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
First Solar Inc., economic profit calculation
US$ in thousands
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
= 1,542,086 – 22.00% × 7,840,426 = -182,790
The financial performance from 2019 to 2023 demonstrates a consistent trajectory toward operational profitability, although the company has not yet achieved positive economic profit. A significant improvement in net operating profit after taxes (NOPAT) is evident, moving from a deficit in 2019 to substantial positive figures by 2023, indicating an strengthening of the core business operations.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trend is observed in NOPAT, which transitioned from a loss of 94,458 thousand USD in 2019 to a profit of 1,542,086 thousand USD in 2023. This represents a substantial recovery and growth phase, with the most significant increase occurring between 2022 and 2023.
- Cost of Capital and Invested Capital
- The cost of capital has remained relatively stable, fluctuating within a narrow range between 20.62% and 22.43%. Invested capital showed a general increase over the period, with a notable spike in 2023 to 7,840,426 thousand USD, following a temporary contraction in 2022.
- Economic Profit Trends
- Despite the growth in NOPAT, economic profit remained negative throughout the five-year period. However, there is a clear trend of convergence toward zero. The economic loss narrowed from 1,103,619 thousand USD in 2019 to 182,790 thousand USD in 2023. This indicates that the operating returns are increasingly covering the cost of the invested capital, although the threshold for value creation has not yet been crossed.
The overall analysis suggests that while the company is significantly improving its operational efficiency and profit generation, the high cost of capital and the expansion of the invested capital base continue to result in a negative economic value added. The steady reduction in economic losses suggests a positive momentum toward achieving a sustainable economic profit.
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Net Operating Profit after Taxes (NOPAT)
First Solar Inc., NOPAT calculation
US$ in thousands
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 allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in equity equivalents to net income (loss).
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 46,969 × 5.20% = 2,442
7 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 15,407 × 21.00% = 3,236
8 Addition of after taxes interest expense to net income (loss).
9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 97,658 × 21.00% = 20,508
10 Elimination of after taxes investment income.
The financial performance of First Solar Inc. from 2019 to 2023 is characterized by a significant divergence between core operational profitability and net income. While net income has exhibited considerable volatility, the net operating profit after taxes (NOPAT) has demonstrated a consistent and strong upward trajectory over the five-year period.
- Net Operating Profit After Taxes (NOPAT) Trends
- A sustained growth pattern is evident in NOPAT, which increased from a negative US$ 94,458 thousand in 2019 to US$ 1,542,086 thousand by the end of 2023. The most significant acceleration occurred between 2022 and 2023, where NOPAT nearly doubled from US$ 826,891 thousand to US$ 1,542,086 thousand, indicating a substantial increase in the efficiency and profitability of core business operations.
- Net Income Volatility
- Net income experienced fluctuations, recording losses in 2019 (US$ 114,933 thousand) and 2022 (US$ 44,166 thousand). This volatility contrasts sharply with the steady growth of NOPAT. However, a strong recovery was observed in 2023, with net income reaching US$ 830,777 thousand, the highest value in the analyzed period.
- Operational versus Bottom-Line Divergence
- A notable discrepancy is observed in 2022, where net income fell into negative territory despite NOPAT continuing its growth to US$ 826,891 thousand. This suggests that the losses recorded in the net income for that period were driven by non-operating factors—such as financing costs, tax adjustments, or non-recurring items—rather than a decline in operational performance. The widening gap between NOPAT and net income underscores the strength of the core operational engine relative to overall accounting profit.
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Cash Operating Taxes
First Solar Inc., cash operating taxes calculation
US$ in thousands
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 analysis of tax-related cash flows and accounting expenses reveals a period of significant volatility followed by a phase of stabilization between 2019 and 2023. The relationship between accrual-based tax expenses and actual cash operating taxes shifted from substantial benefits to consistent outflows, indicating a transition in the entity's taxable position.
- Cash Operating Tax Volatility
- A significant fluctuation is observed in 2020, where cash operating taxes recorded a negative value of 119.2 million, representing a substantial cash benefit or tax refund. This represents a sharp reversal from 2019, where cash payments totaled 42.9 million. From 2021 onward, a recovery trend is evident, with cash payments returning to positive territory at 23.0 million and increasing to 56.5 million by the end of 2023.
- Accrual versus Cash Tax Divergence
- Income tax expenses largely mirrored the volatility seen in cash taxes during the 2019-2020 period, specifically with the significant benefit of 107.3 million recorded in 2020. However, a notable divergence occurred in 2021, where the income tax expense reached 103.5 million while the actual cash operating tax payment remained relatively low at 23.0 million. This indicates a period where accounting tax provisions significantly exceeded actual cash outflows.
- Convergence and Stabilization
- A trend toward convergence is observed in the final two years of the analyzed period. In 2022 and 2023, the figures for income tax expense (52.8 million and 60.5 million) and cash operating taxes (54.9 million and 56.5 million) aligned closely. This stabilization suggests that the accounting tax provisions have become more reflective of the actual cash taxes paid, pointing to a more predictable and steady tax environment.
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Invested Capital
First Solar Inc., invested capital calculation (financing approach)
US$ in thousands
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 allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of product warranty liability.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities and restricted marketable securities.
The capital structure experienced significant shifts between 2019 and 2023, characterized by an initial period of deleveraging followed by a substantial expansion of the capital base in the final year.
- Total Reported Debt and Leases
- A consistent downward trend was observed from 2019 through 2022, with debt levels declining from 595,314 thousand US$ to a period low of 234,131 thousand US$. This trajectory reversed sharply in 2023, with debt increasing to 624,389 thousand US$, the highest level recorded in the five-year period.
- Stockholders' Equity
- Equity maintained a generally positive trajectory, rising from 5,096,767 thousand US$ in 2019 to 6,687,469 thousand US$ by 2023. Despite a slight contraction in 2022, the overall growth indicates a strengthening of the equity base over the long term.
- Invested Capital
- Invested capital grew steadily from 4,894,577 thousand US$ in 2019 to a peak of 5,692,249 thousand US$ in 2021. A contraction occurred in 2022, reducing the figure to 5,054,301 thousand US$, before a significant surge in 2023 brought the total to 7,840,426 thousand US$. This final increase suggests a substantial deployment of resources, driven by both the spike in debt and the increase in stockholders' equity.
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Cost of Capital
First Solar Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 15,492,026) | 15,492,026) | ÷ | 16,069,951) | = | 0.96 | 0.96 | × | 22.64% | = | 21.83% | ||
| Debt and finance lease liabilities3 | 530,956) | 530,956) | ÷ | 16,069,951) | = | 0.03 | 0.03 | × | 6.04% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 46,969) | 46,969) | ÷ | 16,069,951) | = | 0.00 | 0.00 | × | 5.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 16,069,951) | 1.00 | 22.00% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,031,862) | 18,031,862) | ÷ | 18,242,630) | = | 0.99 | 0.99 | × | 22.64% | = | 22.38% | ||
| Debt and finance lease liabilities3 | 160,986) | 160,986) | ÷ | 18,242,630) | = | 0.01 | 0.01 | × | 4.96% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 49,782) | 49,782) | ÷ | 18,242,630) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 18,242,630) | 1.00 | 22.43% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,040,959) | 8,040,959) | ÷ | 8,443,517) | = | 0.95 | 0.95 | × | 22.64% | = | 21.56% | ||
| Debt and finance lease liabilities3 | 243,865) | 243,865) | ÷ | 8,443,517) | = | 0.03 | 0.03 | × | 2.80% × (1 – 21.00%) | = | 0.06% | ||
| Operating lease liability4 | 158,693) | 158,693) | ÷ | 8,443,517) | = | 0.02 | 0.02 | × | 2.80% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 8,443,517) | 1.00 | 21.67% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,587,018) | 8,587,018) | ÷ | 9,087,134) | = | 0.94 | 0.94 | × | 22.64% | = | 21.40% | ||
| Debt and finance lease liabilities3 | 297,076) | 297,076) | ÷ | 9,087,134) | = | 0.03 | 0.03 | × | 2.90% × (1 – 21.00%) | = | 0.07% | ||
| Operating lease liability4 | 203,040) | 203,040) | ÷ | 9,087,134) | = | 0.02 | 0.02 | × | 2.90% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 9,087,134) | 1.00 | 21.52% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 5,335,103) | 5,335,103) | ÷ | 5,962,933) | = | 0.89 | 0.89 | × | 22.64% | = | 20.26% | ||
| Debt and finance lease liabilities3 | 504,213) | 504,213) | ÷ | 5,962,933) | = | 0.08 | 0.08 | × | 4.30% × (1 – 21.00%) | = | 0.29% | ||
| Operating lease liability4 | 123,617) | 123,617) | ÷ | 5,962,933) | = | 0.02 | 0.02 | × | 4.30% × (1 – 21.00%) | = | 0.07% | ||
| Total: | 5,962,933) | 1.00 | 20.62% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
First Solar Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (182,790) | (306,709) | (665,541) | (885,828) | (1,103,619) | |
| Invested capital2 | 7,840,426) | 5,054,301) | 5,692,249) | 5,111,222) | 4,894,577) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -2.33% | -6.07% | -11.69% | -17.33% | -22.55% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -28.80% | -28.42% | 28.16% | — | — | |
| Analog Devices Inc. | -10.06% | -11.43% | -14.67% | -9.61% | — | |
| Applied Materials Inc. | 13.36% | 23.33% | 18.82% | 7.16% | — | |
| Broadcom Inc. | 4.87% | 3.61% | -5.62% | -10.85% | — | |
| Intel Corp. | -19.83% | -13.05% | 3.54% | — | — | |
| KLA Corp. | 20.17% | 22.57% | 11.03% | — | — | |
| Lam Research Corp. | 2.38% | 17.40% | 12.74% | — | — | |
| Marvell Technology Inc. | -22.13% | -24.89% | -26.61% | — | — | |
| Micron Technology Inc. | -37.98% | -10.44% | -15.17% | — | — | |
| NVIDIA Corp. | -16.05% | 26.14% | 6.62% | — | — | |
| Qualcomm Inc. | 0.23% | 26.66% | 24.06% | 9.13% | — | |
| Texas Instruments Inc. | 12.32% | 32.90% | 31.54% | — | — | |
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 × -182,790 ÷ 7,840,426 = -2.33%
4 Click competitor name to see calculations.
An analysis of the financial data from 2019 to 2023 reveals a consistent trajectory of improvement in value creation metrics, characterized by a steady reduction in economic losses and a narrowing economic spread.
- Economic Profit Trend
- A sustained upward trend is observed in economic profit, which remained negative throughout the five-year period but improved significantly. The economic loss decreased from 1,103,619 thousand US dollars in 2019 to 182,790 thousand US dollars by 2023. This progression indicates a consistent reduction in the gap between the company's net operating profit after taxes and its cost of capital.
- Invested Capital Dynamics
- Invested capital exhibited general growth over the period, rising from 4,894,577 thousand US dollars in 2019 to 7,840,426 thousand US dollars in 2023. While there was a marginal contraction in 2022, the substantial increase in 2023 suggests a significant expansion of the capital base, occurring simultaneously with the improvement in economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio demonstrates a continuous convergence toward zero, moving from -22.55% in 2019 to -2.33% in 2023. This steady increase indicates that the return on invested capital is increasingly aligning with the cost of capital. The narrowing of this ratio suggests an improvement in capital efficiency and a transition toward a state of positive economic value added.
The combined data indicates that while the organization has not yet achieved positive economic profit, the rate of value destruction has decelerated markedly. The ability to improve the economic spread ratio despite a significant increase in invested capital in the final year suggests enhanced operational performance and a strengthening financial position.
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Economic Profit Margin
First Solar Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (182,790) | (306,709) | (665,541) | (885,828) | (1,103,619) | |
| Net sales | 3,318,602) | 2,619,319) | 2,923,377) | 2,711,332) | 3,063,117) | |
| Add: Increase (decrease) in deferred revenue | 797,243) | 910,129) | 64,079) | (160,923) | 216,886) | |
| Adjusted net sales | 4,115,845) | 3,529,448) | 2,987,456) | 2,550,409) | 3,280,003) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -4.44% | -8.69% | -22.28% | -34.73% | -33.65% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -73.50% | -70.47% | 10.61% | — | — | |
| Analog Devices Inc. | -36.13% | -42.83% | -94.24% | -31.23% | — | |
| Applied Materials Inc. | 8.96% | 13.47% | 12.01% | 5.45% | — | |
| Broadcom Inc. | 8.52% | 6.76% | -13.24% | -29.94% | — | |
| Intel Corp. | -33.68% | -18.36% | 3.97% | — | — | |
| KLA Corp. | 16.02% | 19.08% | 10.87% | — | — | |
| Lam Research Corp. | 2.09% | 12.85% | 10.28% | — | — | |
| Marvell Technology Inc. | -74.77% | -111.07% | -81.68% | — | — | |
| Micron Technology Inc. | -129.04% | -17.68% | -25.06% | — | — | |
| NVIDIA Corp. | -12.70% | 17.52% | 5.17% | — | — | |
| Qualcomm Inc. | 0.20% | 17.76% | 14.49% | 6.89% | — | |
| Texas Instruments Inc. | 15.89% | 28.85% | 28.21% | — | — | |
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 ÷ Adjusted net sales
= 100 × -182,790 ÷ 4,115,845 = -4.44%
3 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 indicates a consistent movement toward economic profitability, characterized by a steady reduction in the economic profit deficit and a general expansion of adjusted net sales.
- Economic Profit Trend
- A sustained recovery is observed in economic profit, which improved from a deficit of US$ 1,103,619 thousand in 2019 to US$ 182,790 thousand by 2023. The consistent year-over-year reduction in this deficit suggests a narrowing gap between the company's net operating profit and its cost of capital.
- Adjusted Net Sales Performance
- Following a contraction in 2020, where sales fell to US$ 2,550,409 thousand, a period of consistent growth occurred. Adjusted net sales increased steadily from 2021 onward, reaching US$ 4,115,845 thousand by the end of 2023, representing a significant increase in scale compared to the 2020 trough.
- Economic Profit Margin Evolution
- The economic profit margin shows a strong positive trend toward the break-even point. After reaching a low of -34.73% in 2020, the margin improved significantly to -22.28% in 2021, -8.69% in 2022, and -4.44% in 2023. This acceleration in margin improvement indicates that the company is becoming increasingly efficient at covering its cost of capital relative to its sales volume.
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