 2022.
- Stockholders' Equity Trends
- Stockholders' equity remained relatively stagnant between 2017 and 2018 before experiencing a significant increase to US$ 5,287,500 thousand in 2019. Despite a slight dip in 2021, the overall trend is positive, with equity reaching US$ 5,894,800 thousand by March 31, 2022, indicating a strengthening of the company's internal funding base.
- Invested Capital Dynamics
- Invested capital exhibits high volatility, peaking at US$ 14,715,398 thousand in 2019 after a prior low of US$ 5,149,468 thousand in 2018. From 2019 to 2022, a systematic reduction in invested capital is observed, with the value falling to US$ 11,963,600 thousand. This decline is primarily attributable to the reduction in total reported debt and leases, as stockholders' equity continued to grow over the same period.
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Cost of Capital
Microchip Technology Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 36,968,602) | 36,968,602) | ÷ | 45,237,202) | = | 0.82 | 0.82 | × | 24.20% | = | 19.77% | ||
| Debt and Credit Facility3 | 8,105,900) | 8,105,900) | ÷ | 45,237,202) | = | 0.18 | 0.18 | × | 3.12% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 162,700) | 162,700) | ÷ | 45,237,202) | = | 0.00 | 0.00 | × | 4.23% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 45,237,202) | 1.00 | 20.23% | ||||||||||
Based on: 10-K (reporting date: 2022-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 38,961,814) | 38,961,814) | ÷ | 49,455,714) | = | 0.79 | 0.79 | × | 24.20% | = | 19.06% | ||
| Debt and Credit Facility3 | 10,328,700) | 10,328,700) | ÷ | 49,455,714) | = | 0.21 | 0.21 | × | 3.82% × (1 – 21.00%) | = | 0.63% | ||
| Operating lease liability4 | 165,200) | 165,200) | ÷ | 49,455,714) | = | 0.00 | 0.00 | × | 4.49% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 49,455,714) | 1.00 | 19.71% | ||||||||||
Based on: 10-K (reporting date: 2021-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 21,545,100) | 21,545,100) | ÷ | 32,774,600) | = | 0.66 | 0.66 | × | 24.20% | = | 15.91% | ||
| Debt and Credit Facility3 | 11,090,300) | 11,090,300) | ÷ | 32,774,600) | = | 0.34 | 0.34 | × | 5.67% × (1 – 21.00%) | = | 1.52% | ||
| Operating lease liability4 | 139,200) | 139,200) | ÷ | 32,774,600) | = | 0.00 | 0.00 | × | 4.60% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 32,774,600) | 1.00 | 17.44% | ||||||||||
Based on: 10-K (reporting date: 2020-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,352,942) | 19,352,942) | ÷ | 32,538,940) | = | 0.59 | 0.59 | × | 24.20% | = | 14.39% | ||
| Debt and Credit Facility3 | 13,043,000) | 13,043,000) | ÷ | 32,538,940) | = | 0.40 | 0.40 | × | 5.69% × (1 – 21.00%) | = | 1.80% | ||
| Operating lease liability4 | 142,998) | 142,998) | ÷ | 32,538,940) | = | 0.00 | 0.00 | × | 5.69% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 32,538,940) | 1.00 | 16.21% | ||||||||||
Based on: 10-K (reporting date: 2019-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 21,811,406) | 21,811,406) | ÷ | 28,288,074) | = | 0.77 | 0.77 | × | 24.20% | = | 18.66% | ||
| Debt and Credit Facility3 | 6,415,200) | 6,415,200) | ÷ | 28,288,074) | = | 0.23 | 0.23 | × | 6.18% × (1 – 31.55%) | = | 0.96% | ||
| Operating lease liability4 | 61,468) | 61,468) | ÷ | 28,288,074) | = | 0.00 | 0.00 | × | 6.18% × (1 – 31.55%) | = | 0.01% | ||
| Total: | 28,288,074) | 1.00 | 19.63% | ||||||||||
Based on: 10-K (reporting date: 2018-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,929,913) | 18,929,913) | ÷ | 24,624,426) | = | 0.77 | 0.77 | × | 24.20% | = | 18.60% | ||
| Debt and Credit Facility3 | 5,619,684) | 5,619,684) | ÷ | 24,624,426) | = | 0.23 | 0.23 | × | 6.25% × (1 – 35.00%) | = | 0.93% | ||
| Operating lease liability4 | 74,830) | 74,830) | ÷ | 24,624,426) | = | 0.00 | 0.00 | × | 6.25% × (1 – 35.00%) | = | 0.01% | ||
| Total: | 24,624,426) | 1.00 | 19.54% | ||||||||||
Based on: 10-K (reporting date: 2017-03-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and Credit Facility. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Microchip Technology Inc., economic spread ratio calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (799,844) | (2,002,583) | (1,938,030) | (1,690,002) | (581,863) | (1,008,900) | |
| Invested capital2 | 11,963,600) | 12,643,700) | 13,725,600) | 14,715,398) | 5,149,468) | 6,087,016) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -6.69% | -15.84% | -14.12% | -11.48% | -11.30% | -16.57% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Advanced Micro Devices Inc. | -28.42% | 28.16% | — | — | — | — | |
| Analog Devices Inc. | -11.43% | -14.67% | -9.61% | — | — | — | |
| Applied Materials Inc. | 23.33% | 18.82% | 7.16% | — | — | — | |
| Broadcom Inc. | 3.61% | -5.62% | -10.85% | — | — | — | |
| Intel Corp. | -13.05% | 3.54% | — | — | — | — | |
| KLA Corp. | 22.57% | 11.03% | — | — | — | — | |
| Lam Research Corp. | 17.40% | 12.74% | — | — | — | — | |
| Marvell Technology Inc. | -24.89% | -26.61% | — | — | — | — | |
| Micron Technology Inc. | -10.44% | -15.17% | — | — | — | — | |
| NVIDIA Corp. | 26.14% | 6.62% | — | — | — | — | |
| Qualcomm Inc. | 26.66% | 24.06% | 9.13% | — | — | — | |
| Texas Instruments Inc. | 32.90% | 31.54% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -799,844 ÷ 11,963,600 = -6.69%
4 Click competitor name to see calculations.
The financial performance from 2017 to 2022 is characterized by a consistent failure to generate positive economic profit, indicating that the return on invested capital remained below the cost of capital throughout the entire period. While economic losses peaked in 2021, a significant recovery was observed in the final year of the analyzed period.
- Economic Profit
- Economic profit remained negative for six consecutive years, reflecting a persistent destruction of shareholder value. Losses fluctuated between -581,863 thousand USD in 2018 and a peak deficit of -2,002,583 thousand USD in 2021. A notable reversal occurred by March 31, 2022, where losses narrowed to -799,844 thousand USD, marking the lowest deficit in the recorded period.
- Invested Capital
- A substantial increase in invested capital occurred in 2019, rising from 5,149,468 thousand USD in 2018 to 14,715,398 thousand USD. Following this peak, a steady downward trend was observed over the subsequent three years, with invested capital declining to 11,963,600 thousand USD by 2022. This suggests a period of aggressive capital expansion followed by a phase of capital contraction or optimization.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, confirming that the company operated with a negative spread between its return on capital and its cost of capital. The ratio experienced volatility, deteriorating from -11.30% in 2018 to -15.84% in 2021. However, a significant improvement was recorded in 2022, as the ratio rose to -6.69%, indicating an increase in capital efficiency and a reduction in the gap between actual returns and required returns.
The correlation between the spike in invested capital in 2019 and the subsequent widening of economic losses through 2021 suggests that the additional capital deployment did not yield immediate economic gains. The convergence of reduced invested capital and improved economic profit in 2022 points toward a positive shift in the organization's ability to manage its capital base and approach a break-even point in economic value creation.
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Economic Profit Margin
Microchip Technology Inc., economic profit margin calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (799,844) | (2,002,583) | (1,938,030) | (1,690,002) | (581,863) | (1,008,900) | |
| Net sales | 6,820,900) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Add: Increase (decrease) in deferred revenue | 117,600) | —) | —) | —) | —) | —) | |
| Adjusted net sales | 6,938,500) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -11.53% | -36.82% | -36.75% | -31.59% | -14.62% | -29.61% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Advanced Micro Devices Inc. | -70.47% | 10.61% | — | — | — | — | |
| Analog Devices Inc. | -42.83% | -94.24% | -31.23% | — | — | — | |
| Applied Materials Inc. | 13.47% | 12.01% | 5.45% | — | — | — | |
| Broadcom Inc. | 6.76% | -13.24% | -29.94% | — | — | — | |
| Intel Corp. | -18.36% | 3.97% | — | — | — | — | |
| KLA Corp. | 19.08% | 10.87% | — | — | — | — | |
| Lam Research Corp. | 12.85% | 10.28% | — | — | — | — | |
| Marvell Technology Inc. | -111.07% | -81.68% | — | — | — | — | |
| Micron Technology Inc. | -17.68% | -25.06% | — | — | — | — | |
| NVIDIA Corp. | 17.52% | 5.17% | — | — | — | — | |
| Qualcomm Inc. | 17.76% | 14.49% | 6.89% | — | — | — | |
| Texas Instruments Inc. | 28.85% | 28.21% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -799,844 ÷ 6,938,500 = -11.53%
3 Click competitor name to see calculations.
Between March 31, 2017, and March 31, 2022, the company consistently reported negative economic profit, indicating that returns on invested capital did not exceed the cost of capital throughout the six-year period. Although adjusted net sales showed a robust upward trend, increasing from approximately 3.4 billion US dollars in 2017 to 6.9 billion US dollars in 2022, this revenue growth did not result in positive economic value added.
- Economic Profit Trends
- Economic profit exhibited significant volatility, experiencing a period of widening deficits between 2018 and 2021. The deficit reached its peak on March 31, 2021, at approximately 2 billion US dollars. However, a substantial recovery was observed by March 31, 2022, as the economic profit improved to negative 799.8 million US dollars, the lowest deficit recorded in the analyzed timeframe.
- Adjusted Net Sales Performance
- A consistent growth trajectory is observed in adjusted net sales, which expanded from 3.4 billion US dollars in 2017 to 6.9 billion US dollars in 2022. A particularly sharp increase occurred between 2018 and 2019, where sales rose from approximately 3.9 billion to 5.3 billion US dollars. This indicates a strong capacity for top-line expansion despite the underlying economic losses.
- Economic Profit Margin Analysis
- The economic profit margin remained negative across all periods, reflecting a consistent failure to generate value above the required return. The margin fluctuated from -29.61% in 2017 to a trough of -36.82% in 2021. A significant positive shift occurred in the final year, with the margin improving to -11.53% by March 31, 2022, suggesting a trend toward improved capital efficiency.
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