Stock Analysis on Net

ON Semiconductor Corp. (NASDAQ:ON)

$22.49

This company has been moved to the archive! The financial data has not been updated since April 29, 2024.

Economic Value Added (EVA)

Microsoft Excel

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Economic Profit

ON Semiconductor Corp., economic profit calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

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
= × =


Net operating profit after taxes (NOPAT)
The NOPAT shows a significant upward trend over the analyzed period, increasing from approximately $340.6 million in 2019 to over $2.07 billion in 2023. Despite a decline in 2020, the figures rebounded strongly in the subsequent years, particularly with a substantial jump in 2021 and further growth through 2022 and 2023. This suggests improved operational efficiency or higher profitability margins in recent years.
Cost of capital
The cost of capital increased steadily from 16.3% in 2019 to a peak of 20.86% in 2022 before slightly declining to 20.46% in 2023. This rising trend indicates increasing capital costs, possibly due to higher market risk, interest rates, or company-specific risk factors, which could impact investment decisions and valuations.
Invested capital
Invested capital has grown consistently year over year, starting at around $6.86 billion in 2019 and reaching over $10.9 billion by 2023. This upward trend signals ongoing capital investments or expansion activities, perhaps to support growth initiatives or improve production capacity.
Economic profit
Economic profit has shown considerable fluctuation during the period. It was negative in 2019 and 2020, reflecting losses when considering the cost of capital. Although the negative impact diminished in 2021 and turned positive in 2022, 2023 witnessed a return to a moderate negative economic profit. This pattern suggests that, despite rising NOPAT, the cost of capital and invested capital levels have eroded the overall economic gain, indicating that the company has struggled with value creation on a capital-adjusted basis in certain years.
Overall Analysis
The company demonstrated substantial growth in operational profitability, as seen in the increasing NOPAT and invested capital, indicative of expansion and improved operating performance. However, the rising cost of capital has put pressure on economic profitability, leading to inconsistent economic profit results over the years. The positive economic profit in 2022 is noteworthy but was not sustained into 2023. This mixed performance in economic profit suggests that while operational efficiency is strong, the return on capital investment is challenged by higher capital costs and potentially high capital employed.

Net Operating Profit after Taxes (NOPAT)

ON Semiconductor Corp., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income attributable to ON Semiconductor Corporation
Deferred income tax expense (benefit)1
Increase (decrease) in accrued restructuring charges2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

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 accrued restructuring charges.

3 Addition of increase (decrease) in equity equivalents to net income attributable to ON Semiconductor Corporation.

4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

6 Addition of after taxes interest expense to net income attributable to ON Semiconductor Corporation.

7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

8 Elimination of after taxes investment income.


Net income attributable to ON Semiconductor Corporation
The net income shows a consistent upward trend over the five-year period. Starting from approximately 211.7 million US dollars in 2019, it increased modestly to 234.2 million in 2020. A significant jump occurred in 2021, with net income more than quadrupling to around 1.009 billion. This strong growth continued through 2022 and 2023, reaching about 1.902 billion and 2.184 billion US dollars respectively, indicating robust profitability improvement and operational performance over time.
Net operating profit after taxes (NOPAT)
NOPAT values display some fluctuations initially but then show a marked increase from 2021 onward. In 2019, NOPAT was approximately 340.6 million US dollars but declined to 262.8 million in 2020. Starting 2021, there was a substantial rise to around 1.214 billion US dollars. The upward trajectory continued into 2022 and 2023 with NOPAT reaching roughly 1.992 billion and 2.074 billion US dollars respectively. This pattern suggests improved operational efficiency and effective tax management contributing to growing operating profitability.

Cash Operating Taxes

ON Semiconductor Corp., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Provision (benefit) for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

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 financial data reveals notable fluctuations in both the provision for income taxes and cash operating taxes over the five-year period ending December 31, 2023.

Provision (benefit) for income taxes
This item shows significant volatility throughout the periods. In 2019, the provision was a positive value of 62,700 thousand US dollars, indicating income tax expense recognition for that year. In 2020, there was a reversal to a tax benefit of 59,800 thousand US dollars, suggesting the company recognized a tax benefit rather than an expense. Following this, 2021 experienced a sharp increase in tax provision to 146,600 thousand US dollars, more than doubling the 2019 figure. The upward trend continued markedly in 2022, reaching 458,400 thousand US dollars, the highest in the period under review. In 2023, the provision decreased somewhat to 350,200 thousand US dollars, although it remained substantially higher than the values reported in 2019 through 2021.
Cash operating taxes
Cash operating taxes demonstrate an overall increasing trend over the five years. Beginning at 79,994 thousand US dollars in 2019, the amount increased modestly to 90,557 thousand US dollars in 2020. In 2021, there was a slight decline to 84,769 thousand US dollars. However, a pronounced upward shift occurred in 2022, with cash operating taxes escalating dramatically to 457,073 thousand US dollars. This elevated level sustained into 2023 with a further slight increase to 470,018 thousand US dollars.

In summary, both the provision for income taxes and cash operating taxes experienced considerable growth from 2021 onwards, with particularly sharp increases in 2022 and 2023. The provision for income taxes fluctuated between an expense and a benefit in the early years but settled into a notably higher expense level in later years. The cash operating taxes overall trend upward, with a pronounced rise starting in 2022, possibly aligning with the increases in the provision for income taxes, indicating higher taxable income or changes in tax positions and payments during those years.


Invested Capital

ON Semiconductor Corp., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Current portion of financing lease liabilities
Current portion of long-term debt
Long-term debt, excluding current portion
Long-term financing lease liabilities
Operating lease liability1
Total reported debt & leases
Total ON Semiconductor Corporation stockholders’ equity
Net deferred tax (assets) liabilities2
Accrued restructuring charges3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Non-controlling interest
Adjusted total ON Semiconductor Corporation stockholders’ equity
Marketable securities, classified as available-for-sale6
Invested capital

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 accrued restructuring charges.

4 Addition of equity equivalents to total ON Semiconductor Corporation stockholders’ equity.

5 Removal of accumulated other comprehensive income.

6 Subtraction of marketable securities, classified as available-for-sale.


Total Reported Debt & Leases
The total reported debt and leases showed a decreasing trend from 3,726,500 thousand USD at the end of 2019 to 3,272,400 thousand USD at the end of 2021. However, this downward trend reversed in the subsequent years, increasing to 3,512,400 thousand USD in 2022 and further to 3,623,800 thousand USD in 2023. Overall, the debt levels exhibit a moderate fluctuation with a reduction phase followed by a gradual increase.
Total ON Semiconductor Corporation Stockholders’ Equity
Stockholders' equity demonstrated consistent and considerable growth over the five-year period. Starting at 3,301,700 thousand USD in 2019, equity increased steadily each year, reaching 7,782,600 thousand USD by 2023. This reflects strong capital accumulation and possibly retained earnings or equity issuances that enhanced the company's net worth significantly over time.
Invested Capital
Invested capital showed a gradual upward trajectory throughout the period. Beginning at 6,857,500 thousand USD in 2019, it remained relatively stable through 2020 but increased notably to 7,560,500 thousand USD in 2021, followed by a sharper rise to 9,371,400 thousand USD in 2022 and 10,925,400 thousand USD in 2023. This trend indicates increasing investment in the company's operational assets, which may support business growth and expansion activities.

Cost of Capital

ON Semiconductor Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt and financing lease liabilities, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt and financing lease liabilities, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt and financing lease liabilities, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt and financing lease liabilities, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt and financing lease liabilities, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt and financing lease liabilities, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt and financing lease liabilities, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt and financing lease liabilities, including current portion. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Long-term debt and financing lease liabilities, including current portion3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in thousands

2 Equity. See details »

3 Long-term debt and financing lease liabilities, including current portion. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

ON Semiconductor Corp., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, 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 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


Economic Profit
The economic profit showed a significant negative value throughout most of the observed period with an initial loss of approximately -777 million USD in 2019 deepening to nearly -1.04 billion USD in 2020. This negative trend reversed sharply in 2022, resulting in a slight positive economic profit of around 37 thousand USD. However, this improvement was short-lived, and economic profit declined again in 2023 to approximately -162 thousand USD, indicating fluctuating profitability and challenges in generating consistent economic value.
Invested Capital
Invested capital demonstrated a persistent upward trend over the five years. It increased steadily from approximately 6.86 billion USD in 2019 to over 10.93 billion USD in 2023. This continuous growth suggests ongoing investments in capital assets or expansion initiatives, reflecting a strategy of increasing resource allocation despite fluctuations in economic profit.
Economic Spread Ratio
The economic spread ratio was consistently negative in the initial years, reaching its lowest point of -15.08% in 2020, indicative of returns on invested capital falling below the cost of capital. Improvement was observed in subsequent years, with the ratio approaching positive territory at 0.39% in 2022, before deteriorating again to -1.48% in 2023. This pattern implies volatility in the effectiveness of capital deployment and challenges in sustaining returns above capital costs.
Overall Analysis
The data indicates a company undergoing substantial capital investment, as seen by the growth in invested capital. However, the returns on these investments, as measured by economic profit and economic spread ratio, have been inconsistent. The sharp improvement in economic profit and spread ratio in 2022 suggests temporary operational or market advantages, but the regression in 2023 highlights persistent difficulties in maintaining profitability relative to capital costs. This suggests the need for ongoing review of capital allocation efficiency and operational strategies to enhance sustainable value creation.

Economic Profit Margin

ON Semiconductor Corp., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit1
Revenue
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, 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 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × ÷ =

3 Click competitor name to see calculations.


Revenue Trends
The revenue demonstrated an overall upward trajectory from 2019 to 2023. Starting at approximately 5.52 billion US dollars in 2019, revenue declined slightly in 2020 to around 5.26 billion US dollars. Thereafter, a marked increase occurred in 2021 and 2022, reaching a peak near 8.33 billion US dollars in 2022, followed by a slight decline to about 8.25 billion US dollars in 2023. This trend indicates a general growth in sales with some variability.
Economic Profit and Profitability
The economic profit figures reveal a challenging profitability environment across the years. The company experienced substantial economic losses in 2019 and 2020, with losses increasing from approximately -777 million US dollars in 2019 to nearly -1.04 billion US dollars in 2020. However, 2021 saw a significant reduction in losses to about -293 million US dollars, followed by a shift to positive economic profit of approximately 37 million US dollars in 2022. Despite this positive turn, 2023 recorded a return to negative economic profit, albeit a reduced loss compared to earlier years, around -162 million US dollars.
Economic Profit Margin
The economic profit margin mirrors the changes in economic profit, starting with a negative margin of -14.08% in 2019, which deepened to -19.77% in 2020. A substantial improvement occurred in 2021, reducing the negative margin to -4.35%, and further improving to a slightly positive margin of 0.44% in 2022. In 2023, the margin declined again to -1.96%, indicating a slight erosion of profitability despite the revenue level being close to that of the previous year.
Overall Insights
The data suggests that while revenue growth has been positive over the period, profitability as measured by economic profit and economic profit margin has been volatile. The company experienced significant losses initially, managed to improve profitability to a positive state in 2022, but faced some setbacks in 2023. This pattern may indicate challenges in cost management, pricing power, or operational efficiency that affect the translation of revenue increases into sustained economic profit.