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 – 24.56% × 10,925,400 = -609,677
The financial performance from 2019 to 2023 reveals a significant expansion in operational profitability that has yet to translate into positive economic value creation. Despite a substantial increase in net operating profit after taxes, the company consistently reported negative economic profit, indicating that the returns generated were insufficient to cover the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- A strong upward trajectory is observed in NOPAT, which grew from 340,562 thousand US$ in 2019 to 2,073,654 thousand US$ in 2023. The most significant acceleration occurred between 2020 and 2022, where profit levels increased more than sevenfold, suggesting a period of rapid operational scaling or improved pricing power.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily from 6,857,500 thousand US$ in 2019 to 10.925,400 thousand US$ by 2023. Concurrently, the cost of capital exhibited an increasing trend, rising from 19.39% in 2019 to a peak of 25.02% in 2022, before settling slightly at 24.56% in 2023. The simultaneous increase in both the volume of capital deployed and the rate at which that capital must be compensated created a higher hurdle for achieving economic profitability.
- Economic Profit Analysis
- Economic profit remained negative throughout the entire five-year period, signifying a consistent destruction of economic value. While there was a trend toward recovery between 2020 and 2022—with the deficit narrowing from -1,296,663 thousand US$ to -352,505 thousand US$—this progress reversed in 2023. The economic profit declined to -609,677 thousand US$ in the final year, as the growth in invested capital and the high cost of capital outweighed the incremental gains in NOPAT.
In summary, the data indicates that while operational efficiency and absolute profits have improved dramatically, the capital intensity and the high cost of financing have prevented the company from achieving a positive economic profit. The reversal of the improvement trend in 2023 suggests that the marginal return on new invested capital is currently below the 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 | × | 27.43% | = | 24.31% | ||
| 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 | 24.56% | ||||||||||
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 | × | 27.43% | = | 24.62% | ||
| 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 | 25.02% | ||||||||||
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 | × | 27.43% | = | 23.58% | ||
| 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 | 23.91% | ||||||||||
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 | × | 27.43% | = | 22.18% | ||
| 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 | 22.64% | ||||||||||
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 | × | 27.43% | = | 18.32% | ||
| 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 | 19.39% | ||||||||||
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 | (609,677) | (352,505) | (593,686) | (1,296,663) | (988,841) | |
| Invested capital2 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.58% | -3.76% | -7.85% | -18.82% | -14.42% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -29.12% | -28.73% | 27.84% | — | — | |
| Analog Devices Inc. | -10.08% | -11.45% | -14.69% | -9.63% | — | |
| Applied Materials Inc. | 13.17% | 23.15% | 18.63% | 6.98% | — | |
| Broadcom Inc. | 4.82% | 3.57% | -5.66% | -10.88% | — | |
| Intel Corp. | -19.94% | -13.15% | 3.44% | — | — | |
| KLA Corp. | 20.05% | 22.45% | 10.91% | — | — | |
| Lam Research Corp. | 2.15% | 17.18% | 12.51% | — | — | |
| Marvell Technology Inc. | -22.31% | -25.08% | -26.81% | — | — | |
| Micron Technology Inc. | -38.30% | -10.78% | -15.51% | — | — | |
| NVIDIA Corp. | -16.34% | 25.86% | 6.34% | — | — | |
| Qualcomm Inc. | 0.15% | 26.59% | 23.99% | 9.06% | — | |
| Texas Instruments Inc. | 12.32% | 32.90% | 31.53% | — | — | |
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 × -609,677 ÷ 10,925,400 = -5.58%
4 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by persistent negative economic profit and a consistent expansion of the invested capital base. While a positive economic spread ratio was not achieved during this period, a notable trend of recovery occurred between 2020 and 2022, followed by a moderate deterioration in 2023.
- Invested Capital Trends
- A steady upward trajectory in invested capital is evident, increasing from 6,857,500 thousand US$ in 2019 to 10,925,400 thousand US$ by the end of 2023. The most significant growth occurred between 2021 and 2023, indicating substantial capital deployment into the organization's operations.
- Economic Profit Volatility
- Economic profit remained negative throughout the five-year analysis, signaling that the returns generated were insufficient to cover the cost of capital. After reaching a peak deficit of 1,296,663 thousand US$ in 2020, the economic loss narrowed progressively to a period low of 352,505 thousand US$ in 2022. This improvement reversed in 2023, as the deficit widened again to 609,677 thousand US$.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrored the movement of economic profit, measuring the efficiency of value creation relative to the capital employed. The ratio deteriorated to -18.82% in 2020 but improved significantly over the following two years, reaching -3.76% in 2022. The shift to -5.58% in 2023 indicates a decline in the spread, suggesting that the growth in invested capital did not yield a proportional increase in economic returns during the final year of the period.
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Economic Profit Margin
ON Semiconductor Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (609,677) | (352,505) | (593,686) | (1,296,663) | (988,841) | |
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.39% | -4.23% | -8.81% | -24.67% | -17.92% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -74.32% | -71.26% | 10.49% | — | — | |
| Analog Devices Inc. | -36.21% | -42.90% | -94.37% | -31.30% | — | |
| Applied Materials Inc. | 8.83% | 13.37% | 11.89% | 5.31% | — | |
| Broadcom Inc. | 8.44% | 6.68% | -13.34% | -30.05% | — | |
| Intel Corp. | -33.86% | -18.50% | 3.85% | — | — | |
| KLA Corp. | 15.93% | 18.98% | 10.75% | — | — | |
| Lam Research Corp. | 1.89% | 12.68% | 10.09% | — | — | |
| Marvell Technology Inc. | -75.41% | -111.94% | -82.30% | — | — | |
| Micron Technology Inc. | -130.14% | -18.25% | -25.63% | — | — | |
| NVIDIA Corp. | -12.92% | 17.34% | 4.95% | — | — | |
| Qualcomm Inc. | 0.13% | 17.71% | 14.45% | 6.83% | — | |
| 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 × -609,677 ÷ 8,253,000 = -7.39%
3 Click competitor name to see calculations.
Between 2019 and 2023, the company consistently recorded negative economic profit, indicating that returns remained below the cost of capital throughout the period. However, the data reveals a volatile trend characterized by a significant recovery phase between 2020 and 2022, followed by a regression in 2023.
- Revenue Trends
- Revenue experienced a slight dip in 2020 to $5.255 billion before entering a period of strong growth, peaking at $8.326 billion in 2022. This growth trajectory suggests a substantial expansion in market activity or pricing power. A marginal decline to $8.253 billion was observed in 2023, indicating a plateau in top-line growth.
- Economic Profit Analysis
- Economic profit reached its most negative point in 2020 at -$1.297 billion. This was followed by a two-year trend of improvement, with losses narrowing to -$593.7 million in 2021 and further improving to -$352.5 million in 2022. In 2023, this progress reversed as economic profit widened again to -$609.7 million, suggesting an increase in the cost of capital or a decrease in operating efficiency relative to the capital invested.
- Economic Profit Margin Performance
- The economic profit margin mirrored the absolute profit trends, falling from -17.92% in 2019 to a low of -24.67% in 2020. A significant recovery was observed thereafter, with the margin improving to -8.81% in 2021 and reaching its peak efficiency at -4.23% in 2022. The margin subsequently declined to -7.39% in 2023, confirming that the company failed to sustain the efficiency gains achieved during the 2021-2022 period.
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