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
Allergan PLC, MVA calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
Between 2015 and 2019, a significant volatility in Market Value Added (MVA) was observed, characterized by an initial period of value creation followed by a multi-year trend of value destruction, concluding with a return to a positive valuation in 2019.
- Market Value Trajectory
- The market fair value experienced a severe contraction from 2015 to 2018, declining from $165.3 billion to a period low of $68.9 billion. This downward trend represents a reduction of approximately 58% over three years. A partial recovery occurred in 2019, with the market value increasing to $86.0 billion.
- Invested Capital Trends
- Invested capital exhibited a consistent and linear decline throughout the entire five-year period. The capital base decreased from $127.5 billion in 2015 to $80.3 billion in 2019. This steady reduction suggests a systematic decrease in the total capital employed in the business.
- Market Value Added (MVA) Performance
- The MVA transitioned from a positive $37.8 billion in 2015 to a negative position in 2016, signaling that the market's valuation of the company had fallen below the capital invested. This negative trajectory intensified through 2018, reaching a deficit of $22.2 billion. The trend reversed in 2019, as MVA returned to a positive $5.7 billion, indicating that the market once again valued the company in excess of its invested capital.
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MVA Spread Ratio
Allergan PLC, MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 5,744,199) | (22,152,605) | (17,937,038) | (2,272,512) | 37,782,769) | |
| Invested capital2 | 80,268,300) | 91,098,773) | 103,552,681) | 111,246,522) | 127,501,981) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 7.16% | -24.32% | -17.32% | -2.04% | 29.63% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2019 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 5,744,199 ÷ 80,268,300 = 7.16%
4 Click competitor name to see calculations.
A comprehensive analysis of the financial data from 2015 to 2019 reveals a period of significant volatility in value creation, characterized by a severe contraction in market value added followed by a partial recovery in the final year. This volatility occurred alongside a consistent and steady reduction in the total invested capital over the five-year period.
- Market Value Added (MVA)
- The MVA exhibited a sharp decline starting after December 31, 2015, when it stood at 37,782,769 thousand US$. The figure transitioned into negative territory by 2016 and continued to deteriorate through 2018, reaching a low of -22,152,605 thousand US$. This indicates a period where the market value of the entity was significantly lower than the capital invested. However, a reversal occurred by December 31, 2019, with MVA returning to a positive value of 5,744,199 thousand US$.
- Invested Capital
- Invested capital demonstrated a linear downward trend throughout the analyzed timeframe. Starting at 127,501,981 thousand US$ in 2015, the capital base decreased every year, ending at 80,268,300 thousand US$ in 2019. This represents a total reduction of approximately 37% of the invested capital over the five-year span, suggesting a strategic contraction of the asset base or a systematic repayment of invested funds.
- MVA Spread Ratio
- The MVA spread ratio closely mirrors the trajectory of the MVA, reflecting the efficiency of value creation relative to the capital employed. The ratio began at a strong 29.63% in 2015 before collapsing to -2.04% in 2016. The decline intensified over the next two years, bottoming out at -24.32% in 2018, which signifies that the company was destroying shareholder value relative to its cost of capital during this window. By December 31, 2019, the ratio recovered to 7.16%, indicating a return to positive value generation.
The correlation between the declining invested capital and the fluctuating MVA spread ratio suggests that while the company reduced its capital footprint, it struggled to maintain market value during the 2016-2018 period. The recovery observed in 2019 suggests a stabilization of market perception or an improvement in operational efficiency relative to the now-smaller capital base.
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MVA Margin
Allergan PLC, MVA margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 5,744,199) | (22,152,605) | (17,937,038) | (2,272,512) | 37,782,769) | |
| Net revenues | 16,088,900) | 15,787,400) | 15,940,700) | 14,570,600) | 15,071,000) | |
| Add: Increase (decrease) in deferred revenue | (9,500) | (1,800) | 22,200) | (2,500) | (8,100) | |
| Adjusted net revenues | 16,079,400) | 15,785,600) | 15,962,900) | 14,568,100) | 15,062,900) | |
| Performance Ratio | ||||||
| MVA margin2 | 35.72% | -140.33% | -112.37% | -15.60% | 250.83% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 MVA. See details »
2 2019 Calculation
MVA margin = 100 × MVA ÷ Adjusted net revenues
= 100 × 5,744,199 ÷ 16,079,400 = 35.72%
3 Click competitor name to see calculations.
The financial period from 2015 to 2019 is characterized by significant volatility in market value creation, which stands in stark contrast to the relative stability of the company's adjusted net revenues.
- Market Value Added (MVA) Trend
- A sharp decline in MVA is observed following 2015, where the value dropped from 37,782,769 thousand US$ to a negative 2,272,512 thousand US$ in 2016. This downward trajectory continued through 2017 and 2018, reaching a trough of negative 22,152,605 thousand US$. A recovery occurred in 2019, with MVA returning to positive territory at 5,744,199 thousand US$, although this remains significantly lower than the 2015 peak.
- MVA Margin Analysis
- The MVA margin mirrored the volatility of the absolute MVA. After an initial high of 250.83% in 2015, the margin collapsed to -15.60% in 2016 and further deteriorated to -112.37% in 2017 and -140.33% in 2018. The shift to negative margins indicates a period where the market value was lower than the capital invested in the business. A positive reversal was noted in 2019, with the margin recovering to 35.72%.
- Revenue Correlation
- Adjusted net revenues remained remarkably stable throughout the period, fluctuating within a narrow range between 14,568,100 thousand US$ (2016) and 16,079,400 thousand US$ (2019). The lack of significant variance in revenue suggests that the dramatic swings in MVA and MVA margin were driven by factors other than top-line sales growth, such as changes in market sentiment, capital structure, or investor expectations regarding future profitability.
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