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
DuPont de Nemours Inc., MVA calculation
US$ in millions
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 »
A sustained negative Market Value Added (MVA) is observed between 2015 and 2019, indicating that the market valuation of the entity remained consistently below its invested capital throughout the period. This suggests a persistent failure to create shareholder value exceeding the cost of capital employed.
- Market Value and Capitalization Trends
- The market value exhibited significant volatility, peaking in 2017 at 94,820 million US$ before declining to 59,435 million US$ by 2019. Simultaneously, invested capital saw a massive expansion in 2017, jumping from 50,610 million US$ in 2016 to 149,192 million US$, which suggests a substantial increase in the asset base or a major corporate restructuring during that year.
- MVA Deficit and Value Erosion
- The MVA trend shows a severe deterioration coinciding with the increase in invested capital. After a slight improvement in 2016, the MVA plummeted to -54,372 million US$ in 2017 and reached its lowest point in 2018 at -69,998 million US$. This widening gap indicates that the market did not perceive the increase in invested capital as value-additive, resulting in a significant destruction of economic value.
- 2019 Capital Adjustment and MVA Recovery
- A sharp correction occurred in 2019, where invested capital decreased substantially to 62,770 million US$. This reduction in the capital base led to a marked recovery in MVA, which improved to -3,335 million US$. While the MVA remained negative, the deficit narrowed significantly, moving closer to the levels observed at the beginning of the analyzed period.
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MVA Spread Ratio
DuPont de Nemours Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | (3,335) | (69,998) | (54,372) | (1,910) | (5,718) | |
| Invested capital2 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | -5.31% | -45.70% | -36.44% | -3.77% | -12.35% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
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 × -3,335 ÷ 62,770 = -5.31%
4 Click competitor name to see calculations.
The financial data exhibits a period of significant volatility in market value creation and capital structure between 2015 and 2019. Throughout the entire five-year period, the market value added remained negative, indicating that the market valuation of the entity was consistently lower than the total capital invested. This trend suggests that the company struggled to generate a market premium over its invested capital base during this timeframe.
- Market Value Added (MVA) Trends
- MVA experienced a slight recovery in 2016, improving from -5,718 million to -1,910 million. However, a severe deterioration occurred in 2017 and 2018, with the value plunging to -54,372 million and reaching a nadir of -69,998 million, respectively. A substantial recovery was observed by the end of 2019, as the negative MVA narrowed significantly to -3,335 million.
- Invested Capital Fluctuations
- The capital base showed relative stability between 2015 and 2016, before experiencing a massive increase in 2017, jumping from 50,610 million to 149,192 million. This elevated level persisted through 2018 at 153,164 million. In 2019, a sharp contraction occurred, with invested capital reducing to 62,770 million, suggesting a significant divestiture or structural reorganization of assets.
- MVA Spread Ratio Analysis
- The MVA spread ratio mirrored the volatility of the absolute MVA and invested capital. The ratio improved from -12.35% in 2015 to -3.77% in 2016, but collapsed during the expansion of the capital base, reaching -36.44% in 2017 and peaking at a negative -45.70% in 2018. This indicates a profound misalignment between the growth in invested capital and the resulting market perception of value. By 2019, the ratio recovered to -5.31%, reflecting a stabilization of the value-to-capital relationship.
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MVA Margin
DuPont de Nemours Inc., 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 millions) | ||||||
| Market value added (MVA)1 | (3,335) | (69,998) | (54,372) | (1,910) | (5,718) | |
| Net sales | 21,512) | 85,977) | 62,484) | 48,158) | 48,778) | |
| Add: Increase (decrease) in deferred revenue | —) | (41) | 2,332) | —) | —) | |
| Adjusted net sales | 21,512) | 85,936) | 64,816) | 48,158) | 48,778) | |
| Performance Ratio | ||||||
| MVA margin2 | -15.51% | -81.45% | -83.89% | -3.97% | -11.72% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
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 sales
= 100 × -3,335 ÷ 21,512 = -15.51%
3 Click competitor name to see calculations.
The analysis of Market Value Added (MVA) and MVA margin from 2015 to 2019 reveals a period of significant volatility and negative value creation relative to invested capital. Throughout the entire five-year observation window, both MVA and the MVA margin remained negative, indicating that the market valuation of the company consistently trailed the total capital invested.
- Market Value Added (MVA) Trends
- The absolute MVA exhibited extreme fluctuations. After a modest improvement between 2015 and 2016, where the deficit narrowed from -5,718 million to -1,910 million, a severe downturn occurred in 2017 and 2018. The MVA plummeted to -54,372 million in 2017 and reached its lowest point in 2018 at -69,998 million. A substantial recovery was observed in 2019, with the MVA improving to -3,335 million, nearly returning to 2015 levels.
- MVA Margin Volatility
- The MVA margin mirrors the trajectory of the absolute MVA, reflecting the relationship between market value deficit and adjusted net sales. The margin improved to -3.97% in 2016 but experienced a sharp deterioration in 2017, reaching -83.89%. This level of value destruction persisted into 2018 at -81.45%. By 2019, the margin recovered to -15.51%, though it remained more negative than the 2016 peak.
- Correlation with Adjusted Net Sales
- A notable divergence is observed between revenue growth and value creation between 2017 and 2018. While adjusted net sales grew significantly, rising from 48,158 million in 2016 to 85,936 million in 2018, the MVA and MVA margin declined sharply. This suggests that the expansion in sales during this period did not translate into market value and may have been associated with capital-intensive activities that the market undervalued. Conversely, the recovery in 2019 occurred alongside a dramatic reduction in adjusted net sales to 21,512 million, implying that a reduction in the operational scale or a structural reorganization contributed to the improvement in market value relative to the capital base.
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