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
Enphase Energy 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
= 521,640 – 21.72% × 1,302,318 = 238,732
The financial trajectory from 2019 to 2023 reflects a period of significant volatility followed by substantial growth in value creation. While the company experienced a period of economic value destruction in 2020, it successfully pivoted to achieve strong positive economic profits by 2022, despite a moderate correction in the final year of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited an overall upward trend, growing from 168,136 thousand dollars in 2019 to 521,640 thousand dollars in 2023. A temporary decline occurred in 2020, with profits dropping to 132,831 thousand dollars. However, a period of rapid acceleration followed, peaking in 2022 at 575,824 thousand dollars before experiencing a slight contraction in 2023.
- Cost of Capital and Invested Capital
- The cost of capital remained remarkably stable throughout the five-year period, fluctuating minimally between 21.70% and 22.60%. Simultaneously, invested capital saw a general expansion, increasing from 528,927 thousand dollars in 2019 to 1,302,318 thousand dollars by 2023. A notable contraction in invested capital was observed in 2021, falling to 779,239 thousand dollars, before expanding sharply in 2022.
- Economic Profit and Value Creation
- Economic profit transitioned from a positive 48,619 thousand dollars in 2019 to a deficit of 76,775 thousand dollars in 2020, indicating that the operating returns were insufficient to cover the cost of the capital employed during that year. Recovery began in 2021, leading to a surge in 2022 where economic profit reached its peak of 293,901 thousand dollars. The 2023 figure of 238,732 thousand dollars indicates continued value creation, although at a lower magnitude than the previous year's peak.
The analysis indicates that the substantial increase in economic profit since 2021 was driven primarily by the growth in NOPAT, which outpaced the increase in the cost of capital charge on invested capital. The stability of the cost of capital suggests that the fluctuations in economic profit are a direct result of operational performance and investment efficiency rather than changes in the company's risk profile or the broader cost of funding.
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Net Operating Profit after Taxes (NOPAT)
Enphase Energy 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 doubtful accounts.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in warranty obligations.
5 Addition of increase (decrease) in liabilities related to restructuring activities.
6 Addition of increase (decrease) in equity equivalents to net income.
7 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 24,022 × 7.00% = 1,682
8 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 10,521 × 21.00% = 2,209
9 Addition of after taxes interest expense to net income.
10 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 69,728 × 21.00% = 14,643
11 Elimination of after taxes investment income.
The financial performance from 2019 to 2023 demonstrates a general upward trajectory in both profitability metrics, despite an initial contraction in 2020. Significant expansion is evident between 2021 and 2022, indicating a period of rapid growth in both operational and net earnings.
- Net Income Trends
- Net income experienced a decrease in 2020, falling to 133,995 thousand USD. A robust recovery followed, with a substantial surge in 2022 to 397,362 thousand USD and a further increase to 438,936 thousand USD by the end of 2023. This represents an overall growth trend characterized by accelerating gains in the latter half of the analyzed period.
- Net Operating Profit After Taxes (NOPAT) Performance
- NOPAT mirrored the 2020 decline, dropping to 132,831 thousand USD. A sharp acceleration began in 2021, with NOPAT reaching a peak of 575,824 thousand USD in 2022. Unlike net income, NOPAT observed a moderate decline in 2023, decreasing to 521,640 thousand USD.
- Operating vs. Net Profitability Divergence
- A notable divergence occurred between 2022 and 2023. While net income continued to grow during this interval, NOPAT decreased. This suggests that the 2023 increase in net income was influenced by non-operating factors, whereas the peak of core operating profitability was achieved in 2022.
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Cash Operating Taxes
Enphase Energy 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 outflows from 2019 to 2023 reveals a significant transition in the financial profile, characterized by a shift from tax-benefit positions to substantial cash tax obligations. There is a clear and accelerating upward trend in both the accounting provision for income taxes and the actual cash taxes paid during operations.
- Cash Operating Taxes Growth
- A consistent and exponential increase in cash operating taxes is observed over the five-year period. Payments grew from US$ 3,653 thousand in 2019 to US$ 108,957 thousand by December 31, 2023. The most pronounced acceleration occurred between 2021 and 2023, where cash outflows increased from US$ 16,301 thousand to over US$ 108 million, reflecting a sharp rise in taxable cash-generating activities.
- Income Tax Provision Transition
- The income tax provision underwent a fundamental reversal between 2019 and 2023. From 2019 through 2021, the company recorded tax benefits, with the largest benefit of US$ 71,034 thousand occurring in 2019. This trend reversed in 2022, as the company began recording positive tax provisions, which reached US$ 74,203 thousand in 2023, signaling a transition to sustained accounting profitability.
- Correlation Between Provisions and Cash Outflows
- A notable divergence is observed between the accrual-based tax provision and actual cash payments. While the company recorded tax benefits in the income statement from 2019 to 2021, cash operating taxes remained positive, albeit at lower levels. By 2023, cash operating taxes significantly exceeded the income tax provision, with cash payments reaching US$ 108,957 thousand against a provision of US$ 74,203 thousand, indicating that cash tax obligations surpassed the current year's accounting expense.
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Invested Capital
Enphase Energy 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 revenues.
5 Addition of warranty obligations.
6 Addition of liabilities related to restructuring activities.
7 Addition of equity equivalents to stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in process.
10 Subtraction of marketable securities.
The total invested capital exhibited a significant overall growth trajectory from 2019 to 2023, expanding from 528.9 million US dollars to 1.3 billion US dollars. This expansion indicates a substantial increase in the capital base utilized to generate economic value, though the growth pattern was characterized by a period of volatility between 2020 and 2022.
- Debt and Lease Obligations
- A rapid escalation in total reported debt and leases is observed, growing from 118.3 million US dollars in 2019 to 1.3 billion US dollars by the end of 2023. The most aggressive increase occurred between 2020 and 2021, during which debt obligations more than tripled. By 2023, the growth in debt had largely stabilized, showing minimal change from the 2022 level.
- Stockholders' Equity
- Equity grew from 272.2 million US dollars in 2019 to 983.6 million US dollars in 2023. A slight contraction was noted in 2021, where equity decreased to 430.2 million US dollars from 484.0 million US dollars the previous year. However, this was followed by a sharp recovery and growth phase in 2022 and 2023, nearly doubling the equity base between 2021 and 2023.
- Invested Capital Dynamics
- Invested capital followed a non-linear progression. After an initial surge to 951.5 million US dollars in 2020, a contraction to 779.2 million US dollars occurred in 2021. This decline is notable as it happened despite a concurrent increase in total debt, suggesting a significant shift in the underlying capital structure or balance sheet adjustments. The capital base then expanded rapidly to reach 1.3 billion US dollars by 2023, driven by simultaneous increases in both debt and equity during the 2022 period.
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Cost of Capital
Enphase Energy Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 16,626,446) | 16,626,446) | ÷ | 17,878,768) | = | 0.93 | 0.93 | × | 23.08% | = | 21.46% | ||
| Debt3 | 1,228,300) | 1,228,300) | ÷ | 17,878,768) | = | 0.07 | 0.07 | × | 4.64% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 24,022) | 24,022) | ÷ | 17,878,768) | = | 0.00 | 0.00 | × | 7.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 17,878,768) | 1.00 | 21.72% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 29,015,256) | 29,015,256) | ÷ | 30,840,481) | = | 0.94 | 0.94 | × | 23.08% | = | 21.71% | ||
| Debt3 | 1,800,777) | 1,800,777) | ÷ | 30,840,481) | = | 0.06 | 0.06 | × | 4.64% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 24,448) | 24,448) | ÷ | 30,840,481) | = | 0.00 | 0.00 | × | 6.50% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 30,840,481) | 1.00 | 21.93% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 19,513,074) | 19,513,074) | ÷ | 21,010,462) | = | 0.93 | 0.93 | × | 23.08% | = | 21.44% | ||
| Debt3 | 1,481,638) | 1,481,638) | ÷ | 21,010,462) | = | 0.07 | 0.07 | × | 4.63% × (1 – 21.00%) | = | 0.26% | ||
| Operating lease liability4 | 15,750) | 15,750) | ÷ | 21,010,462) | = | 0.00 | 0.00 | × | 7.40% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 21,010,462) | 1.00 | 21.70% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,965,624) | 24,965,624) | ÷ | 26,464,798) | = | 0.94 | 0.94 | × | 23.08% | = | 21.77% | ||
| Debt3 | 1,479,423) | 1,479,423) | ÷ | 26,464,798) | = | 0.06 | 0.06 | × | 5.70% × (1 – 21.00%) | = | 0.25% | ||
| Operating lease liability4 | 19,751) | 19,751) | ÷ | 26,464,798) | = | 0.00 | 0.00 | × | 7.70% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 26,464,798) | 1.00 | 22.03% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 7,278,663) | 7,278,663) | ÷ | 7,491,633) | = | 0.97 | 0.97 | × | 23.08% | = | 22.42% | ||
| Debt3 | 200,258) | 200,258) | ÷ | 7,491,633) | = | 0.03 | 0.03 | × | 7.57% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 12,712) | 12,712) | ÷ | 7,491,633) | = | 0.00 | 0.00 | × | 8.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 7,491,633) | 1.00 | 22.60% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Enphase Energy 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 | 238,732) | 293,901) | 86,478) | (76,775) | 48,619) | |
| Invested capital2 | 1,302,318) | 1,285,383) | 779,239) | 951,473) | 528,927) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 18.33% | 22.86% | 11.10% | -8.07% | 9.19% | |
| 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 × 238,732 ÷ 1,302,318 = 18.33%
4 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 exhibits a period of initial volatility followed by significant value creation and subsequent stabilization. The overall trend indicates a substantial expansion in both the capital base and the ability to generate returns exceeding the cost of capital, despite a notable contraction in 2020.
- Economic Profit Trends
- Economic profit experienced a sharp decline in 2020, falling to negative 76,775 thousand US dollars. However, a strong recovery followed, with profit increasing to 86,478 thousand US dollars in 2021 and peaking at 293,901 thousand US dollars in 2022. A slight moderation occurred in 2023, with economic profit settling at 238,732 thousand US dollars, remaining significantly higher than pre-2022 levels.
- Invested Capital Expansion
- The capital base grew considerably over the five-year period, increasing from 528,927 thousand US dollars in 2019 to 1,302,318 thousand US dollars by the end of 2023. While there was a temporary reduction in invested capital in 2021, the subsequent surge in 2022 suggests a strategic deployment of resources to drive growth, which coincided with the peak in economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the volatility of the economic profit, dropping from 9.19% in 2019 to -8.07% in 2020, indicating a period where the cost of capital exceeded the returns generated. A rapid reversal occurred between 2021 and 2022, with the ratio climbing to a peak of 22.86%. The decline to 18.33% in 2023 suggests a slight reduction in the efficiency of value creation relative to the invested capital, although the ratio remains robust compared to the 2019-2021 period.
Analysis suggests that the period between 2021 and 2023 was characterized by high capital efficiency, as the increase in invested capital was leveraged to generate substantial economic surplus. The alignment of the peak spread ratio and peak economic profit in 2022 identifies this as the point of maximum economic value creation within the analyzed timeframe.
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Economic Profit Margin
Enphase Energy 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 | 238,732) | 293,901) | 86,478) | (76,775) | 48,619) | |
| Net revenues | 2,290,786) | 2,330,853) | 1,382,049) | 774,425) | 624,333) | |
| Add: Increase (decrease) in deferred revenues | 115,112) | 122,504) | 76,718) | (8,849) | 71,957) | |
| Adjusted net revenues | 2,405,898) | 2,453,357) | 1,458,767) | 765,576) | 696,290) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 9.92% | 11.98% | 5.93% | -10.03% | 6.98% | |
| 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 revenues
= 100 × 238,732 ÷ 2,405,898 = 9.92%
3 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a period of rapid scale expansion followed by a stabilization phase. A strong correlation is evident between the growth of adjusted net revenues and the eventual maximization of economic value created.
- Revenue Trajectory
- Adjusted net revenues grew substantially from US$ 696.29 million in 2019 to a peak of US$ 2.45 billion in 2022. This period of expansion reflects a significant increase in operational scale, which transitioned into a marginal contraction to US$ 2.41 billion by the end of 2023.
- Economic Profit Fluctuations
- Economic profit experienced notable volatility during the analyzed period. An initial profit of US$ 48.62 million in 2019 shifted to a deficit of US$ 76.78 million in 2020. A sharp recovery ensued, with economic profit rising to US$ 86.48 million in 2021 and peaking at US$ 293.90 million in 2022, before moderating to US$ 238.73 million in 2023.
- Economic Profit Margin Analysis
- The economic profit margin followed the trend of absolute profit, shifting from 6.98% in 2019 to -10.03% in 2020, indicating a period where returns did not exceed the cost of capital. The margin recovered to 5.93% in 2021 and reached a high of 11.98% in 2022. The 2023 margin of 9.92% suggests a stabilization of value creation efficiency, mirroring the plateau observed in net revenues.
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