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
Ecolab Inc., MVA calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
Analysis of the market value added (MVA) reveals a period of substantial growth between 2017 and 2020, followed by a correction in 2021. The overall trend indicates a consistent capacity to create shareholder value, as MVA remained positive and significant throughout the five-year period.
- Market Valuation Dynamics
- The fair market value increased consistently from 46.1 billion USD in 2017 to a peak of 68.0 billion USD in 2020. This upward trajectory suggests expanding investor confidence and an increasing market perception of the company's growth potential. A contraction occurred in 2021, with the valuation retreating to 61.6 billion USD.
- Invested Capital Fluctuations
- Invested capital remained relatively stable, generally fluctuating between 17 billion USD and 18 billion USD. A notable reduction to 15.6 billion USD was observed in 2020, which served to amplify the MVA for that fiscal year. By 2021, invested capital rose to its period high of 18.4 billion USD.
- Market Value Added Performance
- MVA exhibited a strong growth trend, rising from 28.8 billion USD in 2017 to a peak of 52.4 billion USD in 2020. The expansion of MVA during this interval was driven primarily by the increase in market valuation, further accelerated by the temporary dip in invested capital in 2020. In 2021, MVA declined to 43.2 billion USD, reflecting the combined impact of a lower market valuation and an increase in the capital base.
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MVA Spread Ratio
Ecolab Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 43,191,401) | 52,430,647) | 41,469,734) | 38,963,106) | 28,759,538) | |
| Invested capital2 | 18,430,300) | 15,595,900) | 18,090,500) | 17,830,002) | 17,388,578) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 234.35% | 336.18% | 229.23% | 218.53% | 165.39% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Linde plc | 128.35% | — | — | — | — | |
| Sherwin-Williams Co. | 418.72% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2021 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 43,191,401 ÷ 18,430,300 = 234.35%
4 Click competitor name to see calculations.
An analysis of the value creation metrics from 2017 to 2021 indicates a period of substantial growth in market value added, peaking in 2020 before experiencing a moderate contraction in 2021. The relationship between invested capital and market valuation suggests a high efficiency in wealth generation for shareholders throughout the observed period.
- Market Value Added (MVA)
- A consistent upward trajectory is observed from 2017, where MVA stood at US$ 28.76 billion, rising to a peak of US$ 52.43 billion by December 31, 2020. This represents a significant increase in the premium the market placed on the company over its invested capital. A correction occurred in 2021, with the value decreasing to US$ 43.19 billion, although this figure remains substantially higher than the 2017 baseline.
- Invested Capital
- Invested capital remained relatively stable between 2017 and 2019, fluctuating within a narrow range between US$ 17.39 billion and US$ 18.09 billion. A notable contraction occurred in 2020, with capital decreasing to US$ 15.60 billion. By 2021, invested capital rebounded to its highest level in the period, reaching US$ 18.43 billion.
- MVA Spread Ratio
- The MVA spread ratio exhibited a strong positive trend, increasing from 165.39% in 2017 to a peak of 336.18% in 2020. This peak was driven by the convergence of maximum MVA and minimum invested capital. In 2021, the ratio declined to 234.35%, reflecting the simultaneous decrease in MVA and the increase in the capital base. Despite this decline, the ratio indicates that the company continued to generate market value significantly in excess of its invested capital.
The overall trend demonstrates that the most aggressive value creation occurred in 2020, where the efficiency of capital utilization reached its zenith. The subsequent adjustment in 2021 indicates a normalization of the market valuation relative to the expanded capital investment.
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MVA Margin
Ecolab Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 43,191,401) | 52,430,647) | 41,469,734) | 38,963,106) | 28,759,538) | |
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Performance Ratio | ||||||
| MVA margin2 | 339.21% | 444.70% | 278.20% | 265.63% | 207.83% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Linde plc | 302.43% | — | — | — | — | |
| Sherwin-Williams Co. | 331.88% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 MVA. See details »
2 2021 Calculation
MVA margin = 100 × MVA ÷ Net sales
= 100 × 43,191,401 ÷ 12,733,100 = 339.21%
3 Click competitor name to see calculations.
The financial performance from 2017 to 2021 reflects a period of substantial growth in market perceived value, characterized by a significant decoupling of market valuation from top-line revenue during the 2020 fiscal year.
- Market Value Added (MVA) Trends
- A consistent upward trajectory is observed from 2017 through 2020, with MVA increasing from $28,759,538 thousand to a peak of $52,430,647 thousand. This indicates a strong increase in the value created for shareholders above the capital invested. However, this trend reversed in 2021, as MVA declined to $43,191,401 thousand.
- Net Sales Performance
- Net sales grew steadily between 2017 and 2019, peaking at $14,906,300 thousand. A sharp contraction occurred in 2020, where sales dropped to $11,790,200 thousand, the lowest point in the analyzed period. A partial recovery was noted in 2021, with sales rising to $12,733,100 thousand.
- MVA Margin Analysis
- The MVA margin demonstrates a significant expansion, rising from 207.83% in 2017 to a peak of 444.70% in 2020. The peak in 2020 is particularly noteworthy as it occurred simultaneously with the lowest annual net sales, suggesting that the market attributed higher value to the company despite a decrease in revenue. In 2021, the margin experienced a correction, decreasing to 339.21%.
Overall, the data indicates that while revenue experienced volatility between 2019 and 2021, the market valuation remained significantly higher than the 2017 baseline, though it faced a downward correction in the final year of the period.
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