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 – 24.63% × 10,925,400 = -617,625
The financial performance from 2019 to 2023 is characterized by a substantial increase in operating profitability that has been offset by a simultaneous rise in invested capital and a high cost of capital. Despite significant growth in absolute earnings, economic value creation remained negative throughout the five-year period, indicating that the returns generated were insufficient to cover the opportunity cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT) Trends
- A strong upward trajectory in NOPAT is evident, particularly after 2020. Following a slight decline from US$ 340.6 million in 2019 to US$ 262.8 million in 2020, NOPAT experienced an aggressive expansion, reaching US$ 1.21 billion in 2021 and peaking at US$ 2.07 billion in 2023. This represents a significant improvement in the entity's ability to generate operating profit from its core business activities.
- Invested Capital and Cost of Capital Analysis
- Invested capital grew steadily and accelerated toward the end of the period, rising from US$ 6.86 billion in 2019 to US$ 10.93 billion in 2023. During this same timeframe, the cost of capital shifted upward from 19.44% in 2019 to a peak of 25.09% in 2022, before settling slightly at 24.63% in 2023. The combination of a larger capital base and an increasing percentage cost of capital substantially increased the total capital charge required to achieve a positive economic profit.
- Economic Profit Evaluation
- Economic profit remained negative for all reported years, signifying that the business did not create economic value above its cost of capital. A period of recovery was observed between 2020 and 2022, where the deficit narrowed from a low of negative US$ 1.30 billion in 2020 to negative US$ 359.4 million in 2022. However, this trend reversed in 2023, with economic profit widening to negative US$ 617.6 million. This reversal suggests that the increase in invested capital in the final year outweighed the incremental gains in NOPAT, thereby eroding the progress made in narrowing the economic loss.
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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 | × | 27.51% | = | 24.38% | ||
| 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 | 24.63% | ||||||||||
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 | × | 27.51% | = | 24.69% | ||
| 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 | 25.09% | ||||||||||
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 | × | 27.51% | = | 23.65% | ||
| 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 | 23.98% | ||||||||||
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 | × | 27.51% | = | 22.24% | ||
| 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 | 22.70% | ||||||||||
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 | × | 27.51% | = | 18.37% | ||
| 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 | 19.44% | ||||||||||
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 | (617,625) | (359,410) | (599,022) | (1,301,236) | (992,601) | |
| Invested capital2 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.65% | -3.84% | -7.92% | -18.89% | -14.47% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -29.22% | -28.83% | 27.74% | — | — | |
| Analog Devices Inc. | -10.09% | -11.45% | -14.69% | -9.63% | — | |
| Applied Materials Inc. | 13.12% | 23.09% | 18.58% | 6.93% | — | |
| Broadcom Inc. | 4.81% | 3.56% | -5.68% | -10.90% | — | |
| Intel Corp. | -19.97% | -13.18% | 3.40% | — | — | |
| KLA Corp. | 20.01% | 22.42% | 10.88% | — | — | |
| Lam Research Corp. | 2.09% | 17.11% | 12.45% | — | — | |
| Marvell Technology Inc. | -22.37% | -25.14% | -26.87% | — | — | |
| Micron Technology Inc. | -29.73% | -2.10% | -6.71% | -12.14% | — | |
| NVIDIA Corp. | -16.42% | 25.78% | 6.26% | — | — | |
| Qualcomm Inc. | 0.13% | 26.57% | 23.96% | 9.03% | — | |
| 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 × -617,625 ÷ 10,925,400 = -5.65%
4 Click competitor name to see calculations.
The financial performance over the five-year period ending December 31, 2023, is characterized by a persistent inability to generate positive economic value. Although there were notable improvements in efficiency between 2020 and 2022, economic profit remained negative throughout the entire duration, indicating that the return on invested capital consistently failed to exceed the cost of capital.
- Invested Capital Expansion
- A consistent upward trend is observed in invested capital, which grew from $6.86 billion in 2019 to $10.93 billion by the end of 2023. This steady increase indicates a significant expansion of the company's capital base over the analyzed period.
- Economic Profit Volatility
- Economic profit remained in negative territory for five consecutive years. The deficit deepened in 2020, reaching its lowest point at -$1.30 billion. A period of recovery followed, with the deficit narrowing to -$599 million in 2021 and further improving to -$359 million in 2022. However, this trend reversed in 2023, as the economic profit declined again to -$617 million.
- Economic Spread Ratio Performance
- The economic spread ratio mirrored the trajectory of economic profit, remaining negative throughout the period. The ratio deteriorated to -18.89% in 2020, representing the widest gap between the cost of capital and the actual return. A substantial recovery was noted through 2022, when the ratio improved to -3.84%. The move to -5.65% in 2023 indicates a slight erosion of this progress, coinciding with the increase in invested capital.
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Economic Profit Margin
ON Semiconductor Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | (617,625) | (359,410) | (599,022) | (1,301,236) | (992,601) | |
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -7.48% | -4.32% | -8.89% | -24.76% | -17.99% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | -74.56% | -71.49% | 10.46% | — | — | |
| Analog Devices Inc. | -36.23% | -42.92% | -94.41% | -31.31% | — | |
| Applied Materials Inc. | 8.79% | 13.33% | 11.85% | 5.27% | — | |
| Broadcom Inc. | 8.42% | 6.66% | -13.37% | -30.08% | — | |
| Intel Corp. | -33.91% | -18.54% | 3.81% | — | — | |
| KLA Corp. | 15.90% | 18.95% | 10.72% | — | — | |
| Lam Research Corp. | 1.83% | 12.63% | 10.04% | — | — | |
| Marvell Technology Inc. | -75.59% | -112.19% | -82.48% | — | — | |
| Micron Technology Inc. | -102.30% | -3.59% | -11.22% | -23.96% | — | |
| NVIDIA Corp. | -12.99% | 17.28% | 4.89% | — | — | |
| Qualcomm Inc. | 0.12% | 17.70% | 14.43% | 6.82% | — | |
| Texas Instruments Inc. | 15.88% | 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 × -617,625 ÷ 8,253,000 = -7.48%
3 Click competitor name to see calculations.
An analysis of the economic value added indicates that the entity has consistently operated with a negative economic profit from 2019 through 2023, signifying that returns have not exceeded the cost of capital during this period. While the absolute economic loss persists, the trajectory reveals a period of significant recovery between 2020 and 2022, followed by a moderate decline in 2023.
- Economic Profit Trends
- Economic profit reached its lowest point in 2020 with a loss of 1,301,236 thousand US$. This was followed by a period of steady improvement, with losses narrowing to 599,022 thousand US$ in 2021 and reaching a five-year peak of -359,410 thousand US$ in 2022. However, this upward trend reversed in 2023, as the economic profit declined to -617,625 thousand US$.
- Revenue Growth and Scaling
- Revenue experienced a slight contraction in 2020 to 5,255,000 thousand US$, but subsequently entered a growth phase, increasing to 8,326,200 thousand US$ by 2022. The period of strongest revenue growth coincided with the most significant reductions in economic losses, suggesting that scaling operations contributed to a reduction in the cost of capital gap. In 2023, revenue remained relatively flat at 8,253,000 thousand US$, coinciding with a deterioration in economic profit.
- Economic Profit Margin Analysis
- The economic profit margin reflects high volatility, dropping from -17.99% in 2019 to a trough of -24.76% in 2020. A sharp recovery followed, with the margin improving to -8.89% in 2021 and reaching its most efficient level of -4.32% in 2022. The 2023 margin of -7.48% represents a regression from the previous year's performance, indicating a decrease in the efficiency of capital utilization relative to revenue generation.
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