Power Integrations Inc (POWI)

Return on total capital

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	17,929	35,059	180,412	175,058	70,487
Long-term debt	US$ in thousands	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	749,772	752,241	755,216	912,032	810,411
Return on total capital		2.39%	4.66%	23.89%	19.19%	8.70%

December 31, 2024 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $17,929K ÷ ($—K + $749,772K)
= 2.39%

Based on the provided data, Power Integrations Inc's return on total capital has shown fluctuations over the years.

- In December 31, 2020, the return on total capital was 8.70%, indicating that the company generated a return of 8.70% on its total invested capital during that period.

- The return on total capital increased significantly to 19.19% by December 31, 2021, suggesting improved efficiency in utilizing capital to generate profits.

- By December 31, 2022, the return on total capital further improved to 23.89%, demonstrating a robust performance in generating returns for both debt and equity providers.

- However, the return on total capital witnessed a decline by December 31, 2023, dropping to 4.66%. This decrease may raise concerns regarding the company's capital allocation decisions or operational performance during that period.

- The downward trend continued as of December 31, 2024, with the return on total capital declining to 2.39%, indicating a further decrease in the company's ability to generate returns on its capital.

In conclusion, Power Integrations Inc's return on total capital has displayed fluctuations over the years, showing both periods of improvement and decline. This metric is crucial for assessing the company's efficiency in generating profits relative to the total capital invested and requires closer examination to identify the factors impacting these fluctuations.