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
EMC Corp., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
An analysis of the financial performance between 2011 and 2015 reveals a general decline in Market Value Added (MVA), characterized by significant volatility in market valuation coupled with a steady increase in invested capital.
- Market Value Trends
- The fair market value exhibited an inconsistent trajectory over the five-year period. After an initial decrease from US$ 56,502 million in 2011 to US$ 47,472 million in 2012, the valuation recovered and peaked at US$ 58,100 million in 2014. However, this growth was not sustained, as the value fell to US$ 51,918 million by December 31, 2015.
- Invested Capital Growth
- Invested capital demonstrated a continuous and linear upward trend. The amount increased every year, rising from US$ 24,594 million in 2011 to US$ 33,788 million in 2015. This suggests a consistent expansion of the capital base utilized in operations throughout the period.
- Market Value Added (MVA) Analysis
- MVA experienced an overall contraction, falling from US$ 31,908 million in 2011 to US$ 18,130 million in 2015. A sharp decline occurred in 2012, followed by a moderate recovery phase through 2014, where MVA reached US$ 25,832 million. The subsequent drop in 2015 represents the lowest value in the analyzed timeframe.
The observed patterns indicate a widening gap between the growth of invested capital and the growth of market valuation. The reduction in MVA, particularly the significant drop observed in 2015, suggests that the market's perception of value creation did not keep pace with the increasing capital requirements of the organization.
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MVA Spread Ratio
EMC Corp., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 18,130) | 25,832) | 20,822) | 20,079) | 31,908) | |
| Invested capital2 | 33,788) | 32,268) | 31,439) | 27,392) | 24,594) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 53.66% | 80.06% | 66.23% | 73.30% | 129.74% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2015 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 18,130 ÷ 33,788 = 53.66%
4 Click competitor name to see calculations.
Financial analysis for the period between December 31, 2011, and December 31, 2015, reveals a diverging relationship between the growth of the capital base and the creation of market value.
- Market Value Added (MVA)
- A general downward trend characterized by volatility is observed in the MVA. The value peaked at 31,908 million USD in 2011 before experiencing a sharp decline to 20,079 million USD in 2012. Although a recovery occurred in 2014, reaching 25,832 million USD, the period concluded with a five-year low of 18,130 million USD in 2015.
- Invested Capital
- Invested capital demonstrated consistent annual growth throughout the observed period. Starting at 24,594 million USD in 2011, the capital base increased steadily each year, reaching 33,788 million USD by December 31, 2015.
- MVA Spread Ratio
- The MVA spread ratio exhibited a significant overall decline, falling from 129.74% in 2011 to 53.66% in 2015. A temporary upward correction to 80.06% was noted in 2014; however, the broader trend indicates a reduction in the efficiency of value creation relative to the total capital deployed over the five-year horizon.
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MVA Margin
EMC Corp., MVA margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 18,130) | 25,832) | 20,822) | 20,079) | 31,908) | |
| Revenues | 24,704) | 24,440) | 23,222) | 21,714) | 20,008) | |
| Add: Increase (decrease) in deferred revenue | 637) | 1,186) | 1,428) | 1,377) | 1,510) | |
| Adjusted revenues | 25,341) | 25,626) | 24,650) | 23,091) | 21,518) | |
| Performance Ratio | ||||||
| MVA margin2 | 71.54% | 100.80% | 84.47% | 86.96% | 148.29% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | — | — | — | — | — | |
| Analog Devices Inc. | — | — | — | — | — | |
| Applied Materials Inc. | — | — | — | — | — | |
| Broadcom Inc. | — | — | — | — | — | |
| Intel Corp. | — | — | — | — | — | |
| KLA Corp. | — | — | — | — | — | |
| Lam Research Corp. | — | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | |
| Micron Technology Inc. | — | — | — | — | — | |
| NVIDIA Corp. | — | — | — | — | — | |
| Qualcomm Inc. | — | — | — | — | — | |
| Texas Instruments Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 MVA. See details »
2 2015 Calculation
MVA margin = 100 × MVA ÷ Adjusted revenues
= 100 × 18,130 ÷ 25,341 = 71.54%
3 Click competitor name to see calculations.
The financial performance between 2011 and 2015 is characterized by a divergence between steady revenue growth and a volatile, generally declining trend in market value creation. While operational scale expanded, the market's valuation of the value added relative to that scale experienced significant contraction.
- Market Value Added (MVA)
- A significant decline in MVA is observed from a peak of 31,908 million US$ in 2011 to 18,130 million US$ by 2015. The trajectory was non-linear, featuring a sharp drop in 2012, a period of recovery peaking in 2014 at 25,832 million US$, and a subsequent steep decline in 2015 to the lowest level in the five-year period.
- Adjusted Revenues
- Revenues exhibited a consistent upward trend for the majority of the period, increasing from 21,518 million US$ in 2011 to a peak of 25,626 million US$ in 2014. A marginal contraction occurred in 2015, with revenues settling at 25,341 million US$, indicating a plateau in top-line growth.
- MVA Margin
- The MVA margin reflects a substantial deterioration in the efficiency of market value creation relative to revenue. Starting at 148.29% in 2011, the margin fell sharply to 86.96% in 2012. Despite a temporary recovery to 100.80% in 2014, the margin plummeted to 71.54% by 2015, representing a total decrease of approximately 76.75 percentage points over the analyzed timeframe.
The analysis indicates that the growth in adjusted revenues was insufficient to sustain the market value added. The contraction of the MVA margin suggests that the market's perception of the company's ability to create value above its capital cost diminished significantly, even as the company expanded its revenue base.
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