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
Builders FirstSource Inc., MVA calculation
US$ in thousands
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 »
Between 2018 and 2022, the organization experienced significant expansion in both its market valuation and its capital base. The Market Value Added (MVA) demonstrated a period of rapid acceleration from 2018 to 2020, followed by a peak in 2021 and a moderate correction in 2022.
- Market Value Trajectory
- The fair market value grew from 3.39 billion USD in 2018 to a peak of 16.46 billion USD in 2021. The most significant surge occurred between 2019 and 2020, during which the market value increased by approximately 130%, indicating a substantial increase in investor confidence or a shift in valuation multiples.
- Invested Capital Expansion
- Invested capital remained relatively stagnant between 2018 and 2019 but saw a marked increase starting in 2020. A major capital expansion occurred in 2021, where invested capital rose from 3.09 billion USD to 8.51 billion USD. This sharp increase suggests a period of aggressive acquisition or large-scale asset investment, which stabilized through the end of 2022.
- Market Value Added (MVA) Performance
- MVA rose consistently from 1.00 billion USD in 2018 to 7.87 billion USD in 2020, signifying that the market began pricing the company far above its invested capital. Although the market value reached its highest point in 2021, the MVA only marginally increased to 7.95 billion USD because the growth in market value was offset by the simultaneous tripling of invested capital. In 2022, a decline in MVA to 6.31 billion USD was observed, driven by a contraction in market value while the invested capital base remained largely unchanged.
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MVA Spread Ratio
Builders FirstSource 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 thousands) | ||||||
| Market value added (MVA)1 | 6,314,192) | 7,954,471) | 7,873,973) | 2,347,161) | 1,000,760) | |
| Invested capital2 | 8,565,898) | 8,507,614) | 3,091,935) | 2,419,816) | 2,393,541) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 73.71% | 93.50% | 254.66% | 97.00% | 41.81% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | 250.73% | 256.11% | — | — | — | |
| Caterpillar Inc. | 194.33% | 165.08% | — | — | — | |
| Eaton Corp. plc | 149.39% | 132.30% | — | — | — | |
| GE Aerospace | 84.87% | 110.77% | — | — | — | |
| Honeywell International Inc. | 224.23% | 209.78% | — | — | — | |
| Lockheed Martin Corp. | 399.68% | 319.28% | — | — | — | |
| RTX Corp. | 59.03% | 61.85% | — | — | — | |
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 × 6,314,192 ÷ 8,565,898 = 73.71%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 demonstrates a period of significant expansion and subsequent volatility in value creation. Market value added exhibited a strong upward trajectory during the initial years, peaking in 2021 before experiencing a contraction in 2022. This fluctuation is closely linked to a substantial increase in the capital base, particularly between 2020 and 2021.
- Market Value Added (MVA) Trends
- A consistent increase in MVA was observed from 2018 to 2021, rising from approximately 1 billion USD to a peak of 7.95 billion USD. The most aggressive growth occurred between 2019 and 2020, where value added more than tripled. However, this trend reversed in 2022, with MVA declining to 6.31 billion USD, indicating a reduction in the premium the market placed over the invested capital.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2018 and 2019, followed by a moderate increase in 2020. A significant structural shift occurred in 2021, where invested capital jumped from 3.09 billion USD to 8.51 billion USD. This abrupt increase suggests a major capital infusion or strategic acquisition, which stabilized at 8.57 billion USD by the end of 2022.
- MVA Spread Ratio Analysis
- The MVA spread ratio showed extreme volatility, peaking at 254.66% in 2020. This peak indicates that the company was generating market value at a rate far exceeding its cost of capital. Following this peak, the ratio declined sharply to 93.50% in 2021 and further to 73.71% in 2022. The decline in the spread ratio coincides with the massive increase in invested capital, suggesting that while absolute value remained high, the efficiency of value creation relative to the expanded capital base diminished.
Overall, the data indicates a transition from a high-efficiency growth phase characterized by a peaking spread ratio in 2020 to a capital-intensive phase starting in 2021. The subsequent decline in both MVA and the spread ratio in 2022 suggests a period of market correction or a decrease in the rate of value generation relative to the increased investment.
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MVA Margin
Builders FirstSource 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 thousands) | ||||||
| Market value added (MVA)1 | 6,314,192) | 7,954,471) | 7,873,973) | 2,347,161) | 1,000,760) | |
| Net sales | 22,726,418) | 19,893,856) | 8,558,874) | 7,280,431) | 7,724,771) | |
| Performance Ratio | ||||||
| MVA margin2 | 27.78% | 39.98% | 92.00% | 32.24% | 12.96% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | 191.47% | 203.39% | — | — | — | |
| Caterpillar Inc. | 188.24% | 190.31% | — | — | — | |
| Eaton Corp. plc | 221.57% | 198.58% | — | — | — | |
| GE Aerospace | 76.94% | 111.81% | — | — | — | |
| Honeywell International Inc. | 295.90% | 293.22% | — | — | — | |
| Lockheed Martin Corp. | 161.14% | 136.30% | — | — | — | |
| RTX Corp. | 96.78% | 107.41% | — | — | — | |
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 sales
= 100 × 6,314,192 ÷ 22,726,418 = 27.78%
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a period of rapid market valuation growth followed by a significant expansion in operational scale, leading to a compression of the market value added margin.
- Market Value Added (MVA) Trends
- A substantial increase in MVA is observed from 2018 to 2021, rising from US$ 1,000,760 thousand to a peak of US$ 7,954,471 thousand. The most aggressive growth occurred between 2019 and 2020, where the value more than tripled. However, a reversal is noted in 2022, with MVA declining to US$ 6,314,192 thousand, indicating a correction in the market's valuation of the entity's future growth prospects.
- Net Sales Expansion
- Net sales remained relatively stable between 2018 and 2020, fluctuating within the range of US$ 7.2 billion to US$ 8.5 billion. A dramatic shift occurred in 2021, where net sales surged to US$ 19,893,856 thousand, further increasing to US$ 22,726,418 thousand by the end of 2022. This trajectory suggests a massive scaling of operations or significant inorganic growth through acquisitions during the latter part of the period.
- MVA Margin Analysis
- The MVA margin exhibited extreme volatility, peaking at 92.00% in 2020. This peak occurred because MVA grew exponentially while net sales remained moderate, signaling a period where market expectations far exceeded current revenue generation. In 2021 and 2022, the margin contracted sharply to 39.98% and 27.78%, respectively. This decline is attributed to the fact that the growth in net sales outpaced the growth in MVA, effectively normalizing the valuation relative to the company's expanded size.
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