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
3M Co., MVA calculation
US$ in millions
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, a significant downward trend is observed in the Market Value Added (MVA), which decreased from US$ 114,909 million to US$ 74,004 million. This decline indicates a reduction in the premium the market assigns to the company over and above its invested capital. While a temporary recovery in MVA occurred in 2020, the overall trajectory reflects a consistent erosion of market-perceived value creation over the five-year period.
- Market Value Fluctuations
- The fair market value experienced a general decline, falling from US$ 147,217 million in 2017 to US$ 113,160 million by 2021. A notable contraction occurred between 2017 and 2019, followed by a brief increase to US$ 124,471 million in 2020, before reaching its lowest point in the period during 2021.
- Invested Capital Expansion
- In contrast to the market value, invested capital exhibited a growth trend. After a slight dip in 2018, capital increased sharply in 2019 to US$ 38,698 million and continued to rise steadily, reaching US$ 39,156 million by 2021. This represents a total increase of approximately 21% from the 2017 baseline.
- MVA Compression Dynamics
- The compression of MVA is the result of a dual negative pressure: the simultaneous decline in market capitalization and the increase in the cost of invested capital. The most acute drop in MVA occurred between 2018 and 2019, where a decrease in market value coincided with a substantial jump in invested capital, resulting in a loss of over US$ 21 billion in MVA within a single fiscal year.
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MVA Spread Ratio
3M Co., 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 millions) | ||||||
| Market value added (MVA)1 | 74,004) | 85,591) | 77,239) | 98,976) | 114,909) | |
| Invested capital2 | 39,156) | 38,880) | 38,698) | 31,616) | 32,308) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 189.00% | 220.14% | 199.60% | 313.06% | 355.67% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | 256.11% | — | — | — | — | |
| Caterpillar Inc. | 165.08% | — | — | — | — | |
| Eaton Corp. plc | 132.30% | — | — | — | — | |
| GE Aerospace | 110.77% | — | — | — | — | |
| Honeywell International Inc. | 209.78% | — | — | — | — | |
| Lockheed Martin Corp. | 319.28% | — | — | — | — | |
| RTX Corp. | 61.85% | — | — | — | — | |
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 × 74,004 ÷ 39,156 = 189.00%
4 Click competitor name to see calculations.
The financial trajectory from 2017 to 2021 is characterized by a contraction in value creation and a diminishing return on invested capital. An overall downward trend is observed in the capacity to generate market value exceeding the capital employed, resulting in a significant erosion of the MVA spread ratio over the five-year period.
- Market Value Added (MVA)
- A general decline in MVA is evident, falling from a peak of 114,909 million USD in 2017 to 74,004 million USD by 2021. Although a marginal recovery was recorded in 2020, reaching 85,591 million USD, this increase was temporary and followed by a further decline to the period's lowest level in 2021.
- Invested Capital
- Invested capital exhibited a moderate increase over the analyzed timeframe. After remaining relatively flat between 2017 and 2018, capital rose sharply in 2019 to 38,698 million USD and continued a slow upward trend to reach 39,156 million USD in 2021. This indicates a growing capital base during a period of declining market value added.
- MVA Spread Ratio
- The MVA spread ratio experienced a substantial reduction, descending from 355.67% in 2017 to 189.00% in 2021. The most acute contraction occurred between 2018 and 2019, where the ratio dropped from 313.06% to 199.60%. This deterioration reflects the combined impact of shrinking market value added and expanding invested capital, signaling a decrease in the efficiency of value creation relative to the investment base.
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MVA Margin
3M Co., 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 millions) | ||||||
| Market value added (MVA)1 | 74,004) | 85,591) | 77,239) | 98,976) | 114,909) | |
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Add: Increase (decrease) in deferred revenue | 31) | 68) | (187) | 104) | (16) | |
| Adjusted net sales | 35,386) | 32,252) | 31,949) | 32,869) | 31,641) | |
| Performance Ratio | ||||||
| MVA margin2 | 209.13% | 265.38% | 241.76% | 301.12% | 363.16% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | 203.39% | — | — | — | — | |
| Caterpillar Inc. | 190.31% | — | — | — | — | |
| Eaton Corp. plc | 198.58% | — | — | — | — | |
| GE Aerospace | 111.81% | — | — | — | — | |
| Honeywell International Inc. | 293.22% | — | — | — | — | |
| Lockheed Martin Corp. | 136.30% | — | — | — | — | |
| RTX Corp. | 107.41% | — | — | — | — | |
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 ÷ Adjusted net sales
= 100 × 74,004 ÷ 35,386 = 209.13%
3 Click competitor name to see calculations.
Between 2017 and 2021, a general contraction in Market Value Added (MVA) and the corresponding MVA margin was observed, occurring despite an overall increase in adjusted net sales over the same period. The analysis indicates a divergence between the company's revenue growth and its market-perceived value creation.
- Market Value Added (MVA)
- A downward trajectory is evident in MVA, which decreased from US$ 114,909 million in 2017 to US$ 74,004 million in 2021. Although a brief recovery was noted in 2020, with value increasing to US$ 85,591 million, the subsequent decline in 2021 resulted in a total reduction of approximately 35.6% from the 2017 peak.
- Adjusted Net Sales
- Adjusted net sales exhibited a positive growth pattern over the analyzed timeframe. From a base of US$ 31,641 million in 2017, sales grew to US$ 35,386 million by December 31, 2021, representing an overall increase of approximately 11.8%.
- MVA Margin
- The MVA margin experienced a significant decline, falling from 363.16% in 2017 to 209.13% in 2021. This contraction suggests that the market's valuation of the company's value creation diminished relative to its sales performance. The steady decrease in the margin, interrupted only by a temporary rise in 2020, highlights a weakening relationship between revenue generation and the addition of market value.
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