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
Estée Lauder Cos. Inc., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 Fair value of debt. See details »
2 Invested capital. See details »
The analysis of market value added (MVA) reveals a period of significant expansion followed by a sharp contraction. From 2018 to 2021, there was a consistent upward trajectory in both market valuation and the resulting MVA, peaking in 2021 before experiencing a substantial decline through 2023.
- Market Value Evolution
- The market value experienced rapid growth over the first four years of the period, increasing from 55,032 million USD in 2018 to a peak of 132,817 million USD in 2021. This represents an increase of approximately 141% during that window. However, a reversal occurred thereafter, with the market value falling to 66,599 million USD by June 30, 2023, erasing a significant portion of the gains achieved during the peak.
- Invested Capital Trends
- In contrast to the volatility of the market value, invested capital demonstrated a general upward trend. Capital grew from 10,334 million USD in 2018 to 17,123 million USD in 2023. While there was a slight reduction in invested capital in 2022, the overall trajectory indicates a steady increase in the company's internal investment base over the six-year period.
- Market Value Added (MVA) Dynamics
- The MVA reflects the difference between the market's valuation and the capital invested. This figure grew from 44,698 million USD in 2018 to a maximum of 117,207 million USD in 2021, signaling high investor confidence and perceived future growth. By 2023, the MVA declined to 49,476 million USD. This indicates a notable divergence: while the company has a higher level of invested capital in 2023 than in 2018, the market's premium over that capital has returned to levels similar to those seen five years prior.
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MVA Spread Ratio
Estée Lauder Cos. Inc., MVA spread ratio calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 49,476) | 88,373) | 117,207) | 76,190) | 66,166) | 44,698) | |
| Invested capital2 | 17,123) | 14,574) | 15,610) | 13,826) | 11,514) | 10,334) | |
| Performance Ratio | |||||||
| MVA spread ratio3 | 288.94% | 606.37% | 750.85% | 551.06% | 574.67% | 432.54% | |
| Benchmarks | |||||||
| MVA Spread Ratio, Competitors4 | |||||||
| Procter & Gamble Co. | 315.48% | 302.90% | 298.89% | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 MVA. See details »
2 Invested capital. See details »
3 2023 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 49,476 ÷ 17,123 = 288.94%
4 Click competitor name to see calculations.
The financial trajectory from 2018 to 2023 reveals a period of significant valuation expansion followed by a sharp contraction in market-perceived value creation.
- Market Value Added (MVA)
- MVA exhibited substantial growth between 2018 and 2021, increasing from US$ 44,698 million to a peak of US$ 117,207 million. This upward trend suggests a period of high market confidence and significant value creation above the invested capital. However, a reversal occurred after June 2021, with values declining to US$ 88,373 million in 2022 and further dropping to US$ 49,476 million by June 2023, returning the metric to levels similar to those seen in 2018.
- Invested Capital
- Invested capital followed a generally ascending path, rising from US$ 10,334 million in 2018 to US$ 17,123 million in 2023. Despite a minor contraction in 2022, the overall trend indicates a consistent increase in the capital deployed into the business over the six-year period.
- MVA Spread Ratio
- The MVA spread ratio mirrored the volatility of the MVA, peaking at 750.85% in 2021, which represents the highest efficiency of value creation relative to capital investment during this timeframe. A severe deterioration is observed between 2021 and 2023, as the ratio plummeted to 288.94%. This decline is particularly significant because it occurred while invested capital reached its maximum level, indicating that the market's valuation of the company's ability to generate value above its capital costs diminished sharply.
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MVA Margin
Estée Lauder Cos. Inc., MVA margin calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 49,476) | 88,373) | 117,207) | 76,190) | 66,166) | 44,698) | |
| Net sales | 15,910) | 17,737) | 16,215) | 14,294) | 14,863) | 13,683) | |
| Add: Increase (decrease) in deferred revenue | 210) | (9) | 92) | (82) | (19) | —) | |
| Adjusted net sales | 16,120) | 17,728) | 16,307) | 14,212) | 14,844) | 13,683) | |
| Performance Ratio | |||||||
| MVA margin2 | 306.92% | 498.49% | 718.75% | 536.10% | 445.74% | 326.67% | |
| Benchmarks | |||||||
| MVA Margin, Competitors3 | |||||||
| Procter & Gamble Co. | 371.43% | 354.79% | 373.41% | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 MVA. See details »
2 2023 Calculation
MVA margin = 100 × MVA ÷ Adjusted net sales
= 100 × 49,476 ÷ 16,120 = 306.92%
3 Click competitor name to see calculations.
An analysis of the market value added (MVA) and MVA margin reveals a period of significant expansion followed by a notable contraction between 2018 and 2023. The company experienced a peak in market valuation relative to its invested capital in 2021, after which a downward trajectory was established.
- Market Value Added (MVA) Trend
- MVA grew consistently from June 30, 2018, at 44,698 million US$, reaching a peak of 117,207 million US$ by June 30, 2021. This represents a substantial increase in the value created for shareholders over a three-year period. However, this trend reversed sharply starting in 2022, with MVA falling to 88,373 million US$ and further declining to 49,476 million US$ by June 30, 2023, nearly returning to 2018 levels.
- Adjusted Net Sales Performance
- Adjusted net sales exhibited a general upward trend from 13,683 million US$ in 2018 to a peak of 17,728 million US$ in 2022, despite a brief contraction in 2020. A decline occurred in 2023, with sales dropping to 16,120 million US$. The discrepancy between the peak in sales (2022) and the peak in MVA (2021) suggests that market valuation peaked ahead of maximum sales achievement.
- MVA Margin Analysis
- The MVA margin, which measures the relationship between market value added and adjusted net sales, followed a trajectory similar to the MVA. The margin expanded from 326.67% in 2018 to a high of 718.75% in 2021, indicating a period of heightened market optimism and perceived value creation. This was followed by a steep decline to 498.49% in 2022 and a further reduction to 306.92% by 2023, signifying a contraction in the market's valuation of the company's revenue-generating capacity.
The overall data indicates that while sales growth remained relatively stable until 2022, the market's valuation of the company was far more volatile. The sharp decline in both MVA and MVA margin after 2021 suggests a significant correction in market expectations or an increase in perceived risk, as the MVA margin in 2023 ended slightly lower than its 2018 starting point despite higher nominal sales.
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