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
General Dynamics Corp., MVA calculation
US$ in millions
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 »
The financial performance between 2015 and 2019 demonstrates a volatile trend in value creation. Market Value Added (MVA) experienced an initial period of strong growth, reaching a peak in 2017, followed by a notable contraction in 2018 and a partial recovery in 2019.
- Market Value Trends
- A general upward trajectory is observed in market value, which rose from 45,481 million US$ in 2015 to 67,397 million US$ in 2017. Despite a moderate decline to 63,814 million US$ in 2018, the value recovered to reach its period high of 67,785 million US$ by December 31, 2019.
- Invested Capital Dynamics
- Invested capital remained relatively stable from 2015 to 2017, increasing marginally from 18,175 million US$ to 19,772 million US$. However, a significant capital expansion occurred in 2018, with invested capital jumping to 29,939 million US$, and further increasing to 31,608 million US$ in 2019.
- Market Value Added (MVA) Analysis
- MVA increased substantially from 27,306 million US$ in 2015 to a peak of 47,625 million US$ in 2017, indicating strong market confidence and value creation. This trend reversed sharply in 2018, with MVA falling to 33,875 million US$. This decrease is attributable to the combined impact of a lower market valuation and a significant increase in the capital base. A modest recovery followed in 2019, with MVA rising to 36,177 million US$.
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MVA Spread Ratio
General Dynamics Corp., 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 millions) | ||||||
| Market value added (MVA)1 | 36,177) | 33,875) | 47,625) | 40,794) | 27,306) | |
| Invested capital2 | 31,608) | 29,939) | 19,772) | 19,539) | 18,175) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 114.46% | 113.15% | 240.87% | 208.78% | 150.24% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX 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 × 36,177 ÷ 31,608 = 114.46%
4 Click competitor name to see calculations.
The analysis of market value added (MVA) and invested capital from 2015 to 2019 reveals a period of significant value creation followed by a marked correction and subsequent stabilization. Market value added exhibited a strong upward trajectory during the first three years of the period, peaking in 2017 before experiencing a decline in 2018 and a slight recovery in 2019.
- Market Value Added (MVA)
- MVA increased consistently from 27,306 million US$ in 2015 to a peak of 47,625 million US$ in 2017. This growth indicates a period of expanding shareholder wealth relative to the capital invested. A significant contraction occurred in 2018, where MVA fell to 33,875 million US$, before rising slightly to 36,177 million US$ by the end of 2019.
- Invested Capital
- Invested capital remained relatively stable between 2015 and 2017, moving from 18,175 million US$ to 19,772 million US$. A substantial increase in capital investment is observed in 2018, with the figure rising to 29,939 million US$, and continuing upward to 31,608 million US$ in 2019. This indicates a significant expansion of the company's capital base in the latter part of the period.
- MVA Spread Ratio
- The MVA spread ratio followed a pattern of growth and subsequent sharp decline. The ratio improved from 150.24% in 2015 to a maximum of 240.87% in 2017, signaling high efficiency in value creation relative to invested capital. However, the ratio dropped precipitously to 113.15% in 2018 and remained nearly flat at 114.46% in 2019. This decline was driven by the simultaneous decrease in absolute MVA and the significant increase in invested capital during 2018.
Overall, the data indicates a shift in the company's financial profile. The high-growth value phase ending in 2017 transitioned into a capital-intensive phase in 2018 and 2019, which resulted in a lower MVA spread ratio despite the stabilization of absolute market value added.
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MVA Margin
General Dynamics Corp., 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 millions) | ||||||
| Market value added (MVA)1 | 36,177) | 33,875) | 47,625) | 40,794) | 27,306) | |
| Revenue | 39,350) | 36,193) | 30,973) | 31,353) | 31,469) | |
| Performance Ratio | ||||||
| MVA margin2 | 91.94% | 93.60% | 153.76% | 130.11% | 86.77% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX 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 ÷ Revenue
= 100 × 36,177 ÷ 39,350 = 91.94%
3 Click competitor name to see calculations.
An analysis of the financial performance from 2015 to 2019 reveals a period of significant volatility in market valuation metrics, characterized by a peak in 2017 followed by a correction and a subsequent divergence between revenue growth and market value added.
- Market Value Added (MVA)
- The MVA experienced a strong upward trajectory between 2015 and 2017, rising from 27,306 million USD to a peak of 47,625 million USD. This period of growth was followed by a sharp contraction in 2018, where the value fell to 33,875 million USD, before seeing a modest recovery to 36,177 million USD by the end of 2019.
- Revenue Trends
- Revenue remained relatively stagnant between 2015 and 2017, fluctuating within a narrow range between 30,973 million USD and 31,469 million USD. However, a distinct growth phase began in 2018, with revenue increasing to 36,193 million USD and continuing upward to reach 39,350 million USD in 2019.
- MVA Margin
- The MVA margin exhibited a strong correlation with the MVA trend in the early part of the period, climbing from 86.77% in 2015 to a maximum of 153.76% in 2017. This peak occurred despite revenue being at its lowest point during those three years, suggesting a high market premium relative to the scale of operations. In 2018 and 2019, the margin declined sharply to 93.60% and 91.94% respectively. This decline is particularly notable as it occurred during the period of most rapid revenue growth, indicating that the expansion in top-line revenue did not translate into a corresponding increase in the market's valuation of the added value created.
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