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 – 20.23% × 2,608,920 = -277,869
Between 2018 and 2022, a significant shift occurred in the generation of economic value, moving from a period of value creation to a sustained period of value destruction.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility throughout the analyzed period. After peaking in 2019 at 278.9 million USD, a sharp decline occurred in 2020 to 154.6 million USD. A recovery followed in 2021 and 2022, with figures stabilizing around 250 million USD. While operational profitability remained positive, the growth in profit did not scale in proportion to the expansion of the capital base.
- Invested Capital
- A substantial expansion in invested capital is observed, increasing from 559.3 million USD in 2018 to 2.61 billion USD by 2022. The most aggressive growth occurred between 2019 and 2020, where capital nearly doubled. This trajectory indicates a period of heavy investment in assets or infrastructure to support growth.
- Cost of Capital
- The cost of capital remained remarkably stable over the five-year horizon, fluctuating minimally between 19.99% and 21.21%. This consistency suggests that the hurdle rate remained constant despite the significant increase in the scale of operations.
- Economic Profit
- Economic profit transitioned from positive figures of approximately 86 million USD in 2018 and 2019 to substantial deficits starting in 2020. The economic profit reached its lowest point in 2022 at negative 277.9 million USD. The widening gap between NOPAT and the total cost of capital indicates that the returns on the expanded capital base were insufficient to cover the required cost of funding.
The overall trend indicates that the aggressive increase in invested capital significantly outpaced the growth in operating profits. The transition to negative economic profit since 2020 suggests that the capital allocation strategy implemented during this period has not yet generated returns sufficient to exceed the cost of capital, resulting in a decrease in overall economic value.
AI Ask an analyst for more
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.
- 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 $249.9 million, suggesting that operational efficiency was maintained despite fluctuations in net income.
AI Ask an analyst for more
Cash Operating Taxes
SolarEdge Technologies Inc., cash operating taxes calculation
US$ 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).
- 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.
AI Ask an analyst for more
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.
- 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.
AI Ask an analyst for more
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 | × | 21.34% | = | 20.20% | ||
| 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 | 20.23% | ||||||||||
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 | × | 21.34% | = | 19.95% | ||
| 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 | 19.99% | ||||||||||
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 | × | 21.34% | = | 20.19% | ||
| 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 | 20.28% | ||||||||||
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 | × | 21.34% | = | 21.20% | ||
| 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 | 21.21% | ||||||||||
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 | × | 21.34% | = | 21.13% | ||
| 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 | 21.16% | ||||||||||
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 | (277,869) | (86,382) | (197,224) | 86,036) | 85,589) | |
| Invested capital2 | 2,608,920) | 1,700,638) | 1,734,649) | 909,829) | 559,312) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -10.65% | -5.08% | -11.37% | 9.46% | 15.30% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -28.83% | 27.74% | — | — | — | |
| Analog Devices Inc. | -11.45% | -14.69% | -9.63% | — | — | |
| Applied Materials Inc. | 23.09% | 18.58% | 6.93% | — | — | |
| Broadcom Inc. | 3.56% | -5.68% | -10.90% | — | — | |
| Intel Corp. | -13.18% | 3.40% | — | — | — | |
| KLA Corp. | 22.42% | 10.88% | — | — | — | |
| Lam Research Corp. | 17.11% | 12.45% | — | — | — | |
| Marvell Technology Inc. | -25.14% | -26.87% | — | — | — | |
| Micron Technology Inc. | -2.10% | -6.71% | -12.14% | — | — | |
| NVIDIA Corp. | 25.78% | 6.26% | — | — | — | |
| Qualcomm Inc. | 26.57% | 23.96% | 9.03% | — | — | |
| 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 × -277,869 ÷ 2,608,920 = -10.65%
4 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 indicates a transition from positive economic value creation to significant value destruction. While the initial period was characterized by positive economic profits and spreads, the subsequent years demonstrate a failure to generate returns exceeding the cost of capital despite a substantial increase in the invested capital base.
- Economic Spread Ratio Analysis
- A precipitous decline in the economic spread ratio is evident, falling from 15.30% in 2018 to -10.65% by 2022. The ratio remained positive through 2019, although it contracted to 9.46%, before shifting into negative territory in 2020. A partial recovery was observed in 2021, where the ratio improved to -5.08%, but this trend reversed in 2022. This volatility and the overall negative trend signify that the return on invested capital has consistently failed to meet the required cost of capital since 2020.
- Invested Capital and Economic Profit Correlation
- Invested capital experienced aggressive growth, increasing from US$ 559,312 thousand in 2018 to US$ 2,608,920 thousand in 2022. This expansion did not result in proportional gains in economic profit. Instead, economic profit transitioned from a positive US$ 85,589 thousand in 2018 to a substantial deficit of US$ 277,869 thousand by the end of 2022. The divergence between the growing capital base and the declining economic profit suggests that the capital deployments during this period did not generate sufficient incremental returns to cover their associated costs.
AI Ask an analyst for more
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 | (277,869) | (86,382) | (197,224) | 86,036) | 85,589) | |
| 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 | -8.81% | -4.33% | -13.71% | 5.69% | 8.75% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -71.49% | 10.46% | — | — | — | |
| Analog Devices Inc. | -42.92% | -94.41% | -31.31% | — | — | |
| Applied Materials Inc. | 13.33% | 11.85% | 5.27% | — | — | |
| Broadcom Inc. | 6.66% | -13.37% | -30.08% | — | — | |
| Intel Corp. | -18.54% | 3.81% | — | — | — | |
| KLA Corp. | 18.95% | 10.72% | — | — | — | |
| Lam Research Corp. | 12.63% | 10.04% | — | — | — | |
| Marvell Technology Inc. | -112.19% | -82.48% | — | — | — | |
| Micron Technology Inc. | -3.59% | -11.22% | -23.96% | — | — | |
| NVIDIA Corp. | 17.28% | 4.89% | — | — | — | |
| Qualcomm Inc. | 17.70% | 14.43% | 6.82% | — | — | |
| 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 × -277,869 ÷ 3,154,511 = -8.81%
3 Click competitor name to see calculations.
A divergent trend is observed between the expansion of adjusted revenues and the generation of economic profit over the period from 2018 to 2022. While the top-line growth demonstrates significant scaling, the capacity to generate economic value above the cost of capital shifted from positive contributions to substantial losses.
- Economic Profit Trajectory
- Positive economic profit was recorded in 2018 and 2019, remaining relatively stable at approximately 85 to 86 million USD. A sharp reversal occurred in 2020, where economic profit fell to negative 197.2 million USD. Following a partial recovery in 2021 to negative 86.4 million USD, the figure declined further in 2022 to a period low of negative 277.9 million USD, signifying an increasing gap between operating returns and the cost of capital.
- Adjusted Revenue Growth
- Adjusted revenues exhibited a strong overall growth pattern, increasing from 978.2 million USD in 2018 to 3.15 billion USD in 2022. Aside from a slight contraction in 2020, the revenue stream expanded consistently, with the most pronounced increase occurring between 2021 and 2022, where revenues grew by approximately 58%.
- Economic Profit Margin Performance
- The economic profit margin reflects a transition from value creation to value destruction. The margin decreased from 8.75% in 2018 to 5.69% in 2019, before dropping sharply to negative 13.71% in 2020. Although the margin improved to negative 4.33% in 2021, it deteriorated again to negative 8.81% in 2022. This trend indicates that the substantial increase in revenue was insufficient to offset the costs associated with the capital employed, resulting in a negative return on economic investment.
AI Ask an analyst for more