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
PayPal Holdings Inc., MVA calculation
US$ in millions
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 financial trajectory from 2018 to 2022 is characterized by extreme volatility in market valuation contrasting with a steady increase in invested capital. This divergence resulted in a significant peak and subsequent contraction of Market Value Added (MVA), indicating a fluctuating market perception of the firm's ability to generate value above its capital costs.
- Market Value Fluctuations
- The market value experienced a rapid escalation, rising from 109,170 million US dollars in 2018 to a peak of 326,092 million US dollars in 2020. Following this peak, a sharp correction occurred, with the value declining to 154,970 million US dollars in 2021 and further retreating to 102,126 million US dollars by the end of 2022, effectively returning to 2018 levels.
- Invested Capital Growth
- In contrast to the volatility of market valuation, invested capital demonstrated a consistent upward trend. Capital increased from 17,780 million US dollars in 2018 to 31,496 million US dollars in 2022. The most significant growth phase occurred between 2018 and 2020, after which the growth rate stabilized, showing marginal increases in 2021 and 2022.
- Market Value Added (MVA) Dynamics
- The MVA closely mirrored the trend of the market value, expanding from 91,390 million US dollars in 2018 to a maximum of 295,832 million US dollars in 2020. This peak represented a period of maximum market optimism. However, a precipitous decline followed, with MVA falling to 123,653 million US dollars in 2021 and reaching a five-year low of 70,630 million US dollars in 2022.
The analysis reveals a significant erosion of the value premium over the final two years of the period. While the firm continued to increase its invested capital base, the market's willingness to award a premium over that capital diminished substantially, as evidenced by the MVA decreasing by approximately 76% from its 2020 peak to the 2022 year-end figure.
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MVA Spread Ratio
PayPal Holdings 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 millions) | ||||||
| Market value added (MVA)1 | 70,630) | 123,653) | 295,832) | 123,901) | 91,390) | |
| Invested capital2 | 31,496) | 31,317) | 30,260) | 22,276) | 17,780) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 224.25% | 394.84% | 977.63% | 556.21% | 514.02% | |
| 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 × 70,630 ÷ 31,496 = 224.25%
4 Click competitor name to see calculations.
The analysis of financial value creation from 2018 to 2022 reveals a period of significant volatility in market valuation contrasted by a steady increase in capital investment. While the company expanded its invested capital consistently throughout the five-year period, the market's valuation of the value added peaked in 2020 before entering a sharp decline.
- Market Value Added (MVA)
- A substantial growth trend is observed between 2018 and 2020, with MVA rising from 91,390 million US$ to a peak of 295,832 million US$. However, this trend reversed sharply in 2021 and 2022, with the value falling to 123,653 million US$ and 70,630 million US$, respectively. This represents a significant contraction in the market's perception of value created above the invested capital by the end of the period.
- Invested Capital
- Invested capital exhibited a consistent upward trajectory, increasing from 17,780 million US$ in 2018 to 31,496 million US$ in 2022. The growth was most pronounced between 2018 and 2020, after which the rate of increase stabilized, showing minimal growth between 2021 and 2022.
- MVA Spread Ratio
- The MVA spread ratio mirrors the trajectory of the MVA, peaking at 977.63% in 2020. This peak indicates a period where market value far exceeded the invested capital. Subsequently, a steep decline occurred, with the ratio dropping to 394.84% in 2021 and further to 224.25% in 2022. The divergence between the steadily increasing invested capital and the decreasing MVA spread ratio suggests a diminishing market premium relative to the capital employed in the business.
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MVA Margin
PayPal Holdings 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 millions) | ||||||
| Market value added (MVA)1 | 70,630) | 123,653) | 295,832) | 123,901) | 91,390) | |
| Net revenues | 27,518) | 25,371) | 21,454) | 17,772) | 15,451) | |
| Performance Ratio | ||||||
| MVA margin2 | 256.67% | 487.38% | 1,378.91% | 697.17% | 591.48% | |
| 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 ÷ Net revenues
= 100 × 70,630 ÷ 27,518 = 256.67%
3 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 is characterized by a marked divergence between consistent operational growth and volatile market valuation. While net revenues expanded steadily throughout the period, market value added and the corresponding MVA margin experienced a dramatic peak in 2020 followed by a significant contraction.
- Market Value Added (MVA)
- MVA exhibited a sharp upward trend in the early part of the period, rising from 91,390 million USD in 2018 to a peak of 295,832 million USD in 2020. Following this peak, a steep decline occurred, with values falling to 123,653 million USD in 2021 and further dropping to 70,630 million USD by December 31, 2022. This represents a substantial reduction in market-perceived value creation relative to invested capital after the 2020 high.
- Net Revenues
- Net revenues demonstrated uninterrupted growth over the five-year span. Starting at 15,451 million USD in 2018, revenues increased annually to reach 27,518 million USD by 2022. The steady nature of this growth indicates a consistent expansion of the operational scale and top-line performance.
- MVA Margin
- The MVA margin followed the volatility of the MVA, increasing from 591.48% in 2018 to a maximum of 1,378.91% in 2020. Subsequently, the margin contracted sharply, ending the period at 256.67% in 2022. The decline in the MVA margin, occurring simultaneously with rising net revenues, indicates that the market's valuation of the company's value-added potential decoupled from its actual revenue growth after 2020.
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