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
Johnson Controls International plc, MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
1 Fair value of debt. See details »
2 Invested capital. See details »
The financial trajectory of Market Value Added (MVA) between September 30, 2018, and September 30, 2023, reveals a period of significant expansion followed by a corrective decline. While the underlying invested capital remained relatively stable after an initial reduction, the MVA was primarily driven by fluctuations in the market's fair value assessment of the company.
- Invested Capital Trends
- A consistent reduction in invested capital occurred between 2018 and 2020, decreasing from US$ 35,173 million to US$ 29,283 million. Following this period, the invested capital entered a phase of high stability, fluctuating minimally around the US$ 29,400 million mark through 2023. This suggests a streamlined capital structure and a disciplined approach to capital deployment over the latter half of the analyzed period.
- Market Valuation Volatility
- The market fair value exhibited substantial volatility. After remaining relatively flat between 2018 and 2020, the valuation surged to a peak of US$ 66,243 million in 2021. This peak was followed by a progressive decline over the next two years, returning to US$ 47,262 million by September 30, 2023. The volatility in market value served as the primary catalyst for the corresponding movements in MVA.
- Market Value Added (MVA) Analysis
- MVA demonstrated a strong upward trend from 2018 to 2021, growing from US$ 8,940 million to a peak of US$ 36,905 million. This growth was achieved through a combination of decreasing invested capital and a sharp increase in market valuation. However, from 2022 onward, MVA experienced a significant contraction, falling to US$ 17,798 million by 2023. Despite this decline, the MVA at the end of the period remained nearly double the level recorded in 2018, indicating that the market continued to value the company substantially above its invested capital base.
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MVA Spread Ratio
Johnson Controls International plc, MVA spread ratio calculation, comparison to benchmarks
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 17,798) | 26,471) | 36,905) | 14,477) | 11,061) | 8,940) | |
| Invested capital2 | 29,464) | 29,496) | 29,338) | 29,283) | 31,274) | 35,173) | |
| Performance Ratio | |||||||
| MVA spread ratio3 | 60.41% | 89.74% | 125.79% | 49.44% | 35.37% | 25.42% | |
| Benchmarks | |||||||
| MVA Spread Ratio, Competitors4 | |||||||
| Boeing Co. | 297.62% | 250.73% | 256.11% | — | — | — | |
| Caterpillar Inc. | 247.08% | 194.33% | 165.08% | — | — | — | |
| Eaton Corp. plc | 289.43% | 149.39% | 132.30% | — | — | — | |
| GE Aerospace | 243.60% | 84.87% | 110.77% | — | — | — | |
| Honeywell International Inc. | 211.09% | 224.23% | 209.78% | — | — | — | |
| Lockheed Martin Corp. | 352.46% | 399.68% | 319.28% | — | — | — | |
| RTX Corp. | 53.93% | 59.03% | 61.85% | — | — | — | |
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
1 MVA. See details »
2 Invested capital. See details »
3 2023 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 17,798 ÷ 29,464 = 60.41%
4 Click competitor name to see calculations.
The financial trajectory between 2018 and 2023 is characterized by a significant expansion in market valuation relative to the capital base, peaking in 2021 before entering a period of contraction. While the invested capital remained relatively stable after 2020, the Market Value Added (MVA) exhibited substantial volatility, indicating shifting market perceptions of the company's value creation capabilities.
- Market Value Added (MVA) Trends
- A strong upward trend is observed from 2018 to 2021, during which MVA increased from 8,940 million USD to a peak of 36,905 million USD. This represents a period of aggressive value creation. However, a subsequent decline occurred over the following two years, with the figure dropping to 26,471 million USD in 2022 and further to 17,798 million USD by September 30, 2023. Despite this retreat, the 2023 MVA remains significantly higher than the levels recorded between 2018 and 2020.
- Invested Capital Stability
- Invested capital showed a consistent downward trend in the initial three years, decreasing from 35,173 million USD in 2018 to 29,283 million USD in 2020. Following this period, the capital base remained remarkably stagnant, fluctuating minimally around the 29 billion USD mark through 2023. This stability suggests that the fluctuations in MVA were driven by market valuation factors rather than significant changes in the company's internal investment or capital structure.
- MVA Spread Ratio Performance
- The MVA spread ratio mirrored the trajectory of the MVA, showing an exponential increase from 25.42% in 2018 to a high of 125.79% in 2021. This peak indicates a period where the market valued the company at a massive premium over its invested capital. A corrective phase followed, with the ratio receding to 89.74% in 2022 and 60.41% in 2023. The current ratio, while diminished from its peak, still reflects a substantially higher efficiency in value creation compared to the 2018-2020 baseline.
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MVA Margin
Johnson Controls International plc, MVA margin calculation, comparison to benchmarks
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 17,798) | 26,471) | 36,905) | 14,477) | 11,061) | 8,940) | |
| Net sales | 26,793) | 25,299) | 23,668) | 22,317) | 23,968) | 31,400) | |
| Add: Increase (decrease) in deferred revenue | 192) | 131) | 202) | 28) | 81) | 47) | |
| Adjusted net sales | 26,985) | 25,430) | 23,870) | 22,345) | 24,049) | 31,447) | |
| Performance Ratio | |||||||
| MVA margin2 | 65.96% | 104.09% | 154.61% | 64.79% | 45.99% | 28.43% | |
| Benchmarks | |||||||
| MVA Margin, Competitors3 | |||||||
| Boeing Co. | 171.80% | 191.47% | 203.39% | — | — | — | |
| Caterpillar Inc. | 214.78% | 188.24% | 190.31% | — | — | — | |
| Eaton Corp. plc | 392.00% | 221.57% | 198.58% | — | — | — | |
| GE Aerospace | 189.55% | 76.94% | 111.81% | — | — | — | |
| Honeywell International Inc. | 278.88% | 295.90% | 293.22% | — | — | — | |
| Lockheed Martin Corp. | 143.06% | 161.14% | 136.30% | — | — | — | |
| RTX Corp. | 84.86% | 96.78% | 107.41% | — | — | — | |
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
1 MVA. See details »
2 2023 Calculation
MVA margin = 100 × MVA ÷ Adjusted net sales
= 100 × 17,798 ÷ 26,985 = 65.96%
3 Click competitor name to see calculations.
The financial trajectory between 2018 and 2023 is characterized by a significant divergence between operational scale and market valuation. While adjusted net sales experienced an initial decline followed by a gradual recovery, the Market Value Added (MVA) and the corresponding MVA margin exhibited extreme volatility, peaking in 2021 before undergoing a substantial correction.
- Market Value Added (MVA) Trends
- A consistent upward trend in MVA is observed from 2018 to 2021, increasing from 8,940 million US$ to a peak of 36,905 million US$. This represents a more than fourfold increase in value creation over three years. However, this peak was followed by a sharp decline, with MVA falling to 26,471 million US$ in 2022 and further contracting to 17,798 million US$ by September 30, 2023.
- Adjusted Net Sales Performance
- Adjusted net sales followed a U-shaped pattern during the period. A contraction occurred between 2018 and 2020, with sales dropping from 31,447 million US$ to a low of 22,345 million US$. From 2021 onward, a steady recovery trend is evident, with sales rising to 26,985 million US$ by 2023, although they remained below the 2018 baseline.
- MVA Margin Analysis
- The MVA margin demonstrates the most acute fluctuations, reflecting the relationship between market value creation and sales. The margin rose from 28.43% in 2018 to an exceptional high of 154.61% in 2021. This surge suggests a period of intense market optimism or a significant valuation premium that decoupled from revenue performance. Subsequently, the margin entered a period of normalization, decreasing to 104.09% in 2022 and settling at 65.96% in 2023.
Overall, the data indicates that the peak valuation achieved in 2021 was unsustainable. Despite the positive trend in adjusted net sales from 2020 to 2023, the decline in both MVA and MVA margin suggests that the market's valuation of the entity's future growth potential moderated significantly in the latter two years of the analyzed period.
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