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
Devon Energy Corp., 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 analysis of Market Value Added (MVA) reveals a significant expansion in shareholder value creation between 2018 and 2022, characterized by a dramatic divergence between the market's valuation and the invested capital base starting in 2020.
- Market Value Trends
- The market valuation exhibited volatility in the early period, declining from US$ 19,571 million in 2018 to US$ 14,454 million in 2019, before entering a period of rapid growth. A substantial surge occurred between 2020 and 2021, where the valuation more than doubled from US$ 20,380 million to US$ 43,826 million, eventually stabilizing at US$ 44,066 million by the end of 2022.
- Invested Capital Dynamics
- Invested capital followed a contradictory path to market value during the 2018-2020 period, decreasing consistently from US$ 15,392 million to a low of US$ 7,866 million. This reduction in the capital base was reversed sharply in 2021 and 2022, with invested capital rising to US$ 16,727 million and US$ 19,717 million, respectively.
- Market Value Added (MVA) Performance
- MVA remained relatively stable and low between 2018 and 2019, moving from US$ 4,178 million to US$ 3,490 million. A pivotal shift occurred in 2020, as MVA rose to US$ 12,514 million, driven by the simultaneous increase in market value and the reduction of invested capital. This growth peaked in 2021 at US$ 27,099 million, representing the highest point of value creation relative to invested capital. A slight contraction to US$ 24,349 million was observed in 2022, resulting from a continued increase in invested capital while the market value remained nearly flat.
- Overall Value Interpretation
- The trajectory indicates that the company transitioned from a period of capital contraction and modest value creation to a phase of aggressive market appreciation. The significant increase in MVA from 2020 onward suggests that the market began attributing substantially more value to the company than the actual capital invested in its operations, although the most recent data indicates a slight cooling of this premium as the capital base expanded.
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MVA Spread Ratio
Devon Energy Corp., 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 | 24,349) | 27,099) | 12,514) | 3,490) | 4,178) | |
| Invested capital2 | 19,717) | 16,727) | 7,866) | 10,964) | 15,392) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 123.49% | 162.01% | 159.10% | 31.84% | 27.15% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | 57.71% | 54.49% | — | — | — | |
| ConocoPhillips | 93.55% | 86.17% | — | — | — | |
| Exxon Mobil Corp. | 67.23% | 42.25% | — | — | — | |
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 × 24,349 ÷ 19,717 = 123.49%
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2018 to 2022 reveals a period of significant valuation growth and capital restructuring. While the initial years showed stability or slight decline, there was a dramatic shift beginning in 2020, characterized by a surge in market perception of value relative to the capital employed.
- Market Value Added (MVA)
- Market Value Added experienced a modest decline from 4,178 million US$ in 2018 to 3,490 million US$ in 2019. However, a sharp upward trajectory followed, with values climbing to 12,514 million US$ in 2020 and peaking at 27,099 million US$ in 2021. A slight correction occurred by the end of 2022, with the value settling at 24,349 million US$, representing a substantial overall increase from the 2018 baseline.
- Invested Capital
- Invested capital followed a U-shaped trend during the period. A contraction is observed from 2018 to 2020, where capital decreased from 15,392 million US$ to a low of 7,866 million US$. This downward trend reversed abruptly in 2021, with invested capital rising to 16,727 million US$ and continuing to grow to 19,717 million US$ by the end of 2022, surpassing the initial 2018 levels.
- MVA Spread Ratio
- The MVA spread ratio exhibited the most volatility, reflecting the diverging trends between market valuation and invested capital. The ratio remained relatively stable between 2018 and 2019, moving from 27.15% to 31.84%. A significant expansion occurred in 2020, with the ratio leaping to 159.10%, and reaching a peak of 162.01% in 2021. This surge indicates that the market value added grew at a rate far exceeding the invested capital during this window. By 2022, the ratio moderated to 123.49%, driven by the simultaneous increase in invested capital and a slight decrease in MVA.
The data indicates that the period between 2020 and 2021 was a phase of extreme value creation or market optimism, as the MVA spread ratio increased more than fivefold. The subsequent trend in 2022 suggests a normalization process where the increase in invested capital began to align more closely with the market valuation.
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MVA Margin
Devon Energy Corp., 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 | 24,349) | 27,099) | 12,514) | 3,490) | 4,178) | |
| Revenues | 19,169) | 12,206) | 4,828) | 6,220) | 10,734) | |
| Performance Ratio | ||||||
| MVA margin2 | 127.02% | 222.02% | 259.21% | 56.12% | 38.93% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Chevron Corp. | 51.99% | 67.80% | — | — | — | |
| ConocoPhillips | 90.01% | 143.57% | — | — | — | |
| Exxon Mobil Corp. | 50.09% | 41.64% | — | — | — | |
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 ÷ Revenues
= 100 × 24,349 ÷ 19,169 = 127.02%
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a significant expansion in market valuation and a volatile revenue cycle, leading to substantial fluctuations in the MVA margin.
- Market Value Added (MVA) Trends
- An upward trajectory in MVA is evident starting in 2020. Following a slight decline from US$ 4,178 million in 2018 to US$ 3,490 million in 2019, the MVA experienced a sharp increase to US$ 12,514 million in 2020. This growth peaked in 2021 at US$ 27,099 million before moderating to US$ 24,349 million by the end of 2022.
- Revenue Analysis
- Revenues followed a U-shaped pattern over the five-year period. A contraction occurred between 2018 and 2020, with revenues dropping from US$ 10,734 million to a period low of US$ 4,828 million. A robust recovery ensued, with revenues climbing to US$ 12,206 million in 2021 and reaching a peak of US$ 19,169 million in 2022.
- MVA Margin Interpretation
- The MVA margin exhibited extreme volatility, peaking at 259.21% in 2020. This spike occurred despite revenues being at their lowest point, indicating a significant disconnect between operational revenue and market valuation during that year. As revenues expanded rapidly in 2021 and 2022, the MVA margin trended downward to 222.02% and 127.02%, respectively. This compression suggests a normalization of the ratio as revenue growth began to catch up with the previously accelerated increase in market value.
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