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
EOG Resources Inc., MVA calculation
US$ in thousands
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 »
Between 2015 and 2019, the financial trajectory of EOG Resources shows a distinct cycle of value creation followed by a substantial erosion of market premium. While the company consistently increased its invested capital, the market valuation fluctuated significantly, leading to a volatile Market Value Added (MVA) trend.
- Market Valuation Trends
- The fair market value experienced an upward trajectory from 2015 to 2017, rising from US$ 44.86 billion to a peak of US$ 68.89 billion. A reversal occurred in 2018, with values declining to US$ 61.07 billion and further dropping to US$ 41.23 billion by the end of 2019, representing a significant contraction from the 2017 peak.
- Invested Capital Growth
- Invested capital exhibited a consistent and linear growth pattern throughout the five-year period. Starting at US$ 24.43 billion in 2015, the capital base expanded annually to reach US$ 32.66 billion by 2019. This steady increase indicates a continuous commitment of resources into the company's operational assets.
- Market Value Added (MVA) Performance
- MVA followed a bell-shaped curve, increasing from US$ 20.43 billion in 2015 to a peak of US$ 42.32 billion in 2017. During this phase, the market valuation grew at a faster rate than the invested capital, signaling strong value creation. However, the subsequent decline in market value, occurring simultaneously with the continued rise in invested capital, resulted in a sharp contraction of MVA to US$ 8.57 billion by 2019.
The overall trend indicates that while the company expanded its capital investment base, the market's perception of the value generated by that capital diminished significantly toward the end of the period. The convergence of rising invested capital and falling market value in 2019 led to the lowest MVA level recorded in the analyzed timeframe.
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MVA Spread Ratio
EOG Resources 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 thousands) | ||||||
| Market value added (MVA)1 | 8,568,618) | 30,709,940) | 42,323,177) | 37,707,123) | 20,425,910) | |
| Invested capital2 | 32,663,914) | 30,360,840) | 26,570,707) | 26,322,407) | 24,433,279) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 26.23% | 101.15% | 159.29% | 143.25% | 83.60% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
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 × 8,568,618 ÷ 32,663,914 = 26.23%
4 Click competitor name to see calculations.
The financial performance from 2015 to 2019 reflects a significant volatility in market value creation despite a consistent increase in the capital base. While the period began with a strong upward trajectory in value addition, the final two years were characterized by a sharp contraction in the market's valuation of the company's invested capital.
- Market Value Added (MVA)
- A period of substantial growth is observed between 2015 and 2017, with MVA increasing from 20,425,910 thousand US$ to a peak of 42,323,177 thousand US$. This indicates a strong increase in the difference between the market value of the firm and the capital contributed by investors. However, this trend reversed after 2017, with a decline to 30,709,940 thousand US$ in 2018 and a precipitous drop to 8,568,618 thousand US$ by the end of 2019.
- Invested Capital
- Unlike the volatility seen in MVA, invested capital exhibited a steady and linear upward trend throughout the five-year period. Capital grew from 24,433,279 thousand US$ in 2015 to 32,663,914 thousand US$ in 2019. This suggests a continuous commitment to resource deployment and expansion of the asset base regardless of fluctuating market valuations.
- MVA Spread Ratio
- The MVA spread ratio, which measures the efficiency of value creation relative to invested capital, mirrored the trajectory of the MVA. The ratio rose from 83.60% in 2015 to a maximum of 159.29% in 2017, suggesting that the company was creating value at a rate significantly exceeding its capital investment. Subsequently, the ratio declined to 101.15% in 2018 and fell sharply to 26.23% in 2019, indicating a marked reduction in the premium the market assigned to the company's invested capital toward the end of the period.
The divergence between the steadily increasing invested capital and the plummeting MVA spread ratio by 2019 indicates that subsequent investments did not yield proportional increases in market value. The collapse of the spread ratio from 159.29% to 26.23% represents a significant erosion of market-perceived value creation over the 2017-2019 interval.
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MVA Margin
EOG Resources 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 thousands) | ||||||
| Market value added (MVA)1 | 8,568,618) | 30,709,940) | 42,323,177) | 37,707,123) | 20,425,910) | |
| Operating revenues and other | 17,379,973) | 17,275,399) | 11,208,320) | 7,650,632) | 8,757,428) | |
| Performance Ratio | ||||||
| MVA margin2 | 49.30% | 177.77% | 377.60% | 492.86% | 233.24% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil Corp. | — | — | — | — | — | |
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 ÷ Operating revenues and other
= 100 × 8,568,618 ÷ 17,379,973 = 49.30%
3 Click competitor name to see calculations.
The financial performance from 2015 to 2019 reveals a significant decoupling between operational growth and market-perceived value. While operating revenues exhibited a strong upward trajectory, particularly in the latter half of the period, Market Value Added (MVA) and the MVA margin experienced a severe contraction toward the end of the timeline.
- Market Value Added (MVA)
- MVA followed a bell-shaped trajectory, increasing from $20.4 billion in 2015 to a peak of $42.3 billion in 2017. This growth was followed by a sharp reversal, with value declining to $30.7 billion in 2018 and falling precipitously to $8.6 billion by December 31, 2019. This decline indicates a substantial reduction in the wealth created for shareholders relative to the capital invested.
- Operating Revenues and Other
- Operational scale showed consistent expansion after 2016. Revenues rose from $7.7 billion in 2016 to $17.4 billion in 2019. A significant surge is observed between 2017 and 2018, where revenues increased from $11.2 billion to $17.3 billion, representing a substantial increase in top-line activity.
- MVA Margin
- The MVA margin exhibited extreme volatility and a strong downward trend after 2016. After reaching a peak of 492.86% in 2016, the margin declined steadily to 177.77% in 2018 and finally to 49.30% in 2019. The inverse relationship between rising operating revenues and a falling MVA margin suggests that the market's valuation of the company's future growth prospects declined even as the company increased its operational volume.
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