Paramount Global (NASDAQ:PARA)

Market (fair) value of Paramount

The market value showed a significant increase from 30,016 million USD at the end of 2018 to a peak of 68,038 million USD in 2020. This was followed by a notable decline to 47,492 million USD in 2021, and a further reduction to 31,542 million USD by the end of 2022. Overall, after peaking in 2020, the market value decreased substantially over the next two years, ending close to the 2018 level.

Invested capital

Invested capital exhibited a steady upward trend from 15,419 million USD in 2018 to 45,938 million USD in 2021. In 2022, there was a slight decrease to 44,287 million USD. The growth in invested capital over the four-year span, followed by a minor contraction, indicates sustained investment activity with a modest pullback in the latest year.

Market Value Added (MVA)

MVA started positively at 14,596 million USD in 2018 but declined sharply to 4,466 million USD in 2019. It rebounded strongly to 26,969 million USD in 2020, coinciding with the peak market value. However, MVA contracted dramatically thereafter, falling to 1,554 million USD in 2021 and turning negative at -12,745 million USD in 2022. This negative value indicates that the market value fell below the invested capital, reflecting diminished investor confidence or adverse market conditions in the latter years.

Summary

The data reveals significant volatility in the company's market valuation over the five-year period. While invested capital consistently increased except for a slight dip in the last year, market valuation followed a more cyclical pattern with a strong peak in 2020 followed by a steep decline. The MVA metric highlights this dynamic by showing a peak in value creation in 2020 but indicating destruction of market value relative to invested capital by 2022. These trends may suggest that despite increased invested capital, external factors or operational challenges affected market perception and company valuation negatively in recent years.

The financial data reveals significant fluctuations in key capital and market value metrics over the five-year period. Observed trends indicate volatility and changing value creation dynamics within the company.

Market Value Added (MVA)

The MVA exhibited a highly volatile trend. Starting at a relatively high positive level in 2018, it sharply declined in 2019, followed by a strong recovery in 2020 to the highest value within the period. Subsequently, it dropped dramatically in 2021 and turned negative in 2022. This progression suggests periods of substantial value creation contrasted by years where the company destroyed value relative to invested capital.

Invested Capital

The invested capital increased significantly from 2018 to 2021, nearly tripling during this span, which may indicate strategic expansion or increased asset base. However, in 2022, there was a slight reduction, signaling either divestitures or capital restructuring after the peak investment in 2021.

MVA Spread Ratio

Reflecting the efficiency of invested capital in generating market value, the MVA spread ratio showed a steep decline from an exceptionally high percentage in 2018 to a minimal positive figure in 2021, then falling into negative territory in 2022. This indicates that the return on invested capital relative to cost diminished over time, ultimately suggesting value erosion in the latest period.

Overall, the data points to a challenging environment in recent years, with initial growth and value creation giving way to diminished returns and capital inefficiency by 2022.

Market Value Added (MVA)

The market value added exhibited significant volatility over the observed period. It started at a high level of 14,596 million US dollars at the end of 2018, experienced a sharp decline to 4,466 million in 2019, and then rose substantially to peak at 26,969 million in 2020. Following this peak, there was a steep decrease to 1,554 million in 2021, which turned negative to -12,745 million by the end of 2022. This trend indicates large fluctuations in value creation, with notable deterioration towards the end of the period.

Adjusted Revenues

The adjusted revenues showed an overall upward trend during the entire period. Starting at 14,504 million US dollars in 2018, revenues nearly doubled in 2019 to 27,977 million, then slightly decreased to 25,497 million in 2020. From 2020 onwards, revenues resumed rising, reaching 28,666 million in 2021 and further increasing to 30,014 million in 2022. This pattern suggests growth in operational activity despite some volatility during 2020.

MVA Margin

The MVA margin closely mirrors the fluctuations seen in MVA, reflecting the ratio of market value added relative to revenues. It began at a very high rate of 100.64% in 2018, drastically dropped to 15.96% in 2019, and then surged back to 105.77% in 2020. Subsequently, it fell sharply to 5.42% in 2021 and moved into negative territory at -42.46% in 2022. This negative margin in the latest period highlights significant value destruction relative to revenue generation.

Summary of Observations

The financial indicators indicate a pattern of considerable instability in value creation across the five-year span. While adjusted revenues largely increased, reflecting growth in business scale, the market value added and MVA margin reveal inconsistent and often negative returns to shareholders' value. The pronounced decline leading to negative MVA and margin in 2022 suggests challenges that impacted the company's ability to sustain market value despite revenue growth.