SolarEdge Technologies Inc. (NASDAQ:SEDG)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates notable fluctuations over the five-year period. Initially, there is an increase from approximately 204 million USD in 2018 to about 279 million USD in 2019, indicating improved operational efficiency or higher profitability. However, in 2020, a significant decline to approximately 155 million USD occurs, possibly reflecting heightened expenses or revenue challenges during that year. In 2021 and 2022, NOPAT rebounds to values close to 254 million USD and 250 million USD, respectively, suggesting partial recovery though it does not surpass the peak observed in 2019.

Cost of Capital

The cost of capital remains relatively stable across all years, hovering around 17% to 18%. The data shows a slight decrease from 17.98% in 2018 to 16.99% in 2021, followed by a minor increase to 17.19% in 2022. This stability suggests consistent financing conditions or risk profile, with no marked changes in the company’s capital costs over the analyzed period.

Invested Capital

There is a significant upward trend in invested capital, which grows steadily from approximately 559 million USD in 2018 to nearly 2.61 billion USD by the end of 2022. The most pronounced increase occurs between 2019 and 2020, more than doubling the invested capital. Despite a slight decline from 2020 to 2021, the overall trend remains strongly positive, indicating substantial increases in the company’s asset base or capital allocations during this period.

Economic Profit

Economic profit data reveals a concerning trend. Initially, from 2018 to 2019, economic profit is positive and increasing, rising from roughly 103 million USD to 115 million USD, which correlates with the increase in NOPAT during this time. However, from 2020 onwards, economic profit turns negative and continues to decline further into negative territory through 2021 and 2022, reaching approximately -199 million USD. This negative trend despite recovering NOPAT suggests that the returns on invested capital are insufficient to cover the cost of capital, possibly due to the rapid increase in invested capital outpacing profit generation.

Summary

Overall, while the company experienced growth in operating profits and a stable cost of capital, the substantial increase in invested capital has not been matched by proportional returns. This has led to negative economic profits in recent years, indicating value destruction from an economic perspective. The company’s capital investments might be generating suboptimal returns, warranting further investigation into asset utilization and investment efficiency going forward.

Net income attributable to SolarEdge Technologies, Inc.

The net income exhibited growth from 2018 to 2019, increasing from approximately $128.8 million to $146.5 million. However, in 2020, net income slightly declined to about $140.3 million, indicating a minor setback. The figure rebounded in 2021 to reach a peak of approximately $169.2 million, representing the highest value in the five-year span. In contrast, 2022 saw a significant drop to around $93.8 million, a sharp decrease compared to the preceding year, signaling a potential issue or challenge impacting profitability in the most recent period.

Net operating profit after taxes (NOPAT)

NOPAT showed notable volatility over the five years. Initially, it rose significantly from about $203.9 million in 2018 to nearly $279.0 million in 2019, demonstrating strong operational performance improvement. A substantial decline occurred in 2020, with NOPAT decreasing to approximately $154.6 million, indicating operational difficulties or increased expenses. Recovery was observed in 2021, with NOPAT climbing back to approximately $253.5 million, nearing prior peak levels. In 2022, NOPAT remained relatively stable, slightly decreasing to about $249.9 million, suggesting that operational efficiency was maintained despite fluctuations in net income.

Income Taxes, Net

The net income taxes exhibit a fluctuating trend over the five-year period. Beginning at 9,077 thousand US dollars in 2018, there was a significant increase to 33,646 thousand US dollars in 2019. This was followed by a decline to 23,344 thousand US dollars in 2020 and a further decrease to 18,054 thousand US dollars in 2021. However, the figure surged noticeably in 2022 to 83,376 thousand US dollars, indicating a substantial rise compared to prior years.

Cash Operating Taxes

The cash operating taxes also show variability with a generally increasing trend. Starting at 15,810 thousand US dollars in 2018, the amount more than doubled to 40,084 thousand US dollars in 2019. There was a decrease to 28,279 thousand US dollars in 2020, followed by a slight increase to 31,486 thousand US dollars in 2021. In 2022, cash operating taxes rose sharply to 95,076 thousand US dollars, marking the highest value within the observed period.

Overall Insights

Both income taxes, net and cash operating taxes demonstrate significant volatility but ultimately culminate in marked increases in 2022. The spike in tax figures during 2022 could suggest improved profitability, changes in tax regulations, or accumulation of deferred tax liabilities. The patterns also indicate that cash operating taxes consistently remain higher than net income taxes, reflecting differences potentially due to timing and tax accounting adjustments.

Total reported debt & leases

The total reported debt and leases exhibit a significant upward trend over the analyzed period. Starting from approximately 19.8 million in 2018, the figure more than doubles to around 42.4 million in 2019. This upward trajectory accelerates sharply in 2020, reaching approximately 647.4 million, followed by continued increases in 2021 and 2022 to roughly 715.6 million and 735.5 million, respectively. This pattern indicates an aggressive increase in debt and lease obligations, particularly notable between 2019 and 2020.

Total SolarEdge Technologies, Inc. stockholders’ equity

Stockholders’ equity demonstrates consistent and robust growth throughout the period. It starts at approximately 562.4 million in 2018 and grows steadily year-over-year, reaching about 811.7 million in 2019 and 1.09 billion in 2020. The growth continues to strengthen, with equity reaching around 1.31 billion in 2021 and showing a substantial increase to approximately 2.18 billion in 2022. This indicates a strengthening equity base, which may reflect retained earnings growth, capital contributions, or a combination thereof.

Invested capital

Invested capital displays a marked upward movement over the observed years. Beginning at approximately 559.3 million in 2018, it rises sharply to about 909.8 million in 2019. The growth is especially pronounced in 2020, reaching approximately 1.73 billion. This figure remains relatively stable in 2021 at roughly 1.70 billion before surging again to approximately 2.61 billion in 2022. The overall increase in invested capital aligns with the increases observed in both debt and equity, suggesting expansion in the company’s capital base.

Summary of Trends

The data reveal a pattern of significant financial growth and expansion over the five-year period. Both debt and equity have increased substantially, with debt experiencing a very sharp rise from 2019 onwards. The growth in stockholders’ equity is steady and strong, culminating in a considerable increase in 2022. Correspondingly, invested capital has also significantly increased, reflecting the combined effects of higher equity and debt. The company appears to be leveraging additional debt alongside equity financing to support its investment growth, which may indicate strategic expansion efforts or increased operational scale.

The financial data reveals significant fluctuations in the company's economic performance and capital investment over the analyzed period.

Economic Profit

There was a positive economic profit in 2018 and 2019, with values of approximately $103.4 million and $115.0 million respectively, indicating profitability during these years. However, a sharp decline occurred starting in 2020, moving into negative territory with a loss of about $144.6 million. This negative trend continued through 2021 and 2022, with the economic loss reducing but remaining substantial at roughly $35.4 million and $198.7 million respectively, suggesting challenges in generating economic value during these later years.

Invested Capital

The invested capital showed a steady increase over the period analyzed. It rose from approximately $559.3 million in 2018 to about $909.8 million in 2019. A significant jump occurred in 2020, almost doubling the invested capital to around $1.73 billion. Although there was a slight decline in 2021 to about $1.70 billion, the capital investment surged again in 2022, reaching approximately $2.61 billion. This increase indicates a substantial expansion in the base of assets or resources employed by the company.

Economic Spread Ratio

The economic spread ratio mirrored the movement of economic profit, starting at a high level of 18.48% in 2018 and decreasing to 12.64% in 2019. It sharply deteriorated in 2020 to -8.33%, turning negative and indicating that the company's return on invested capital fell below its cost of capital. The ratio remained negative in the subsequent years, with values of -2.08% in 2021 and -7.62% in 2022, reflecting ongoing challenges in generating returns above the cost of capital despite the increase in invested capital.

In summary, while the company considerably increased its invested capital over the five-year period, this was accompanied by deteriorating economic profit and increasingly negative economic spread ratios from 2020 onward. This pattern suggests difficulties in achieving adequate returns on the higher capital base, resulting in economic losses and strained profitability metrics during the latter part of the period.

Revenue Trends

The adjusted revenues of the company exhibit a strong upward trajectory over the five-year period. Starting at approximately 978 million US dollars in 2018, revenues increased significantly each year, reaching over 3.15 billion US dollars by 2022. This represents more than a threefold increase in sales over the observed timeframe, indicating robust top-line growth.

Profitability and Economic Profit

The economic profit values demonstrate a declining and fluctuating pattern contrary to the revenue growth. Initially, the company generated positive economic profits of about 103 million US dollars in 2018 and 115 million in 2019. However, beginning in 2020, the economic profit turned negative and remained so through 2022, with a low point near -198 million US dollars in 2022. This shift signals increasing difficulties in generating value above the cost of capital despite rising revenues.

Economic Profit Margin

The economic profit margin mirrors the trend in economic profit, showing a decline from 10.57% in 2018 to a negative 6.3% by 2022. The margin decreased steadily after 2019, turning negative in 2020 and deteriorating further through the subsequent years. This indicates that the company's profitability relative to its revenues has worsened, reflecting declining efficiency or increased costs outpacing revenue gains.

Overall Insights

The data reflects a scenario where rapid revenue growth has not translated into sustained economic profitability. The company appears to be facing margin pressures or elevated costs that have eroded its ability to generate positive economic profit despite expansion in sales. This divergence calls for a closer examination of cost structures, pricing strategies, or investment returns to reverse the negative economic profit trends.