Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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SolarEdge Technologies Inc. pages available for free this week:
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2015
- Return on Assets (ROA) since 2015
- Price to Earnings (P/E) since 2015
- Price to Operating Profit (P/OP) since 2015
- Price to Sales (P/S) since 2015
- Analysis of Debt
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Return on Invested Capital (ROIC)
SolarEdge Technologies Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, 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: 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 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- From 2018 to 2019, NOPAT increased significantly from approximately 204 million US dollars to around 279 million US dollars. However, in 2020, there was a notable decline to about 155 million US dollars. The figure rebounded again in 2021 to approximately 254 million US dollars, then slightly decreased to about 250 million US dollars in 2022. Overall, NOPAT shows volatility with substantial fluctuations over the observed period.
- Invested Capital
- The invested capital demonstrated a consistent upward trend throughout the period. It more than doubled from approximately 559 million US dollars in 2018 to over 909 million US dollars in 2019 and then nearly doubled again to approximately 1.73 billion US dollars in 2020. The invested capital remained stable between 2020 and 2021, showing a slight decrease, before increasing sharply in 2022 to nearly 2.61 billion US dollars. This indicates significant investment growth, particularly strong in the latest year.
- Return on Invested Capital (ROIC)
- ROIC exhibited a declining trend over the years. Starting from a high of 36.46% in 2018, it decreased to 30.66% in 2019, followed by a sharp drop to 8.91% in 2020. There was a partial recovery in 2021 when ROIC rose to 14.91%, but it declined again to 9.58% in 2022. These changes suggest diminishing efficiency in the use of invested capital to generate returns, particularly after 2019, despite the increased capital base.
- Summary
- The data reveals that while net operating profit has experienced fluctuations, it generally remained within a moderate range after an initial peak in 2019. Invested capital has expanded substantially, reflecting aggressive investment or asset growth strategies. However, the considerable increase in invested capital has not been matched by proportional increases in profitability, as evidenced by the downward trend in ROIC. The declining ROIC indicates that the company has faced challenges in maintaining high returns on its expanding capital base during the observed timeframe.
Decomposition of ROIC
SolarEdge Technologies Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × |
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin exhibited a declining trend over the five-year period. Starting at 22.46% in 2018, it decreased slightly to 21.11% in 2019, followed by a more pronounced drop to 12.71% in 2020. Although there was a modest recovery to 14.3% in 2021, the margin declined again to 10.93% in 2022. This indicates a reduction in operational profitability, with notable volatility and a downward trajectory in recent years.
- Turnover of Capital (TO)
- The turnover of capital showed a general decrease from 1.75 in 2018 to a low of 0.83 in 2020, reflecting a reduced efficiency in generating revenue from capital employed. However, the ratio improved subsequently, rising to 1.17 in 2021 and 1.21 in 2022. Despite this improvement, the turnover of capital in 2022 remained below the levels observed at the start of the period, suggesting that capital efficiency has not fully recovered to earlier standards.
- 1 – Effective Cash Tax Rate (CTR)
- This metric declined steadily from 92.8% in 2018 to 72.44% in 2022, indicating that the effective cash tax burden decreased over the period. The decrease was gradual with a slight fluctuation in 2021, but the overall trend points to a reduction in the proportion of earnings paid out as cash taxes, which may have positive implications for cash flow management.
- Return on Invested Capital (ROIC)
- The return on invested capital mirrored the trend observed in the operating profit margin, starting at a strong 36.46% in 2018 and declining sharply to 8.91% by 2020. A partial recovery occurred in 2021 when the ROIC increased to 14.91%, but this was followed by another decline to 9.58% in 2022. This pattern suggests challenges in generating returns from invested capital, with considerable variability and a generally downward trend over the analysis period.
Operating Profit Margin (OPM)
SolarEdge Technologies Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, 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: 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 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- Over the analyzed period from 2018 to 2022, the net operating profit before taxes exhibited a generally positive trend with some fluctuations. It increased significantly from approximately 220 million USD in 2018 to over 319 million USD in 2019. However, in 2020, there was a notable decline to about 183 million USD. The figure rebounded in 2021 to approximately 285 million USD and continued to rise to nearly 345 million USD in 2022. This pattern suggests some volatility in profitability, with a strong recovery following the dip in 2020.
- Adjusted Revenues
- Adjusted revenues showed consistent and robust growth throughout the five-year period. Starting from around 978 million USD in 2018, revenues surged to over 1.5 billion USD in 2019 and then slightly declined to approximately 1.44 billion USD in 2020. Since then, revenues expanded significantly, reaching nearly 2 billion USD in 2021 and then escalating further to more than 3.15 billion USD in 2022. This upward trajectory highlights strong sales growth, especially notable in the last two years.
- Operating Profit Margin (OPM)
- The operating profit margin experienced a declining trend over the period analyzed. Starting at 22.46% in 2018, the margin showed a slight decrease to 21.11% in 2019. A more pronounced drop occurred in 2020, with the margin falling to 12.71%. Subsequent years showed minor fluctuations, with the margin increasing moderately to 14.3% in 2021 but decreasing again to 10.93% in 2022. This pattern indicates that despite growing revenues and overall profit, operating efficiency or cost management may have been challenged, leading to a reduction in profitability ratio relative to sales.
Turnover of Capital (TO)
SolarEdge Technologies Inc., TO 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) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, 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: 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 Invested capital. See details »
2 2022 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Revenues Trend
- The adjusted revenues show a consistent upward trend over the five-year period. Starting at approximately 978 million USD in 2018, revenues increased significantly to over 3.15 billion USD by the end of 2022. There was a notable acceleration in revenue growth from 2021 to 2022, where the increase surpassed one billion USD, indicating strong sales expansion or business scaling during that final year.
- Invested Capital Trend
- The invested capital follows a similar growth trajectory, rising from about 559 million USD in 2018 to nearly 2.61 billion USD by the end of 2022. The largest jump occurred between 2019 and 2020, when invested capital almost doubled from around 910 million USD to over 1.73 billion USD. After a slight decline in 2021, it surged again by over 50% in 2022, suggesting increased asset deployment or reinvestment activities to support growing operations.
- Turnover of Capital (TO) Ratio Analysis
- The turnover of capital ratio, which measures revenue generated per unit of invested capital, exhibited a decline from 1.75 in 2018 to 0.83 in 2020, indicating less efficient use of capital during this period despite rising revenues. However, from 2020 onward, the ratio recovered and stabilized around 1.17 in 2021 and 1.21 in 2022, reflecting improved or stabilized capital efficiency as the company adjusted investments relative to revenue growth.
- Overall Insights
- The data indicates strong revenue growth fueled by substantial increases in invested capital, particularly from 2019 onwards. Capital efficiency dipped notably in 2020 but showed signs of recovery and stabilization in subsequent years, which suggests an initial lag in capital utilization's effectiveness possibly due to investment scaling or operational restructuring. By 2022, the combination of significantly higher revenues and improved turnover ratio reflects a more effective alignment of capital deployment with revenue generation.
Effective Cash Tax Rate (CTR)
SolarEdge Technologies Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, 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: 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 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- There is a notable increase in cash operating taxes over the analyzed period. Starting at $15,810 thousand in 2018, the cash taxes rose substantially to $40,084 thousand in 2019. The figure then slightly declined to $28,279 thousand in 2020, followed by a minor increase to $31,486 thousand in 2021. In 2022, cash operating taxes surged significantly to $95,076 thousand, marking the highest value in the period.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT exhibited fluctuations during the timeline. Initially, it increased from $219,730 thousand in 2018 to $319,070 thousand in 2019, indicating strong profitability growth. A decrease to $182,879 thousand occurred in 2020, representing a considerable drop. In 2021, NOPBT recovered to $284,999 thousand and further increased to $344,938 thousand in 2022, achieving the highest profit level in the series.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed an upward trend over the years. Starting at a low rate of 7.2% in 2018, the rate nearly doubled to 12.56% in 2019. It continued to increase to 15.46% in 2020, then decreased slightly to 11.05% in 2021. In 2022, the effective tax rate sharply rose to 27.56%, indicating a significant increase in the proportion of operating profit paid as cash taxes. This rise corresponds with the large increase in cash operating taxes recorded in 2022.