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
Generac Holdings 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 »
The financial trajectory from 2017 to 2021 demonstrates a period of significant value creation, where the market valuation expanded at a rate that substantially exceeded the growth of invested capital.
- Market Value Trajectory
- A consistent upward trend is observed from 2017 through 2019, with the fair value increasing from approximately 3.9 billion to 7.7 billion. A period of rapid acceleration occurred in 2020, with the market value peaking at nearly 22 billion, marking an increase of approximately 184% in a single fiscal year. A moderate correction followed in 2021, as the market value adjusted to 19.17 billion.
- Invested Capital Expansion
- Invested capital exhibited a steady and linear increase throughout the five-year period, rising from 1.71 billion in 2017 to 3.77 billion in 2021. This gradual growth indicates a disciplined expansion of the capital base, contrasting with the more volatile fluctuations seen in the market valuation.
- Market Value Added (MVA) Analysis
- The MVA grew from 2.19 billion in 2017 to a peak of 19.28 billion in 2020, signaling an extraordinary increase in the wealth created for shareholders over and above the capital contributed. The surge between 2019 and 2020 suggests that market expectations for future growth and profitability shifted dramatically upward. Despite a decline to 15.40 billion in 2021, the MVA remains substantially higher than the pre-2020 levels, confirming that the market continues to assign a premium to the company's operational assets and future prospects.
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MVA Spread Ratio
Generac Holdings 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 | 15,402,739) | 19,281,554) | 5,484,843) | 2,276,880) | 2,186,319) | |
| Invested capital2 | 3,771,373) | 2,684,660) | 2,246,986) | 1,970,846) | 1,710,524) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 408.41% | 718.21% | 244.10% | 115.53% | 127.82% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | 256.11% | — | — | — | — | |
| Caterpillar Inc. | 165.08% | — | — | — | — | |
| Eaton Corp. plc | 132.30% | — | — | — | — | |
| GE Aerospace | 110.77% | — | — | — | — | |
| Honeywell International Inc. | 209.78% | — | — | — | — | |
| Lockheed Martin Corp. | 319.28% | — | — | — | — | |
| RTX Corp. | 61.85% | — | — | — | — | |
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 × 15,402,739 ÷ 3,771,373 = 408.41%
4 Click competitor name to see calculations.
The financial trajectory between 2017 and 2021 is characterized by a period of exponential growth in market valuation, peaking in 2020, followed by a moderate correction in 2021. While the capital base expanded steadily throughout the five-year period, the market's valuation of the company's value creation experienced significantly higher volatility and magnitude of change.
- Market Value Added (MVA)
- A substantial upward trend is observed in the MVA, which grew from $2,186,319 thousand in 2017 to a peak of $19,281,554 thousand in 2020. This represents a nearly nine-fold increase over four years. However, a contraction occurred in 2021, with MVA declining to $15,402,739 thousand, suggesting a cooling of market expectations or a correction in market price relative to the capital invested.
- Invested Capital
- Invested capital exhibited a consistent and linear growth pattern. From 2017 to 2021, the capital base increased from $1,710,524 thousand to $3,771,373 thousand. This steady expansion indicates a disciplined approach to increasing the company's resource base to support operations, regardless of the volatility seen in market valuation.
- MVA Spread Ratio
- The MVA spread ratio shows significant fluctuation, reflecting the disparity between the rate of market value growth and the rate of capital investment. After a slight dip in 2018 to 115.53%, the ratio escalated sharply to 244.10% in 2019 and reached an extraordinary peak of 718.21% in 2020. By 2021, the ratio moderated to 408.41%. These figures indicate that for much of the period, the market attributed value to the company at a rate far exceeding its physical and financial capital investments, particularly during the 2020 peak.
The divergence between the steady growth of invested capital and the volatile surge in MVA suggests that the company's valuation during this period was driven primarily by market sentiment and perceived future earnings potential rather than proportional increases in the capital base.
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MVA Margin
Generac Holdings Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Market value added (MVA)1 | 15,402,739) | 19,281,554) | 5,484,843) | 2,276,880) | 2,186,319) | |
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Add: Increase (decrease) in deferred revenue related to extended warranties | 21,859) | 11,050) | 10,398) | 10,486) | 19,861) | |
| Adjusted net sales | 3,759,043) | 2,496,250) | 2,214,734) | 2,033,950) | 1,692,306) | |
| Performance Ratio | ||||||
| MVA margin2 | 409.75% | 772.42% | 247.65% | 111.94% | 129.19% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | 203.39% | — | — | — | — | |
| Caterpillar Inc. | 190.31% | — | — | — | — | |
| Eaton Corp. plc | 198.58% | — | — | — | — | |
| GE Aerospace | 111.81% | — | — | — | — | |
| Honeywell International Inc. | 293.22% | — | — | — | — | |
| Lockheed Martin Corp. | 136.30% | — | — | — | — | |
| RTX Corp. | 107.41% | — | — | — | — | |
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 ÷ Adjusted net sales
= 100 × 15,402,739 ÷ 3,759,043 = 409.75%
3 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by a period of exponential growth in market valuation relative to sales, peaking in 2020 before experiencing a moderate correction in 2021.
- Market Value Added (MVA)
- MVA remained relatively stable between 2017 and 2018, with values of 2,186,319 and 2,276,880 thousand US dollars, respectively. A significant upward trajectory began in 2019, with MVA increasing to 5,484,843 thousand US dollars, culminating in a peak of 19,281,554 thousand US dollars in 2020. A contraction occurred in 2021, where the value declined to 15,402,739 thousand US dollars, although this figure remained substantially higher than the levels recorded prior to 2020.
- Adjusted Net Sales
- Adjusted net sales demonstrated consistent and uninterrupted growth throughout the analyzed period. Starting at 1,692,306 thousand US dollars in 2017, sales rose steadily to 2,496,250 thousand US dollars by 2020, and experienced a sharp increase to 3,759,043 thousand US dollars in 2021.
- MVA Margin
- The MVA margin exhibited significant volatility, reflecting a disparity between market valuation growth and revenue growth. After a slight decrease from 129.19% in 2017 to 111.94% in 2018, the margin expanded rapidly to 247.65% in 2019 and reached a peak of 772.42% in 2020. In 2021, the margin compressed to 409.75%. This contraction in 2021 was driven by the simultaneous decrease in total MVA and a substantial increase in adjusted net sales, suggesting a normalization of market expectations relative to the company's operational scale.
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