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
Steel Dynamics Inc., MVA calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
Between 2017 and 2021, Market Value Added (MVA) exhibited significant volatility, characterized by a sharp contraction followed by a robust recovery. The metric reached a minimum in 2019 before ascending to its peak by the end of the observed period, suggesting a cyclical shift in market perception regarding the entity's ability to generate value above its invested capital.
- Market Value Trends
- The fair market value experienced a downward trajectory from 2017 to 2019, decreasing from US$ 13,717,584 thousand to US$ 8,344,755 thousand. This decline was reversed starting in 2020, with value increasing to US$ 12,779,712 thousand and eventually reaching a period high of US$ 16,917,499 thousand in 2021.
- Invested Capital Growth
- Invested capital demonstrated a consistent upward trend throughout the five-year period. Capital increased steadily from US$ 5,964,900 thousand in 2017 to US$ 6,781,124 thousand in 2020, with a notable acceleration in 2021, where it rose to US$ 8,550,168 thousand. This indicates a sustained expansion of the asset base used to generate returns.
- Market Value Added (MVA) Dynamics
- MVA mirrored the volatility of the market value, dropping from US$ 7,752,685 thousand in 2017 to a low of US$ 1,622,934 thousand in 2019. The subsequent recovery was rapid, with MVA climbing to US$ 5,998,588 thousand in 2020 and closing at US$ 8,367,331 thousand in 2021. The divergence between the steady growth of invested capital and the wider fluctuations in market value indicates that MVA variance was primarily driven by market sentiment and valuation multiples rather than changes in the capital invested in the business.
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MVA Spread Ratio
Steel Dynamics Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 8,367,331) | 5,998,588) | 1,622,934) | 4,298,099) | 7,752,685) | |
| Invested capital2 | 8,550,168) | 6,781,124) | 6,721,821) | 6,403,131) | 5,964,900) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 97.86% | 88.46% | 24.14% | 67.12% | 129.97% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Freeport-McMoRan Inc. | 138.11% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2021 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 8,367,331 ÷ 8,550,168 = 97.86%
4 Click competitor name to see calculations.
The financial trajectory between 2017 and 2021 is characterized by significant volatility in market value creation alongside a consistent expansion of the capital base. A pronounced contraction in value was observed between 2017 and 2019, followed by a robust recovery phase through 2021.
- Market Value Added (MVA)
- MVA experienced a steep decline from 7,752,685 thousand US dollars in 2017 to a period low of 1,622,934 thousand US dollars in 2019. This downward trend reversed sharply in 2020, with a recovery to 5,998,588 thousand US dollars, culminating in a peak of 8,367,331 thousand US dollars by December 31, 2021. The data indicates a substantial resurgence in the market's valuation of the entity relative to its invested capital toward the end of the period.
- Invested Capital
- Invested capital demonstrated a steady and linear growth pattern over the five-year horizon. Starting at 5,964,900 thousand US dollars in 2017, the capital base increased incrementally each year, reaching 6,781,124 thousand US dollars in 2020. A more significant acceleration in investment occurred in 2021, with the total rising to 8,550,168 thousand US dollars, suggesting an intensified phase of asset acquisition or capacity expansion.
- MVA Spread Ratio
- The MVA spread ratio exhibits a mirrored pattern to the MVA, reflecting the efficiency of value creation relative to capital employed. The ratio plummeted from 129.97% in 2017 to 24.14% in 2019, marking a period of diminished value generation per unit of investment. A strong recovery ensued, with the ratio climbing to 88.46% in 2020 and further increasing to 97.86% in 2021, indicating that the entity regained significant momentum in creating market value above its invested capital costs.
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MVA Margin
Steel Dynamics Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 8,367,331) | 5,998,588) | 1,622,934) | 4,298,099) | 7,752,685) | |
| Net sales | 18,408,850) | 9,601,482) | 10,464,991) | 11,821,839) | 9,538,797) | |
| Performance Ratio | ||||||
| MVA margin2 | 45.45% | 62.48% | 15.51% | 36.36% | 81.28% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Freeport-McMoRan Inc. | 210.68% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 MVA. See details »
2 2021 Calculation
MVA margin = 100 × MVA ÷ Net sales
= 100 × 8,367,331 ÷ 18,408,850 = 45.45%
3 Click competitor name to see calculations.
The analysis of the financial metrics between December 31, 2017, and December 31, 2021, reveals significant volatility in both value creation and operational scale, characterized by a sharp contraction followed by a robust recovery.
- Market Value Added (MVA)
- A substantial downward trend is observed from 2017 to 2019, with MVA decreasing from 7,752,685 thousand US$ to a period low of 1,622,934 thousand US$. This decline represents a significant reduction in the market's valuation of the company relative to its capital invested. However, a strong recovery occurred in the subsequent two years, with MVA rising to 5,998,588 thousand US$ in 2020 and reaching a peak of 8,367,331 thousand US$ by 2021.
- Net Sales
- Revenue levels remained relatively stable between 2017 and 2020, fluctuating within a range of approximately 9.5 billion to 11.8 billion US$. A dramatic increase is noted in 2021, where net sales surged to 18,408,850 thousand US$, nearly doubling the previous year's performance. This indicates a massive expansion in operational volume or a significant increase in pricing power during the final year of the period.
- MVA Margin
- The MVA margin exhibits a volatile trajectory that mirrors the fluctuations in MVA but is tempered by the scale of net sales. The margin peaked at 81.28% in 2017 before falling sharply to 15.51% in 2019. While the margin recovered to 62.48% in 2020, it decreased to 45.45% in 2021. This decline in 2021 occurs despite the absolute increase in MVA, as the growth in net sales outpaced the growth in market value added, resulting in a lower relative margin.
Overall, the data indicates a cyclical pattern of value erosion and creation. While the company achieved its highest absolute MVA in 2021, the efficiency of value creation relative to sales, as measured by the MVA margin, remained below the 2017 and 2020 levels due to the rapid acceleration of top-line revenue.
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