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
Fortinet Inc., MVA calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
The analysis of Market Value Added (MVA) from 2018 to 2022 reveals a period of aggressive value creation followed by a moderate correction. Between 2018 and 2021, there was a consistent and accelerating increase in the gap between the market's valuation of the company and the capital invested in its operations, peaking in December 2021.
- Market Value Trends
- The market valuation experienced substantial growth, rising from approximately 14.4 billion US dollars in 2018 to a peak of 51.6 billion US dollars in 2021. This represents a significant expansion in investor confidence and perceived future earnings potential. However, a reversal occurred in 2022, with the market value contracting to 46.5 billion US dollars.
- Invested Capital Trajectory
- Invested capital showed a steady upward trajectory over the five-year period, growing from 1.89 billion US dollars in 2018 to 4.28 billion US dollars in 2022. Unlike the market value, which fluctuated, the invested capital increased consistently, indicating a continuous deployment of resources into the business infrastructure and operations.
- Market Value Added (MVA) Dynamics
- MVA grew exponentially from 12.6 billion US dollars in 2018 to 48.4 billion US dollars in 2021. The most pronounced increase occurred between 2020 and 2021, where MVA nearly doubled, suggesting that the market's perception of the company's value grew far more rapidly than the physical capital required to generate that value. In 2022, MVA declined to 42.2 billion US dollars, driven by the simultaneous decrease in market valuation and the increase in invested capital.
The divergence between the steady increase in invested capital and the volatility of the market value in the final year indicates a shift in market sentiment. While the company continues to expand its capital base, the resulting MVA has begun to contract, suggesting a normalization of the valuation multiples that drove the peak in 2021.
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MVA Spread Ratio
Fortinet Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 42,219,742) | 48,361,479) | 25,001,179) | 15,160,589) | 12,558,300) | |
| Invested capital2 | 4,282,000) | 3,286,100) | 2,218,800) | 2,227,800) | 1,886,300) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 985.98% | 1,471.70% | 1,126.79% | 680.52% | 665.76% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 442.58% | 739.74% | — | — | — | |
| Adobe Inc. | 658.07% | 1,033.13% | 1,082.99% | — | — | |
| AppLovin Corp. | 60.64% | 260.37% | — | — | — | |
| Cadence Design Systems Inc. | 1,302.22% | 1,110.87% | — | — | — | |
| Datadog Inc. | 1,772.59% | 5,219.74% | — | — | — | |
| International Business Machines Corp. | 60.62% | 55.46% | — | — | — | |
| Intuit Inc. | 406.80% | 1,175.12% | — | — | — | |
| Microsoft Corp. | 956.02% | 1,383.21% | — | — | — | |
| Oracle Corp. | 224.95% | 260.27% | — | — | — | |
| Palantir Technologies Inc. | 488.89% | 829.78% | — | — | — | |
| Palo Alto Networks Inc. | 559.30% | 573.51% | — | — | — | |
| Salesforce Inc. | 150.31% | 270.75% | — | — | — | |
| ServiceNow Inc. | 1,276.86% | 1,798.18% | — | — | — | |
| Synopsys Inc. | 565.55% | 707.79% | 468.10% | — | — | |
| Workday Inc. | 655.74% | 908.31% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2022 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 42,219,742 ÷ 4,282,000 = 985.98%
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2018 to 2022 reveals a period of substantial market value creation followed by a moderate correction in the final year. The company experienced a significant expansion in its Market Value Added (MVA) and a corresponding increase in invested capital, which directly influenced the trajectory of the MVA spread ratio.
- Market Value Added (MVA)
- MVA exhibited a strong upward trend between 2018 and 2021, rising from 12,558,300 thousand US$ to a peak of 48,361,479 thousand US$. This represents a nearly fourfold increase over four years, indicating a period of aggressive value creation in the eyes of the market. A decline occurred in 2022, with the value receding to 42,219,742 thousand US$, though it remained significantly higher than the 2018 baseline.
- Invested Capital
- Invested capital showed a consistent growth pattern throughout the period. Starting at 1,886,300 thousand US$ in 2018, the capital base expanded steadily, with a more pronounced acceleration occurring between 2020 and 2022. By the end of 2022, invested capital reached 4,282,000 thousand US$, reflecting a strategic increase in the resources deployed into the business.
- MVA Spread Ratio
- The MVA spread ratio mirrored the growth of the MVA, showing a sharp escalation from 665.76% in 2018 to a peak of 1,471.70% in 2021. This suggests that the market valuation grew at a rate far exceeding the growth of invested capital. However, in 2022, the ratio contracted to 985.98%. This decrease is attributable to the simultaneous decline in MVA and the continued increase in invested capital, indicating a reduction in the spread between market value and the capital invested.
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MVA Margin
Fortinet Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 42,219,742) | 48,361,479) | 25,001,179) | 15,160,589) | 12,558,300) | |
| Revenue | 4,417,400) | 3,342,200) | 2,594,400) | 2,156,200) | 1,801,200) | |
| Add: Increase (decrease) in deferred revenue | 1,187,400) | 847,600) | 496,200) | 449,100) | 350,500) | |
| Adjusted revenue | 5,604,800) | 4,189,800) | 3,090,600) | 2,605,300) | 2,151,700) | |
| Performance Ratio | ||||||
| MVA margin2 | 753.28% | 1,154.27% | 808.94% | 581.91% | 583.65% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Accenture PLC | 213.17% | 379.26% | — | — | — | |
| Adobe Inc. | 766.46% | 1,287.44% | 1,554.19% | — | — | |
| AppLovin Corp. | 113.54% | 521.30% | — | — | — | |
| Cadence Design Systems Inc. | 1,299.21% | 1,128.47% | — | — | — | |
| Datadog Inc. | 1,226.04% | 4,145.45% | — | — | — | |
| International Business Machines Corp. | 105.00% | 105.45% | — | — | — | |
| Intuit Inc. | 782.89% | 1,489.94% | — | — | — | |
| Microsoft Corp. | 916.17% | 1,148.11% | — | — | — | |
| Oracle Corp. | 412.88% | 514.72% | — | — | — | |
| Palantir Technologies Inc. | 820.15% | 1,366.76% | — | — | — | |
| Palo Alto Networks Inc. | 651.61% | 771.73% | — | — | — | |
| Salesforce Inc. | 417.33% | 620.94% | — | — | — | |
| ServiceNow Inc. | 1,026.11% | 1,555.49% | — | — | — | |
| Synopsys Inc. | 796.87% | 1,126.17% | 803.94% | — | — | |
| Workday Inc. | 888.92% | 1,185.07% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 MVA. See details »
2 2022 Calculation
MVA margin = 100 × MVA ÷ Adjusted revenue
= 100 × 42,219,742 ÷ 5,604,800 = 753.28%
3 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by consistent revenue expansion and a significant period of market valuation growth that peaked in 2021 before experiencing a correction in 2022.
- Market Value Added (MVA)
- A substantial upward trend in MVA is observed between 2018 and 2021, with the value increasing from US$ 12,558,300 thousand to a peak of US$ 48,361,479 thousand. This growth indicates a strong increase in the market's valuation of the company relative to the capital invested. However, this trend reversed in 2022, as MVA declined to US$ 42,219,742 thousand.
- Adjusted Revenue
- Adjusted revenue exhibited a linear and uninterrupted growth pattern over the five-year period. Starting at US$ 2,151,700 thousand in 2018, revenue grew steadily each year, reaching US$ 5,604,800 thousand by December 31, 2022. This demonstrates a consistent ability to scale operational top-line performance.
- MVA Margin
- The MVA margin highlights a divergence between market perception and revenue growth. After remaining relatively flat between 2018 and 2019 at approximately 582-584%, the margin surged to a high of 1,154.27% in 2021. A notable contraction occurred in 2022, where the margin dropped to 753.28%. This decline is particularly significant because it occurred despite the continued increase in adjusted revenue, suggesting that the market's valuation premium decreased more rapidly than the revenue grew during the final year of the period.
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