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
SolarEdge Technologies Inc., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
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
= 249,862 – 20.20% × 2,608,920 = -277,085
The financial trajectory from 2018 to 2022 indicates a transition from positive economic value creation to significant value destruction. While the entity initially generated positive economic profit, a substantial increase in invested capital, coupled with volatile operating returns, resulted in a persistent negative economic profit starting in 2020.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility over the five-year period. After an initial increase from 203,920 thousand US$ in 2018 to 278,986 thousand US$ in 2019, a sharp decline occurred in 2020, falling to 154,600 thousand US$. Although profitability recovered in 2021 and 2022, stabilizing around 250,000 thousand US$, the growth in operating profit failed to keep pace with the expansion of the capital base.
- Invested Capital Growth
- A rapid and aggressive expansion of invested capital is observed. The capital base grew from 559,312 thousand US$ in 2018 to 2,608,920 thousand US$ by 2022, representing an increase of approximately 368%. This expansion was most pronounced between 2019 and 2020, where invested capital nearly doubled.
- Cost of Capital Stability
- The cost of capital remained relatively stable throughout the period, fluctuating within a narrow range between 19.96% and 21.18%. This consistent high hurdle rate meant that any increase in invested capital required a proportional and significant increase in NOPAT to maintain a positive economic profit.
- Economic Profit Trends
- Economic profit shifted from a positive position of 85,765 thousand US$ in 2018 and 86,323 thousand US$ in 2019 to deep negative values in subsequent years. The transition to value destruction became evident in 2020 with an economic loss of 196,702 thousand US$. Despite a moderate improvement in 2021, the economic profit declined further to -277,085 thousand US$ in 2022. This downward trend is primarily attributed to the fact that the capital charge—the product of invested capital and the cost of capital—grew far more rapidly than the NOPAT.
In summary, the widening gap between the cost of funding the expanding capital base and the actual operating profits generated has led to a sustained erosion of economic value. The entity is currently operating in a state where its returns are insufficient to cover its cost of capital.
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Net Operating Profit after Taxes (NOPAT)
SolarEdge Technologies Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in warranty obligations.
5 Addition of increase (decrease) in equity equivalents to net income attributable to SolarEdge Technologies, Inc..
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 62,439 × 2.17% = 1,355
7 2022 Calculation
Tax benefit of interest expenses = Adjusted interest expenses × Statutory income tax rate
= 12,893 × 21.00% = 2,708
8 Addition of after taxes interest expense to net income attributable to SolarEdge Technologies, Inc..
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 9,815 × 21.00% = 2,061
10 Elimination of after taxes investment income.
An analysis of the financial results from 2018 to 2022 reveals divergent trends between core operational profitability and final net earnings. While operational performance demonstrated resilience and recovery through 2022, the bottom-line net income experienced a significant contraction in the final year of the analyzed period.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT exhibited a volatile trajectory, peaking at US$ 278,986 thousand in 2019 before experiencing a sharp decline to US$ 154,600 thousand in 2020. A strong recovery followed in 2021, with NOPAT rising to US$ 253,512 thousand and remaining relatively stable at US$ 249,862 thousand in 2022. This pattern suggests that the core operational ability to generate profit recovered from the 2020 downturn and maintained a consistent level of performance through 2022.
- Net Income Analysis
- Net income attributable to the company showed a steady growth pattern from 2018 to 2021, increasing from US$ 128,833 thousand to a peak of US$ 169,170 thousand. However, 2022 saw a substantial decrease, with net income falling to US$ 93,779 thousand, marking the lowest point in the five-year period.
- Operational vs. Net Profit Divergence
- A significant divergence is observed between NOPAT and net income in 2022. While NOPAT remained nearly flat compared to 2021 (decreasing by only approximately 1.4%), net income dropped by approximately 44.6%. This indicates that the reduction in final profitability for 2022 was not driven by a failure in core operational efficiency, but was instead the result of non-operating factors, such as increased financing costs, tax adjustments, or other non-core expenses.
- Profitability Margin Gap
- Throughout the period, NOPAT consistently remained higher than net income. The gap between these two metrics widened most significantly in 2022, where NOPAT was approximately 2.66 times the size of net income. This suggests that the operational value creation remained strong even as the net profit attributable to shareholders was heavily constrained.
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Cash Operating Taxes
SolarEdge Technologies Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
An analysis of tax expenditures from 2018 through 2022 reveals a period of significant volatility, culminating in a substantial increase in both accrual-based and cash-based tax obligations. The trajectories of net income taxes and cash operating taxes are closely correlated, though a persistent gap remains between the two metrics.
- Cash Operating Tax Trends
- Cash operating taxes exhibited a non-linear growth pattern over the five-year period. Starting at 15,810 thousand US$ in 2018, the figure rose sharply to 40,084 thousand US$ in 2019, before declining to 28,279 thousand US$ in 2020. A marginal recovery occurred in 2021, followed by an exponential increase to 95,076 thousand US$ by December 31, 2022.
- Variance Between Net and Cash Taxes
- A consistent discrepancy is observed where cash operating taxes exceed net income taxes in every reported year. This indicates that actual cash outflows for taxes have remained higher than the tax expense recognized on the income statement, suggesting the impact of non-deductible expenses or timing differences in tax payments.
- Analysis of the 2022 Surge
- The fiscal year 2022 marks a critical inflection point. Cash operating taxes increased by approximately 202% relative to 2021. Similarly, net income taxes surged from 18,054 thousand US$ to 83,376 thousand US$, representing a nearly five-fold increase. This synchronized spike suggests a significant increase in taxable profitability or a change in the applicable tax regime during the final year of the analyzed period.
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Invested Capital
SolarEdge Technologies Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
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 revenues.
5 Addition of warranty obligations.
6 Addition of equity equivalents to total SolarEdge Technologies, Inc. stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of assets under construction and payments on account.
9 Subtraction of marketable securities.
Invested capital exhibited a substantial upward trajectory between 2018 and 2022, growing from US$ 559,312 thousand to US$ 2,608,920 thousand. This expansion represents a significant increase in the total capital deployed to generate economic value. The growth pattern was characterized by a sharp acceleration in 2020, a period of marginal contraction in 2021, and a final surge in 2022.
- Total Reported Debt and Leases
- A dramatic shift in the leverage profile occurred in 2020, with total debt and leases increasing from US$ 42,433 thousand in 2019 to US$ 647,397 thousand. This represents a rapid expansion of borrowed capital. Following this spike, debt levels entered a phase of moderate growth, reaching US$ 735,538 thousand by December 31, 2022.
- Stockholders' Equity
- Equity maintained a consistent and steady growth trend throughout the analyzed period. Starting at US$ 562,408 thousand in 2018, equity rose incrementally each year to reach US$ 2,176,366 thousand by 2022. This continuous increase indicates a strengthening of the internal capital base, likely driven by retained earnings or capital contributions.
- Invested Capital Dynamics
- The composition of invested capital shifted notably over the five-year duration. In the early period, the capital base was predominantly equity-funded. The sharp rise in invested capital observed in 2020 was primarily catalyzed by the sudden increase in total debt. However, by 2022, the growth in stockholders' equity became the primary driver of the total invested capital balance, ending the period with equity contributing the vast majority of the US$ 2,608,920 thousand total.
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Cost of Capital
SolarEdge Technologies Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,603,113) | 16,603,113) | ÷ | 17,545,200) | = | 0.95 | 0.95 | × | 21.31% | = | 20.17% | ||
| Convertible senior notes and finance lease liabilities3 | 879,648) | 879,648) | ÷ | 17,545,200) | = | 0.05 | 0.05 | × | 0.60% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 62,439) | 62,439) | ÷ | 17,545,200) | = | 0.00 | 0.00 | × | 2.17% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 17,545,200) | 1.00 | 20.20% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible senior notes and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,997,086) | 12,997,086) | ÷ | 13,902,436) | = | 0.93 | 0.93 | × | 21.31% | = | 19.92% | ||
| Convertible senior notes and finance lease liabilities3 | 853,710) | 853,710) | ÷ | 13,902,436) | = | 0.06 | 0.06 | × | 0.56% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 51,640) | 51,640) | ÷ | 13,902,436) | = | 0.00 | 0.00 | × | 1.68% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 13,902,436) | 1.00 | 19.96% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible senior notes and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,608,746) | 16,608,746) | ÷ | 17,553,910) | = | 0.95 | 0.95 | × | 21.31% | = | 20.16% | ||
| Convertible senior notes and finance lease liabilities3 | 898,976) | 898,976) | ÷ | 17,553,910) | = | 0.05 | 0.05 | × | 2.07% × (1 – 21.00%) | = | 0.08% | ||
| Operating lease liability4 | 46,188) | 46,188) | ÷ | 17,553,910) | = | 0.00 | 0.00 | × | 1.68% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 17,553,910) | 1.00 | 20.25% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible senior notes and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 6,201,211) | 6,201,211) | ÷ | 6,243,644) | = | 0.99 | 0.99 | × | 21.31% | = | 21.17% | ||
| Convertible senior notes and finance lease liabilities3 | 2,630) | 2,630) | ÷ | 6,243,644) | = | 0.00 | 0.00 | × | 2.85% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 39,803) | 39,803) | ÷ | 6,243,644) | = | 0.01 | 0.01 | × | 1.46% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 6,243,644) | 1.00 | 21.18% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible senior notes and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,997,006) | 1,997,006) | ÷ | 2,016,820) | = | 0.99 | 0.99 | × | 21.31% | = | 21.10% | ||
| Convertible senior notes and finance lease liabilities3 | —) | —) | ÷ | 2,016,820) | = | 0.00 | 0.00 | × | 2.85% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 19,814) | 19,814) | ÷ | 2,016,820) | = | 0.01 | 0.01 | × | 2.85% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 2,016,820) | 1.00 | 21.13% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in thousands
2 Equity. See details »
3 Convertible senior notes and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
SolarEdge Technologies Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (277,085) | (85,877) | (196,702) | 86,323) | 85,765) | |
| Invested capital2 | 2,608,920) | 1,700,638) | 1,734,649) | 909,829) | 559,312) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.62% | -5.05% | -11.34% | 9.49% | 15.33% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -28.73% | 27.84% | — | — | — | |
| Analog Devices Inc. | -11.45% | -14.69% | -9.63% | — | — | |
| Applied Materials Inc. | 23.15% | 18.63% | 6.98% | — | — | |
| Broadcom Inc. | 3.57% | -5.66% | -10.88% | — | — | |
| Intel Corp. | -13.15% | 3.44% | — | — | — | |
| KLA Corp. | 22.45% | 10.91% | — | — | — | |
| Lam Research Corp. | 17.18% | 12.51% | — | — | — | |
| Marvell Technology Inc. | -25.08% | -26.81% | — | — | — | |
| Micron Technology Inc. | -10.78% | -15.51% | — | — | — | |
| NVIDIA Corp. | 25.86% | 6.34% | — | — | — | |
| Qualcomm Inc. | 26.59% | 23.99% | 9.06% | — | — | |
| Texas Instruments Inc. | 32.90% | 31.53% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -277,085 ÷ 2,608,920 = -10.62%
4 Click competitor name to see calculations.
An analysis of the economic value added indicates a significant transition from value creation to value destruction between 2018 and 2022. While the period began with positive returns exceeding the cost of capital, a sharp reversal occurred in 2020, which persisted through the end of the observed timeframe despite a substantial increase in the deployed capital base.
- Economic Profit Trends
- Economic profit remained positive and relatively stable during 2018 and 2019, reaching 86,323 thousand USD in the latter year. A severe contraction occurred in 2020, with economic profit falling to negative 196,702 thousand USD. Although there was a moderate recovery in 2021, the trend deteriorated again in 2022, reaching a five-year low of negative 277,085 thousand USD.
- Invested Capital Expansion
- A consistent upward trend in invested capital is observed, growing from 559,312 thousand USD in 2018 to 2,608,920 thousand USD by 2022. The most aggressive expansion occurred between 2019 and 2020, where the capital base nearly doubled. This indicates a significant increase in the resources utilized to drive operations, which did not result in a corresponding increase in economic profit.
- Economic Spread Ratio Performance
- The economic spread ratio shifted from a strong positive position of 15.33% in 2018 to a negative trajectory starting in 2020. The ratio declined to -11.34% in 2020, saw a brief improvement to -5.05% in 2021, and subsequently fell to -10.62% in 2022. This pattern demonstrates that the return on invested capital remained below the cost of capital for three consecutive years, signaling a failure to generate economic value from the increased capital investments.
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Economic Profit Margin
SolarEdge Technologies Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (277,085) | (85,877) | (196,702) | 86,323) | 85,765) | |
| Revenues | 3,110,279) | 1,963,865) | 1,459,271) | 1,425,660) | 937,237) | |
| Add: Increase (decrease) in deferred revenues | 44,232) | 29,325) | (20,777) | 85,776) | 41,009) | |
| Adjusted revenues | 3,154,511) | 1,993,190) | 1,438,494) | 1,511,436) | 978,246) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -8.78% | -4.31% | -13.67% | 5.71% | 8.77% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -71.26% | 10.49% | — | — | — | |
| Analog Devices Inc. | -42.90% | -94.37% | -31.30% | — | — | |
| Applied Materials Inc. | 13.37% | 11.89% | 5.31% | — | — | |
| Broadcom Inc. | 6.68% | -13.34% | -30.05% | — | — | |
| Intel Corp. | -18.50% | 3.85% | — | — | — | |
| KLA Corp. | 18.98% | 10.75% | — | — | — | |
| Lam Research Corp. | 12.68% | 10.09% | — | — | — | |
| Marvell Technology Inc. | -111.94% | -82.30% | — | — | — | |
| Micron Technology Inc. | -18.25% | -25.63% | — | — | — | |
| NVIDIA Corp. | 17.34% | 4.95% | — | — | — | |
| Qualcomm Inc. | 17.71% | 14.45% | 6.83% | — | — | |
| Texas Instruments Inc. | 28.85% | 28.21% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -277,085 ÷ 3,154,511 = -8.78%
3 Click competitor name to see calculations.
A significant divergence is observed between revenue growth and economic value creation from 2018 to 2022. While the organization achieved substantial scaling in its top-line adjusted revenues, this growth did not translate into sustained economic profit. Instead, the period is characterized by a transition from positive economic value added to persistent losses, indicating that the returns generated from the expanded capital base failed to exceed the cost of that capital.
- Economic Profit Trajectory
- Economic profit remained positive and stable between 2018 and 2019, peaking at 86.3 million USD in 2019. However, a sharp reversal occurred in 2020, with the figure dropping to a loss of 196.7 million USD. Although a partial recovery was noted in 2021, the trend reversed again in 2022, reaching a five-year low of negative 277.1 million USD.
- Adjusted Revenue Growth
- A strong upward trend in adjusted revenues is evident, increasing from 978.2 million USD in 2018 to 3.15 billion USD in 2022. The most aggressive expansion occurred between 2021 and 2022, where revenues increased by approximately 58%. This indicates a successful increase in market penetration or demand, despite the declining economic profitability.
- Economic Profit Margin Volatility
- The economic profit margin shifted from a positive 8.77% in 2018 to a negative 8.78% in 2022. The most severe compression occurred in 2020, where the margin fell to negative 13.67%. The inverse relationship between the rising revenue and the falling margin suggests that the cost of capital or operational inefficiencies increased at a rate that outpaced revenue gains, eroding the overall economic value generated per dollar of revenue.
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