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
Cummins Inc., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Fair value of debt. See details »
2 Invested capital. See details »
Between December 31, 2019, and December 31, 2023, the market value added (MVA) exhibited an overall upward trajectory, indicating that the market has increasingly valued the entity above its invested capital base over the five-year period.
- Market Value Trends
- The fair market value experienced a sharp increase from US$ 28,513 million in 2019 to US$ 41,776 million in 2020. After a moderate contraction to US$ 37,081 million in 2021, the value recovered and stabilized, reaching US$ 43,797 million in 2022 and remaining nearly flat at US$ 43,815 million in 2023.
- Invested Capital Dynamics
- Invested capital rose consistently from US$ 15,235 million in 2019 to a peak of US$ 22,657 million in 2022. A subsequent decrease to US$ 20,768 million was recorded in 2023, suggesting a reduction in the capital employed or a reallocation of resources toward the end of the period.
- Market Value Added (MVA) Analysis
- MVA grew from US$ 13,278 million in 2019 to US$ 23,047 million in 2023. A significant peak was observed in 2020 at US$ 24,297 million, driven by a substantial surge in market value. Despite a dip to US$ 19,563 million in 2021, MVA trended upward in 2022 and 2023. The increase in MVA during the final year was supported by a combination of stable market value and a reduction in invested capital, enhancing the gap between the company's market valuation and its book investment.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
MVA Spread Ratio
Cummins Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 23,047) | 21,140) | 19,563) | 24,297) | 13,278) | |
| Invested capital2 | 20,768) | 22,657) | 17,518) | 17,479) | 15,235) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 110.97% | 93.30% | 111.67% | 139.01% | 87.16% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | 297.62% | 250.73% | 256.11% | — | — | |
| Caterpillar Inc. | 247.08% | 194.33% | 165.08% | — | — | |
| Eaton Corp. plc | 289.43% | 149.39% | 132.30% | — | — | |
| GE Aerospace | 243.60% | 84.87% | 110.77% | — | — | |
| Honeywell International Inc. | 211.09% | 224.23% | 209.78% | — | — | |
| Lockheed Martin Corp. | 352.46% | 399.68% | 319.28% | — | — | |
| RTX Corp. | 53.93% | 59.03% | 61.85% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 MVA. See details »
2 Invested capital. See details »
3 2023 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 23,047 ÷ 20,768 = 110.97%
4 Click competitor name to see calculations.
Analysis of the financial metrics from 2019 to 2023 reveals a general trajectory of value creation, characterized by a substantial increase in market value added and a fluctuating yet positive MVA spread ratio.
- Market Value Added (MVA)
- Market value added experienced a sharp increase between 2019 and 2020, rising from 13,278 million USD to 24,297 million USD. Following a correction in 2021 to 19,563 million USD, a steady recovery trend was observed, with values climbing to 21,140 million USD in 2022 and reaching 23,047 million USD by the end of 2023.
- Invested Capital
- Invested capital demonstrated a consistent upward trend for the majority of the period. After rising from 15,235 million USD in 2019 to 17,518 million USD in 2021, a significant expansion occurred in 2022, peaking at 22,657 million USD. A moderate reduction followed in 2023, with the figure settling at 20,768 million USD.
- MVA Spread Ratio
- The MVA spread ratio exhibited significant volatility, peaking at 139.01% in 2020. This was followed by a downward trend over the subsequent two years, declining to 111.67% in 2021 and further to 93.30% in 2022. A reversal occurred in 2023, with the ratio increasing to 110.97%, indicating an improved efficiency in generating market value relative to the capital invested.
The relationship between invested capital and MVA suggests that while the scale of investment expanded significantly by 2022, the corresponding market value did not increase at a proportional rate, resulting in the compression of the spread ratio during that period. The recovery of the spread ratio in 2023, coinciding with a reduction in invested capital and a simultaneous increase in MVA, indicates a more favorable alignment between capital deployment and market valuation.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
MVA Margin
Cummins Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 23,047) | 21,140) | 19,563) | 24,297) | 13,278) | |
| Net sales | 34,065) | 28,074) | 24,021) | 19,811) | 23,571) | |
| Add: Increase (decrease) in deferred revenue | 338) | 143) | 174) | 177) | 198) | |
| Adjusted net sales | 34,403) | 28,217) | 24,195) | 19,988) | 23,769) | |
| Performance Ratio | ||||||
| MVA margin2 | 66.99% | 74.92% | 80.85% | 121.56% | 55.86% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | 171.80% | 191.47% | 203.39% | — | — | |
| Caterpillar Inc. | 214.78% | 188.24% | 190.31% | — | — | |
| Eaton Corp. plc | 392.00% | 221.57% | 198.58% | — | — | |
| GE Aerospace | 189.55% | 76.94% | 111.81% | — | — | |
| Honeywell International Inc. | 278.88% | 295.90% | 293.22% | — | — | |
| Lockheed Martin Corp. | 143.06% | 161.14% | 136.30% | — | — | |
| RTX Corp. | 84.86% | 96.78% | 107.41% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 MVA. See details »
2 2023 Calculation
MVA margin = 100 × MVA ÷ Adjusted net sales
= 100 × 23,047 ÷ 34,403 = 66.99%
3 Click competitor name to see calculations.
The analysis of market value added (MVA) and its relationship to adjusted net sales reveals a period of significant volatility followed by a phase of steady operational expansion and market stabilization.
- Market Value Added (MVA)
- The MVA exhibited a sharp increase between 2019 and 2020, rising from 13,278 million US$ to 24,297 million US$. Following a contraction in 2021 to 19,563 million US$, a consistent upward trajectory was established, reaching 23,047 million US$ by the end of 2023. This indicates a general growth in the market's valuation of wealth creation relative to the capital invested over the observed period.
- Adjusted Net Sales
- A temporary decline in adjusted net sales occurred in 2020, falling to 19,988 million US$ from 23,769 million US$ in 2019. A robust recovery followed, with sales expanding annually to 24,195 million US$ in 2021, 28,217 million US$ in 2022, and peaking at 34,403 million US$ in 2023. This reflects an aggressive growth in top-line revenue starting from the 2020 trough.
- MVA Margin
- The MVA margin reached a peak of 121.56% in 2020, which resulted from the convergence of rising MVA and declining adjusted net sales. Since 2020, a sustained downward trend is observed, with the margin declining to 80.85% in 2021, 74.92% in 2022, and 66.99% in 2023. This contraction suggests that revenue growth has outpaced the growth of market value added during the recovery phase.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?