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Returns On Capital At Power Integrations (NASDAQ:POWI) Paint A Concerning Picture

Simply Wall St · 4d ago

What financial metrics can indicate to us that a company is maturing or even in decline? Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. So after we looked into Power Integrations (NASDAQ:POWI), the trends above didn't look too great.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Power Integrations, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.0076 = US$5.3m ÷ (US$773m - US$71m) (Based on the trailing twelve months to September 2025).

Thus, Power Integrations has an ROCE of 0.8%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 8.9%.

See our latest analysis for Power Integrations

roce
NasdaqGS:POWI Return on Capital Employed January 5th 2026

Above you can see how the current ROCE for Power Integrations compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Power Integrations .

What Can We Tell From Power Integrations' ROCE Trend?

We are a bit worried about the trend of returns on capital at Power Integrations. Unfortunately the returns on capital have diminished from the 7.1% that they were earning five years ago. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Power Integrations becoming one if things continue as they have.

In Conclusion...

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. It should come as no surprise then that the stock has fallen 58% over the last five years, so it looks like investors are recognizing these changes. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

On a separate note, we've found 2 warning signs for Power Integrations you'll probably want to know about.

While Power Integrations isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.