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
Colgate-Palmolive Co., 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 between 2018 and 2022 reflects a period of valuation expansion followed by a recent contraction. Market Value Added (MVA) remained substantially positive throughout this timeframe, indicating that the market's valuation of the entity consistently exceeded the total capital invested.
- Market Value Trends
- A growth phase is observed from 2018 to 2020, with market value increasing from US$ 64,829 million to a peak of US$ 76,166 million. This upward momentum reversed after 2020, leading to a decline that reached US$ 69,357 million by the end of 2022. The overall movement suggests a period of peak market optimism followed by a valuation correction.
- Invested Capital Dynamics
- Invested capital showed a general upward trend over the five-year period, rising from US$ 11,791 million in 2018 to US$ 14,460 million in 2022. A marginal decrease was noted in 2021, where capital dropped to US$ 13,505 million, before recovering to its highest level in 2022. This indicates a steady increase in the capital base employed to drive operations.
- Market Value Added (MVA) Interpretation
- MVA closely tracked the fluctuations of the market value, reaching its maximum of US$ 62,223 million in 2020. The subsequent decrease in market value, combined with the rise in invested capital, resulted in a reduction of MVA to US$ 54,897 million by December 31, 2022. Despite the decline from the 2020 peak, the MVA in 2022 remained higher than the 2018 level of US$ 53,038 million, signifying that the entity continues to generate significant value beyond the cost of its invested capital.
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MVA Spread Ratio
Colgate-Palmolive Co., 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 | 54,897) | 61,626) | 62,223) | 60,724) | 53,038) | |
| Invested capital2 | 14,460) | 13,505) | 13,943) | 13,859) | 11,791) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 379.64% | 456.32% | 446.27% | 438.16% | 449.81% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Procter & Gamble Co. | 302.90% | 298.89% | — | — | — | |
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 × 54,897 ÷ 14,460 = 379.64%
4 Click competitor name to see calculations.
An analysis of value creation and capital efficiency reveals a period of growth in market valuation followed by a contraction in the final year of the observed period.
- Market Value Added (MVA)
- Market value added exhibited a positive trajectory between 2018 and 2020, rising from 53,038 million USD to a peak of 62,223 million USD. A moderate decline followed in 2021, which accelerated into a more pronounced decrease to 54,897 million USD by December 31, 2022. Despite this downward trend in the latter two years, the ending MVA remained higher than the 2018 baseline.
- Invested Capital
- Invested capital demonstrated a general upward trend, increasing from 11,791 million USD in 2018 to 14,460 million USD in 2022. The most significant growth occurred between 2018 and 2019, with the subsequent years showing relative stability and a final uptick in 2022, indicating a consistent expansion of the capital base.
- MVA Spread Ratio
- The MVA spread ratio remained relatively stable and elevated from 2018 through 2021, fluctuating within a range of 438.16% to 456.32%, suggesting that the market consistently valued the firm significantly higher than its invested capital. However, a sharp contraction was observed in 2022, with the ratio falling to 379.64%. This decline is the result of a divergent trend where invested capital increased while market value added decreased, signaling a reduction in the premium the market attributed to the invested capital during that period.
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MVA Margin
Colgate-Palmolive Co., 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 | 54,897) | 61,626) | 62,223) | 60,724) | 53,038) | |
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Performance Ratio | ||||||
| MVA margin2 | 305.54% | 353.74% | 377.77% | 386.95% | 341.21% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Procter & Gamble Co. | 354.79% | 373.41% | — | — | — | |
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 × 54,897 ÷ 17,967 = 305.54%
3 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 reveals a divergence between operational growth and market valuation premiums. While net sales exhibited a consistent upward trend, increasing from US$ 15,544 million to US$ 17,967 million over the five-year period, the market value added (MVA) and the corresponding MVA margin experienced significant volatility and a subsequent decline.
- Market Value Added (MVA)
- An initial growth phase is observed between 2018 and 2020, with MVA rising from US$ 53,038 million to a peak of US$ 62,223 million. However, this trend reversed after 2020, with a contraction occurring in 2021 and a more pronounced decline to US$ 54,897 million by December 31, 2022. This indicates that the surplus market value over the capital invested peaked mid-period before retreating.
- MVA Margin
- The MVA margin peaked in 2019 at 386.95%. Following this peak, a continuous downward trajectory is observed, falling to 377.77% in 2020, 353.74% in 2021, and ending at 305.54% in 2022. The steady erosion of this margin, occurring simultaneously with rising net sales, suggests that revenue growth did not translate into proportional increases in market valuation premiums.
- Correlation Analysis
- A notable disconnect exists between the linear growth of net sales and the non-linear movement of MVA. The contraction of the MVA margin from its 2019 high suggests a reduction in the market's valuation of the company relative to its sales volume, indicating that the perceived value creation per dollar of sales diminished during the latter half of the analyzed period.
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