Market Value Added (MVA)
Market value added (MVA) is the difference between a firm fair value and its invested capital. MVA is a measure of the value a company has created in excess of the resources already committed to the enterprise.
MVA
Automatic Data Processing Inc., MVA calculation
US$ in thousands
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 Fair value of debt. See details »
2 Invested capital. See details »
An analysis of the financial performance from June 30, 2016, to June 30, 2021, reveals a significant expansion in shareholder wealth creation, as evidenced by the growth in Market Value Added (MVA). The general trajectory is characterized by a strong upward trend, despite a notable period of volatility in 2020.
- Market Value Trajectory
- The market fair value experienced consistent growth from 2016 to 2019, rising from approximately 43.47 billion USD to 75.39 billion USD. A sharp contraction occurred by June 30, 2020, where the value declined to 60.52 billion USD. However, a substantial recovery followed in 2021, with the market value reaching a peak of 93.19 billion USD, representing a total increase of approximately 114% over the six-year period.
- Invested Capital Trends
- Invested capital remained relatively stable with a slight downward trend between 2016 and 2018, decreasing from 7.92 billion USD to 7.29 billion USD. A shift occurred in 2019, marked by an increase to 9.46 billion USD, followed by a steady rise to 10.15 billion USD by June 30, 2021. The growth in invested capital is significantly more modest than the growth in market value, indicating a high ratio of market valuation relative to the capital employed.
- Market Value Added (MVA) Performance
- MVA demonstrated a strong positive correlation with the overall market value. Starting at 35.55 billion USD in 2016, MVA climbed steadily to 65.93 billion USD by 2019. Similar to the market value, MVA experienced a retraction in 2020, dropping to 50.94 billion USD. The period concluded with a sharp surge to 83.04 billion USD in 2021. The widening gap between market value and invested capital suggests that the market attributes significant intangible value to the organization and anticipates strong future earnings beyond the cost of the capital invested.
The disparity between the steady increase in invested capital and the volatile but aggressive growth in market value indicates that MVA is primarily driven by market sentiment and perceived future growth potential rather than incremental increases in physical or financial capital investment.
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MVA Spread Ratio
Automatic Data Processing Inc., MVA spread ratio calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Market value added (MVA)1 | 83,035,278) | 50,939,138) | 65,925,332) | 53,986,010) | 44,468,604) | 35,546,487) | |
| Invested capital2 | 10,152,600) | 9,580,300) | 9,463,158) | 7,289,794) | 7,519,836) | 7,921,908) | |
| Performance Ratio | |||||||
| MVA spread ratio3 | 817.87% | 531.71% | 696.65% | 740.57% | 591.35% | 448.71% | |
| Benchmarks | |||||||
| MVA Spread Ratio, Competitors4 | |||||||
| Accenture PLC | 739.74% | 550.21% | — | — | — | — | |
| Adobe Inc. | 1,033.13% | 1,082.99% | — | — | — | — | |
| AppLovin Corp. | 260.37% | — | — | — | — | — | |
| Cadence Design Systems Inc. | 1,110.87% | — | — | — | — | — | |
| Datadog Inc. | 5,219.74% | — | — | — | — | — | |
| International Business Machines Corp. | 55.46% | — | — | — | — | — | |
| Intuit Inc. | 1,175.12% | — | — | — | — | — | |
| Microsoft Corp. | 1,383.21% | — | — | — | — | — | |
| Oracle Corp. | 260.27% | — | — | — | — | — | |
| Palantir Technologies Inc. | 829.78% | — | — | — | — | — | |
| Palo Alto Networks Inc. | 573.51% | — | — | — | — | — | |
| Salesforce Inc. | 270.75% | — | — | — | — | — | |
| ServiceNow Inc. | 1,798.18% | — | — | — | — | — | |
| Synopsys Inc. | 707.79% | 468.10% | — | — | — | — | |
| Workday Inc. | 908.31% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 MVA. See details »
2 Invested capital. See details »
3 2021 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 83,035,278 ÷ 10,152,600 = 817.87%
4 Click competitor name to see calculations.
Between June 30, 2016, and June 30, 2021, the financial data indicates a strong overall growth in market value creation, despite a period of volatility observed around 2020.
- Market Value Added (MVA)
- MVA experienced a sustained increase from 2016 to 2019, growing from US$ 35.5 billion to US$ 65.9 billion. A temporary contraction occurred in 2020, with MVA falling to US$ 50.9 billion. However, a significant recovery followed, resulting in a period high of US$ 83.0 billion by June 30, 2021.
- Invested Capital
- Invested capital trended slightly downward between 2016 and 2018, decreasing from US$ 7.9 billion to US$ 7.3 billion. From 2019 onward, a steady upward trend in capital investment was observed, with the total reaching US$ 10.2 billion by the end of the analyzed period.
- MVA Spread Ratio
- The MVA spread ratio, reflecting the efficiency of value creation relative to invested capital, showed an initial upward climb from 448.71% in 2016 to 740.57% in 2018. A downward correction was noted through 2020, where the ratio dipped to 531.71%. This was followed by a sharp rebound to 817.87% in 2021, suggesting that the increase in market value significantly outpaced the growth in invested capital during the final year.
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MVA Margin
Automatic Data Processing Inc., MVA margin calculation, comparison to benchmarks
| Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | Jun 30, 2016 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Market value added (MVA)1 | 83,035,278) | 50,939,138) | 65,925,332) | 53,986,010) | 44,468,604) | 35,546,487) | |
| Revenues | 15,005,400) | 14,589,800) | 14,175,200) | 13,325,800) | 12,379,800) | 11,667,800) | |
| Add: Increase (decrease) in deferred revenues | (16,800) | (36,900) | (53,800) | (20,000) | 10,000) | 23,000) | |
| Adjusted revenues | 14,988,600) | 14,552,900) | 14,121,400) | 13,305,800) | 12,389,800) | 11,690,800) | |
| Performance Ratio | |||||||
| MVA margin2 | 553.99% | 350.03% | 466.85% | 405.73% | 358.91% | 304.06% | |
| Benchmarks | |||||||
| MVA Margin, Competitors3 | |||||||
| Accenture PLC | 379.26% | 279.96% | — | — | — | — | |
| Adobe Inc. | 1,287.44% | 1,554.19% | — | — | — | — | |
| AppLovin Corp. | 521.30% | — | — | — | — | — | |
| Cadence Design Systems Inc. | 1,128.47% | — | — | — | — | — | |
| Datadog Inc. | 4,145.45% | — | — | — | — | — | |
| International Business Machines Corp. | 105.45% | — | — | — | — | — | |
| Intuit Inc. | 1,489.94% | — | — | — | — | — | |
| Microsoft Corp. | 1,148.11% | — | — | — | — | — | |
| Oracle Corp. | 514.72% | — | — | — | — | — | |
| Palantir Technologies Inc. | 1,366.76% | — | — | — | — | — | |
| Palo Alto Networks Inc. | 771.73% | — | — | — | — | — | |
| Salesforce Inc. | 620.94% | — | — | — | — | — | |
| ServiceNow Inc. | 1,555.49% | — | — | — | — | — | |
| Synopsys Inc. | 1,126.17% | 803.94% | — | — | — | — | |
| Workday Inc. | 1,185.07% | — | — | — | — | — | |
Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).
1 MVA. See details »
2 2021 Calculation
MVA margin = 100 × MVA ÷ Adjusted revenues
= 100 × 83,035,278 ÷ 14,988,600 = 553.99%
3 Click competitor name to see calculations.
The analysis of market value added (MVA) and associated margins from 2016 to 2021 reveals a period of significant value creation characterized by steady revenue growth and volatile but overall increasing market valuation.
- Market Value Added (MVA) Trend
- A consistent upward trajectory in MVA is observed from June 30, 2016, through June 30, 2019, with values increasing from 35.5 billion to 65.9 billion. This growth period was interrupted in 2020, where MVA declined to 50.9 billion. However, a substantial recovery occurred by June 30, 2021, with MVA reaching a peak of 83.0 billion, representing a significant increase over the baseline 2016 figure.
- Adjusted Revenue Performance
- Adjusted revenues demonstrated stable and linear growth throughout the six-year period. Starting at 11.7 billion in 2016, revenues increased incrementally each year to reach 15.0 billion by 2021. Unlike the MVA, the revenue stream remained unaffected by the volatility observed in 2020, indicating a resilience in core operational earnings despite fluctuations in market valuation.
- MVA Margin Analysis
- The MVA margin, which measures the relationship between market value added and adjusted revenues, reflects the market's perceived value relative to operational size. The margin expanded steadily from 304.06% in 2016 to a high of 466.85% in 2019. A contraction is noted in 2020, where the margin fell to 350.03%, aligning with the dip in total MVA. The period concluded with a sharp increase to 553.99% in 2021, suggesting that market valuation growth significantly outpaced the growth rate of adjusted revenues during the final year of the analysis.
The divergence between the steady growth of adjusted revenues and the more volatile movements of the MVA suggests that the market's valuation of the entity is influenced by factors beyond immediate annual revenue gains. The recovery in 2021 indicates a strong increase in investor confidence and a heightened premium placed on the organization's future growth prospects.
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