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
ON Semiconductor Corp., 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
= 2,073,654 – 24.31% × 10,925,400 = -582,655
An analysis of the economic value added reveals that the company has consistently failed to generate a positive economic profit from 2019 through 2023. Despite a substantial increase in operational profitability, the growth in invested capital combined with a high cost of capital has resulted in a persistent destruction of economic value.
- Net Operating Profit After Taxes (NOPAT)
- A significant upward trajectory in NOPAT is observed, particularly following a slight dip in 2020. Profitability rose from 340,562 thousand USD in 2019 to 2,073,654 thousand USD by 2023. The most aggressive growth occurred between 2020 and 2022, where NOPAT increased by approximately 655% over two years, indicating a strong improvement in core operational efficiency.
- Invested Capital and Cost of Capital
- The capital base expanded steadily from 6,857,500 thousand USD in 2019 to 10,925,400 thousand USD in 2023. Simultaneously, the cost of capital remained high and showed an increasing trend for most of the period, rising from 19.20% in 2019 to a peak of 24.77% in 2022, before slightly moderating to 24.31% in 2023. This elevated cost of capital creates a high threshold for the company to achieve positive economic value.
- Economic Profit Trends
- Economic profit remained negative throughout the entire observation period, confirming that the return on invested capital was insufficient to cover the cost of capital. A trend of recovery was evident between 2020 and 2022, as the economic loss narrowed from 1,281,115 thousand USD to 329,026 thousand USD. However, this progress reversed in 2023, with the economic profit declining again to 582,655 thousand USD. This recent downturn suggests that the increase in invested capital in 2023 outweighed the marginal gains in NOPAT.
The overall financial pattern indicates that while the company has successfully scaled its operations and increased absolute profits, the scale of investment required to achieve these gains has not yet yielded a return that exceeds the company's cost of capital.
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Net Operating Profit after Taxes (NOPAT)
ON Semiconductor Corp., 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 accrued restructuring charges.
3 Addition of increase (decrease) in equity equivalents to net income attributable to ON Semiconductor Corporation.
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 264,000 × 4.80% = 12,672
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 87,472 × 21.00% = 18,369
6 Addition of after taxes interest expense to net income attributable to ON Semiconductor Corporation.
7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 93,100 × 21.00% = 19,551
8 Elimination of after taxes investment income.
The financial trajectory from 2019 to 2023 is characterized by a period of initial stability followed by a phase of rapid expansion in both operating and bottom-line profitability. The growth profile indicates a significant scaling of operations and profitability starting in 2021.
- Net Operating Profit After Taxes (NOPAT) Trends
- A contraction in NOPAT occurred between 2019 and 2020, with values decreasing from 340,562 thousand US$ to 262,790 thousand US$. However, this was followed by a period of exponential growth; NOPAT increased by approximately 362% in 2021 and continued to climb to 1,991,931 thousand US$ by 2022. The growth rate decelerated significantly in 2023, with the figure reaching 2,073,654 thousand US$, suggesting a stabilization of operating profitability.
- Net Income Progression
- Net income attributable to the corporation exhibited a consistent upward trend throughout the five-year period. Unlike NOPAT, net income did not experience a decline in 2020, growing slightly from 211,700 thousand US$ to 234,200 thousand US$. The most substantial gains were realized between 2021 and 2023, with net income rising from 1,009,600 thousand US$ to 2,183,700 thousand US$, representing a total increase of approximately 932% since 2019.
- Comparative Analysis of NOPAT and Net Income
- From 2019 through 2022, NOPAT consistently remained higher than net income, a pattern typically indicative of the impact of interest expenses or other non-operating costs reducing the final bottom line. A notable shift occurred in 2023, where net income (2,183,700 thousand US$) exceeded NOPAT (2,073,654 thousand US$). This divergence suggests the influence of non-operating income or a significant change in the company's financial structure and tax positioning during the final year of the observed period.
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Cash Operating Taxes
ON Semiconductor Corp., cash operating taxes calculation
US$ 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 financial data reveals a significant shift in the tax profile between 2019 and 2023, characterized by a sharp escalation in both accrual-based tax provisions and actual cash tax outflows starting in 2022.
- Provision for Income Taxes Trends
- The provision for income taxes exhibited substantial volatility over the five-year period. Following a provision of $62.7 million in 2019, a tax benefit of $59.8 million was recorded in 2020. The provision then rose to $146.6 million in 2021 and peaked at $458.4 million in 2022, before declining to $350.2 million in 2023.
- Cash Operating Taxes Trends
- Cash operating taxes remained relatively stable from 2019 through 2021, with values ranging between $79.99 million and $90.56 million. A dramatic increase occurred in 2022, with cash outflows surging to $457.07 million, a growth of approximately 438% compared to the previous year. This trend persisted into 2023, with cash taxes increasing further to $470.02 million.
- Relationship Between Accruals and Cash Outflows
- A notable divergence is observed between the provision for income taxes and cash operating taxes during the 2019-2021 period. Most prominently, in 2020, the company recorded a tax benefit while simultaneously maintaining a cash tax payment of $90.56 million. However, starting in 2022, the cash operating taxes converged closely with the income tax provisions. This transition indicates a shift toward a regime where tax obligations are settled in cash more concurrently with the recognition of the expense, which directly increases the cash tax component utilized in Economic Value Added (EVA) calculations.
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Invested Capital
ON Semiconductor Corp., invested capital calculation (financing approach)
US$ 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 accrued restructuring charges.
4 Addition of equity equivalents to total ON Semiconductor Corporation stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of marketable securities, classified as available-for-sale.
Invested capital has demonstrated a consistent and accelerating upward trajectory over the five-year period ending December 31, 2023. Total invested capital increased from US$ 6,857,500 thousand in 2019 to US$ 10,925,400 thousand in 2023, reflecting a significant expansion of the capital base used to generate economic value.
- Debt and Lease Obligations
- Total reported debt and leases remained relatively stable over the analyzed period. A gradual decline was observed from 2019 to 2021, where the balance reached a period low of US$ 3,272,400 thousand. While a slight increase followed in 2022 and 2023, the total debt level at the end of 2023 was lower than the initial 2019 figure, indicating that debt did not serve as a primary driver for capital expansion.
- Stockholders' Equity Evolution
- Stockholders' equity showed substantial and continuous growth, more than doubling from US$ 3,301,700 thousand in 2019 to US$ 7,782,600 thousand in 2023. The rate of growth accelerated markedly after 2020, with the largest year-over-year increases occurring between 2021 and 2023. This trend suggests a strong accumulation of retained earnings or significant capital contributions.
- Invested Capital Composition and Drivers
- The expansion of total invested capital is almost exclusively attributable to the increase in stockholders' equity. Because debt levels remained flat or slightly declined while equity grew aggressively, the capital structure shifted toward a higher proportion of equity financing. This transition indicates a reduction in financial leverage as the primary means of funding growth, with the company relying instead on its own internal equity base to support its invested capital requirements.
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Cost of Capital
ON Semiconductor Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,156,430) | 33,156,430) | ÷ | 37,417,230) | = | 0.89 | 0.89 | × | 27.15% | = | 24.06% | ||
| Long-term debt and financing lease liabilities, including current portion3 | 3,996,800) | 3,996,800) | ÷ | 37,417,230) | = | 0.11 | 0.11 | × | 2.71% × (1 – 21.00%) | = | 0.23% | ||
| Operating lease liability4 | 264,000) | 264,000) | ÷ | 37,417,230) | = | 0.01 | 0.01 | × | 4.80% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 37,417,230) | 1.00 | 24.31% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and financing lease liabilities, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 34,730,220) | 34,730,220) | ÷ | 38,692,220) | = | 0.90 | 0.90 | × | 27.15% | = | 24.37% | ||
| Long-term debt and financing lease liabilities, including current portion3 | 3,680,300) | 3,680,300) | ÷ | 38,692,220) | = | 0.10 | 0.10 | × | 4.91% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 281,700) | 281,700) | ÷ | 38,692,220) | = | 0.01 | 0.01 | × | 4.90% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 38,692,220) | 1.00 | 24.77% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and financing lease liabilities, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 25,370,322) | 25,370,322) | ÷ | 29,510,322) | = | 0.86 | 0.86 | × | 27.15% | = | 23.34% | ||
| Long-term debt and financing lease liabilities, including current portion3 | 3,965,100) | 3,965,100) | ÷ | 29,510,322) | = | 0.13 | 0.13 | × | 2.93% × (1 – 21.00%) | = | 0.31% | ||
| Operating lease liability4 | 174,900) | 174,900) | ÷ | 29,510,322) | = | 0.01 | 0.01 | × | 4.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 29,510,322) | 1.00 | 23.67% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and financing lease liabilities, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,237,223) | 17,237,223) | ÷ | 21,319,023) | = | 0.81 | 0.81 | × | 27.15% | = | 21.95% | ||
| Long-term debt and financing lease liabilities, including current portion3 | 3,933,900) | 3,933,900) | ÷ | 21,319,023) | = | 0.18 | 0.18 | × | 2.96% × (1 – 21.00%) | = | 0.43% | ||
| Operating lease liability4 | 147,900) | 147,900) | ÷ | 21,319,023) | = | 0.01 | 0.01 | × | 4.90% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 21,319,023) | 1.00 | 22.41% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and financing lease liabilities, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 8,591,272) | 8,591,272) | ÷ | 12,863,272) | = | 0.67 | 0.67 | × | 27.15% | = | 18.13% | ||
| Long-term debt and financing lease liabilities, including current portion3 | 4,158,000) | 4,158,000) | ÷ | 12,863,272) | = | 0.32 | 0.32 | × | 4.03% × (1 – 21.00%) | = | 1.03% | ||
| Operating lease liability4 | 114,000) | 114,000) | ÷ | 12,863,272) | = | 0.01 | 0.01 | × | 5.40% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 12,863,272) | 1.00 | 19.20% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt and financing lease liabilities, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ON Semiconductor Corp., 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 | (582,655) | (329,026) | (575,543) | (1,281,115) | (976,057) | |
| Invested capital2 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.33% | -3.51% | -7.61% | -18.60% | -14.23% | |
| 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. | -29.62% | -1.97% | -6.58% | -12.02% | — | |
| 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 × -582,655 ÷ 10,925,400 = -5.33%
4 Click competitor name to see calculations.
The analysis of economic value creation reveals that the organization has consistently failed to generate positive economic profit throughout the observed five-year period. While there were notable fluctuations in the magnitude of the losses, the inability to exceed the cost of capital indicates a persistent destruction of shareholder value from an economic perspective.
- Economic Profit Trends
- Economic profit exhibited significant volatility, reaching its lowest point in 2020 with a deficit of 1,281,115 thousand US dollars. A recovery phase followed, with losses narrowing substantially to 329,026 thousand US dollars by 2022. However, this positive momentum reversed in 2023, as economic profit declined again to 582,655 thousand US dollars.
- Invested Capital Growth
- A consistent and aggressive upward trend in invested capital is observed. From 2019 to 2023, the capital base expanded from 6,857,500 thousand US dollars to 10,925,400 thousand US dollars. This represents a substantial increase in the resources deployed into the business, which has occurred despite the continued absence of positive economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, remained negative for the entire duration. The ratio deteriorated to -18.60% in 2020, coinciding with the peak economic loss. A marked improvement was recorded between 2021 and 2022, where the ratio climbed to -3.51%, suggesting an increase in operational efficiency or a narrowing gap between returns and capital costs. This improvement was partially eroded in 2023, with the ratio sliding back to -5.33%.
In summary, the data indicates a period of capital expansion that has not yet translated into economic value creation. The improvement seen through 2022 was not sustained into 2023, suggesting that the increase in invested capital has not yet yielded the returns necessary to achieve a positive economic spread.
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Economic Profit Margin
ON Semiconductor Corp., 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 | (582,655) | (329,026) | (575,543) | (1,281,115) | (976,057) | |
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.06% | -3.95% | -8.54% | -24.38% | -17.69% | |
| 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. | -101.90% | -3.38% | -11.01% | -23.72% | — | |
| 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 ÷ Revenue
= 100 × -582,655 ÷ 8,253,000 = -7.06%
3 Click competitor name to see calculations.
An analysis of the economic value added metrics from 2019 through 2023 reveals a consistent state of negative economic profit, indicating that the entity did not generate returns in excess of its cost of capital throughout the period. Despite this, there was a notable trend of operational improvement between 2020 and 2022, which was subsequently reversed in 2023.
- Revenue Trends
- Revenue exhibited a slight decline in 2020 to 5.26 billion US dollars from 5.52 billion US dollars in 2019. This was followed by a period of significant growth, increasing to 6.74 billion US dollars in 2021 and peaking at 8.33 billion US dollars in 2022. The growth trend plateaued in 2023, with revenue ending the year at 8.25 billion US dollars.
- Economic Profit Performance
- Economic profit reached its most negative point in 2020 at negative 1.28 billion US dollars. A recovery phase occurred over the next two years, with losses narrowing to negative 575.5 million US dollars in 2021 and reaching a period high of negative 329 million US dollars in 2022. This recovery was interrupted in 2023, as economic profit declined again to negative 582.7 million US dollars.
- Economic Profit Margin Analysis
- The economic profit margin showed significant volatility, hitting a low of negative 24.38% in 2020. The margin improved markedly to negative 8.54% in 2021 and reached its most favorable level of negative 3.95% in 2022, correlating with the peak in revenue. However, the margin deteriorated to negative 7.06% in 2023, suggesting a decrease in the efficiency of value creation relative to the scale of operations.
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