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 – 24.67% × 10,925,400 = -621,174
The financial performance from 2019 to 2023 demonstrates a significant expansion in operational profitability that has not yet been sufficient to offset the cost of invested capital, resulting in persistent negative economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A substantial upward trajectory is observed in NOPAT, which increased from 340,562 thousand US$ in 2019 to 2,073,654 thousand US$ by 2023. Following a brief decline in 2020, the figures experienced rapid growth beginning in 2021, indicating a strong increase in core operational earnings power over the period.
- Invested Capital and Cost of Capital
- Invested capital grew consistently from 6,857,500 thousand US$ in 2019 to 10,925,400 thousand US$ in 2023. During this same window, the cost of capital trended upward from 19.47% in 2019 to a peak of 25.12% in 2022, ending at 24.67% in 2023. The simultaneous expansion of the capital base and the increase in the cost of that capital created a high financial hurdle for value creation.
- Economic Profit Analysis
- Economic profit remained negative throughout the entire analysis period, confirming that the returns generated were insufficient to cover the cost of capital. A period of improvement was noted between 2020 and 2022, where losses narrowed from -1,303,278 thousand US$ to -362,493 thousand US$. However, this trend reversed in 2023, with economic profit falling to -621,174 thousand US$. This deterioration in the final year suggests that the growth in invested capital outpaced the growth in NOPAT relative to 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.
- Net income attributable to ON Semiconductor Corporation
- The net income shows a consistent upward trend over the five-year period. Starting from approximately 211.7 million US dollars in 2019, it increased modestly to 234.2 million in 2020. A significant jump occurred in 2021, with net income more than quadrupling to around 1.009 billion. This strong growth continued through 2022 and 2023, reaching about 1.902 billion and 2.184 billion US dollars respectively, indicating robust profitability improvement and operational performance over time.
- Net operating profit after taxes (NOPAT)
- NOPAT values display some fluctuations initially but then show a marked increase from 2021 onward. In 2019, NOPAT was approximately 340.6 million US dollars but declined to 262.8 million in 2020. Starting 2021, there was a substantial rise to around 1.214 billion US dollars. The upward trajectory continued into 2022 and 2023 with NOPAT reaching roughly 1.992 billion and 2.074 billion US dollars respectively. This pattern suggests improved operational efficiency and effective tax management contributing to growing operating profitability.
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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 notable fluctuations in both the provision for income taxes and cash operating taxes over the five-year period ending December 31, 2023.
- Provision (benefit) for income taxes
- This item shows significant volatility throughout the periods. In 2019, the provision was a positive value of 62,700 thousand US dollars, indicating income tax expense recognition for that year. In 2020, there was a reversal to a tax benefit of 59,800 thousand US dollars, suggesting the company recognized a tax benefit rather than an expense. Following this, 2021 experienced a sharp increase in tax provision to 146,600 thousand US dollars, more than doubling the 2019 figure. The upward trend continued markedly in 2022, reaching 458,400 thousand US dollars, the highest in the period under review. In 2023, the provision decreased somewhat to 350,200 thousand US dollars, although it remained substantially higher than the values reported in 2019 through 2021.
- Cash operating taxes
- Cash operating taxes demonstrate an overall increasing trend over the five years. Beginning at 79,994 thousand US dollars in 2019, the amount increased modestly to 90,557 thousand US dollars in 2020. In 2021, there was a slight decline to 84,769 thousand US dollars. However, a pronounced upward shift occurred in 2022, with cash operating taxes escalating dramatically to 457,073 thousand US dollars. This elevated level sustained into 2023 with a further slight increase to 470,018 thousand US dollars.
In summary, both the provision for income taxes and cash operating taxes experienced considerable growth from 2021 onwards, with particularly sharp increases in 2022 and 2023. The provision for income taxes fluctuated between an expense and a benefit in the early years but settled into a notably higher expense level in later years. The cash operating taxes overall trend upward, with a pronounced rise starting in 2022, possibly aligning with the increases in the provision for income taxes, indicating higher taxable income or changes in tax positions and payments during those years.
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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.
- Total Reported Debt & Leases
- The total reported debt and leases showed a decreasing trend from 3,726,500 thousand USD at the end of 2019 to 3,272,400 thousand USD at the end of 2021. However, this downward trend reversed in the subsequent years, increasing to 3,512,400 thousand USD in 2022 and further to 3,623,800 thousand USD in 2023. Overall, the debt levels exhibit a moderate fluctuation with a reduction phase followed by a gradual increase.
- Total ON Semiconductor Corporation Stockholders’ Equity
- Stockholders' equity demonstrated consistent and considerable growth over the five-year period. Starting at 3,301,700 thousand USD in 2019, equity increased steadily each year, reaching 7,782,600 thousand USD by 2023. This reflects strong capital accumulation and possibly retained earnings or equity issuances that enhanced the company's net worth significantly over time.
- Invested Capital
- Invested capital showed a gradual upward trajectory throughout the period. Beginning at 6,857,500 thousand USD in 2019, it remained relatively stable through 2020 but increased notably to 7,560,500 thousand USD in 2021, followed by a sharper rise to 9,371,400 thousand USD in 2022 and 10,925,400 thousand USD in 2023. This trend indicates increasing investment in the company's operational assets, which may support business growth and expansion activities.
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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 | × | 27.55% | = | 24.41% | ||
| 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 | 24.67% | ||||||||||
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 | × | 27.55% | = | 24.73% | ||
| 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 | 25.12% | ||||||||||
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 | × | 27.55% | = | 23.68% | ||
| 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 | 24.01% | ||||||||||
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 | × | 27.55% | = | 22.27% | ||
| 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 | 22.73% | ||||||||||
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 | × | 27.55% | = | 18.40% | ||
| 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 | 19.47% | ||||||||||
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 | (621,174) | (362,493) | (601,404) | (1,303,278) | (994,280) | |
| Invested capital2 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.69% | -3.87% | -7.95% | -18.92% | -14.50% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -29.27% | -28.89% | 27.68% | — | — | |
| Analog Devices Inc. | -10.01% | -11.38% | -14.62% | -9.56% | — | |
| Applied Materials Inc. | 13.12% | 23.09% | 18.58% | 6.93% | — | |
| Broadcom Inc. | 4.88% | 3.62% | -5.62% | -10.84% | — | |
| Intel Corp. | -19.94% | -13.16% | 3.43% | — | — | |
| KLA Corp. | 21.23% | 23.59% | 12.10% | 1.14% | — | |
| Lam Research Corp. | 4.55% | 19.53% | 14.87% | -0.82% | — | |
| Micron Technology Inc. | -29.70% | -2.06% | -6.67% | -12.11% | — | |
| NVIDIA Corp. | -16.46% | 25.74% | 6.22% | — | — | |
| Qualcomm Inc. | 0.18% | 26.62% | 24.01% | 9.08% | — | |
| Texas Instruments Inc. | 12.40% | 32.98% | 31.62% | — | — | |
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 × -621,174 ÷ 10,925,400 = -5.69%
4 Click competitor name to see calculations.
The financial performance regarding economic value added reflects a period of consistent value destruction, as evidenced by negative economic profit and a negative economic spread ratio throughout the five-year period ending December 31, 2023. Despite a significant expansion in the capital base, the returns generated have remained below the cost of capital.
- Invested Capital Trends
- A consistent upward trajectory in invested capital is observed, rising from US$ 6.86 billion in 2019 to US$ 10.93 billion by 2023. This growth represents a total increase of approximately 59.3% over the period, indicating sustained investment in the company's asset base and operational capacity.
- Economic Profit Analysis
- Economic profit remained negative for all reported years, indicating that the company failed to generate returns exceeding its cost of capital. The most significant loss occurred in 2020, reaching negative US$ 1.30 billion. A recovery trend was evident through 2022, where the loss narrowed to negative US$ 362.5 million, before widening again to negative US$ 621.2 million in 2023.
- Economic Spread Ratio Performance
- The economic spread ratio, which measures the difference between the return on invested capital and the weighted average cost of capital, stayed in negative territory throughout the period. The ratio reached its lowest point in 2020 at -18.92%. A notable improvement occurred between 2021 and 2022, with the ratio peaking at -3.87%, suggesting a narrowing gap between returns and capital costs. However, a slight deterioration to -5.69% was recorded in 2023.
The correlation between the expanding invested capital and the persistently negative economic spread ratio suggests that the increase in assets has not yet translated into sufficient operational returns to achieve economic value creation. While the narrowing of the spread ratio between 2020 and 2022 indicated a positive trend toward breaking even, the 2023 results show a reversal of that progress.
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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 | (621,174) | (362,493) | (601,404) | (1,303,278) | (994,280) | |
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.53% | -4.35% | -8.92% | -24.80% | -18.02% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -74.71% | -71.63% | 10.44% | — | — | |
| Analog Devices Inc. | -35.95% | -42.63% | -93.91% | -31.07% | — | |
| Applied Materials Inc. | 8.80% | 13.34% | 11.86% | 5.28% | — | |
| Broadcom Inc. | 8.53% | 6.77% | -13.23% | -29.93% | — | |
| Intel Corp. | -33.87% | -18.50% | 3.84% | — | — | |
| KLA Corp. | 16.86% | 19.95% | 11.92% | 1.28% | — | |
| Lam Research Corp. | 3.99% | 14.41% | 12.00% | -0.96% | — | |
| Micron Technology Inc. | -102.18% | -3.53% | -11.15% | -23.89% | — | |
| NVIDIA Corp. | -13.02% | 17.25% | 4.86% | — | — | |
| Qualcomm Inc. | 0.16% | 17.73% | 14.46% | 6.85% | — | |
| Texas Instruments Inc. | 15.99% | 28.92% | 28.28% | — | — | |
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 × -621,174 ÷ 8,253,000 = -7.53%
3 Click competitor name to see calculations.
The analysis of economic value added over the five-year period ending December 31, 2023, reveals a consistent failure to generate positive economic profit. While there was a notable period of improvement between 2020 and 2022, the most recent fiscal year indicates a regression in value creation efficiency.
- Economic Profit Trends
- Economic profit remained negative throughout the entire observed period, signifying that the company did not generate returns sufficient to cover its cost of capital. The most significant deficit occurred in 2020, with a loss of 1,303,278 thousand US$. A recovery phase followed, with losses narrowing to 601,404 thousand US$ in 2021 and reaching a period low of 362,493 thousand US$ in 2022. However, this positive trajectory reversed in 2023, as economic profit declined to 621,174 thousand US$.
- Revenue Growth and Correlation
- Revenue demonstrated an overall upward trajectory from 2019 to 2022. Following a slight dip in 2020 to 5,255,000 thousand US$, revenue increased to 6,739,800 thousand US$ in 2021 and peaked at 8,326,200 thousand US$ in 2022. The growth in revenue during this period correlated with the reduction in economic losses. In 2023, revenue stagnated, decreasing slightly to 8,253,000 thousand US$, which coincided with the renewed increase in economic profit losses.
- Economic Profit Margin Analysis
- The economic profit margin experienced significant volatility, reaching a trough of -24.80% in 2020. There was a substantial improvement in the margin through 2021 (-8.92%) and 2022 (-4.35%), indicating a narrowing gap between operating returns and the cost of capital. This improvement was not sustained into 2023, as the margin widened again to -7.53%, reflecting a decline in the efficiency of capital utilization relative to revenue.
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