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
HP Inc., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
The analysis of Market Value Added (MVA) between 2013 and 2018 reveals a period of significant volatility, characterized by a sharp contraction in 2015 followed by a substantial recovery and stabilization of value creation.
- Market Value Trends
- The market value of the entity experienced an initial increase, peaking at 95,293 million USD in 2014. This was followed by a precipitous decline to 34,402 million USD by 2016. A moderate recovery occurred in 2017, with the value stabilizing around 41,124 million USD by 2018.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2013 and 2015, fluctuating between 65,787 million USD and 71,569 million USD. However, a drastic reduction is observed in 2016, where invested capital fell to 9,027 million USD. This sharp decrease persisted through 2018, ending at 7,561 million USD, indicating a fundamental change in the company's capital structure or a significant divestiture event.
- Market Value Added (MVA) Performance
- MVA showed a strong positive trajectory early on, reaching 29,506 million USD in 2014. In 2015, a critical inflection point occurred as MVA turned negative, reaching -22,691 million USD, signifying that the market value had fallen below the total invested capital. From 2016 onward, MVA returned to positive territory and grew steadily, reaching 33,562 million USD by 2018.
- Correlation and Value Creation
- The recovery of MVA from 2016 to 2018 was driven primarily by the massive reduction in invested capital rather than a proportional increase in market value. By significantly lowering the capital base, the organization improved its MVA, suggesting that the market began to value the leaner capital structure more favorably, resulting in consistent gains in value added over the final three years of the period.
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MVA Spread Ratio
HP Inc., MVA spread ratio calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 33,562) | 32,285) | 25,376) | (22,691) | 29,506) | 10,977) | |
| Invested capital2 | 7,561) | 9,763) | 9,027) | 71,569) | 65,787) | 67,461) | |
| Performance Ratio | |||||||
| MVA spread ratio3 | 443.87% | 330.68% | 281.12% | -31.70% | 44.85% | 16.27% | |
| Benchmarks | |||||||
| MVA Spread Ratio, Competitors4 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 MVA. See details »
2 Invested capital. See details »
3 2018 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 33,562 ÷ 7,561 = 443.87%
4 Click competitor name to see calculations.
The financial performance between October 31, 2013, and October 31, 2018, is characterized by significant volatility in market value added and a fundamental shift in the capital structure of the organization.
- Market Value Added (MVA) Trends
- Market value added exhibited a fluctuating trajectory throughout the period. An initial increase was observed from 2013 to 2014, with values rising from 10,977 million to 29,506 million US$. A sharp reversal occurred in 2015, where MVA fell to a negative 22,691 million US$. However, a strong recovery followed, with MVA returning to positive territory in 2016 and continuing a steady upward trend to reach 33,562 million US$ by 2018.
- Invested Capital Shifts
- A dramatic reduction in invested capital is evident beginning in 2016. From 2013 to 2015, invested capital remained relatively stable, fluctuating between 65,787 million and 71,569 million US$. In 2016, a substantial contraction occurred, with invested capital dropping to 9,027 million US$. This low level of capital persisted through 2018, ending at 7,561 million US$, indicating a significant restructuring of the asset base or a major divestiture.
- MVA Spread Ratio Dynamics
- The MVA spread ratio mirrored the volatility of the MVA but experienced an exponential increase following the reduction in invested capital. The ratio rose from 16.27% in 2013 to 44.85% in 2014, before plunging to -31.70% in 2015. Starting in 2016, the ratio surged to 281.12% and climbed consistently to reach 443.87% by 2018. This rapid escalation is attributable to the simultaneous recovery of market value added and the drastic decrease in the denominator of invested capital.
The overall progression indicates that while the organization faced a period of value destruction in 2015, it subsequently achieved a much higher efficiency in creating market value relative to its invested capital base toward the end of the analyzed period.
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MVA Margin
HP Inc., MVA margin calculation, comparison to benchmarks
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 33,562) | 32,285) | 25,376) | (22,691) | 29,506) | 10,977) | |
| Net revenue | 58,472) | 52,056) | 48,238) | 103,355) | 111,454) | 112,298) | |
| Add: Increase (decrease) in deferred revenue | 167) | 149) | (79) | 498) | (310) | (481) | |
| Adjusted net revenue | 58,639) | 52,205) | 48,159) | 103,853) | 111,144) | 111,817) | |
| Performance Ratio | |||||||
| MVA margin2 | 57.24% | 61.84% | 52.69% | -21.85% | 26.55% | 9.82% | |
| Benchmarks | |||||||
| MVA Margin, Competitors3 | |||||||
| Apple Inc. | — | — | — | — | — | — | |
| Arista Networks Inc. | — | — | — | — | — | — | |
| Cisco Systems Inc. | — | — | — | — | — | — | |
| Dell Technologies Inc. | — | — | — | — | — | — | |
| Lumentum Holdings Inc. | — | — | — | — | — | — | |
| Super Micro Computer Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 MVA. See details »
2 2018 Calculation
MVA margin = 100 × MVA ÷ Adjusted net revenue
= 100 × 33,562 ÷ 58,639 = 57.24%
3 Click competitor name to see calculations.
The financial performance from 2013 to 2018 is characterized by significant volatility in market value and a structural shift in revenue scale, resulting in a dramatic expansion of the MVA margin during the latter half of the period.
- Market Value Added (MVA)
- Market value added exhibited extreme fluctuations, beginning at 10,977 million US dollars in 2013 and rising to 29,506 million US dollars in 2014. A severe contraction occurred in 2015, with MVA falling to negative 22,691 million US dollars. A strong recovery followed this trough, with values ascending to 33,562 million US dollars by 2018, indicating a restoration and subsequent growth of shareholder value relative to the capital invested.
- Adjusted Net Revenue
- Revenue remained relatively stable, exceeding 100,000 million US dollars between 2013 and 2015. A sharp decline is observed in 2016, where revenue dropped to 48,159 million US dollars, representing a reduction of more than half of the preceding year's volume. Following this decline, a consistent upward trend emerged, with revenue recovering to 58,639 million US dollars by the end of the observed period in 2018.
- MVA Margin
- The MVA margin mirrors the volatility of both market value and revenue. After an initial increase from 9.82% in 2013 to 26.55% in 2014, the margin collapsed to -21.85% in 2015. From 2016 onward, the margin experienced an aggressive ascent, peaking at 61.84% in 2017 before moderating slightly to 57.24% in 2018. This trend indicates that in the final three years of the period, the company generated significantly higher market value relative to its revenue base than it had in the initial years.
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