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
Northrop Grumman Corp., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Fair value of debt. See details »
2 Invested capital. See details »
The Market Value Added (MVA) for Northrop Grumman demonstrates a consistently positive trend between 2018 and 2022, reflecting a market valuation that substantially exceeds the total invested capital. While the period is marked by some volatility, the overall trajectory indicates a sustained creation of shareholder value.
- Market Value Dynamics
- The market value experienced a notable increase from 62.46 billion USD in 2018 to 80.81 billion USD in 2019. Following a correction to 68.26 billion USD in 2020, a steady recovery was observed, culminating in a five-year high of 81.77 billion USD by the end of 2022.
- Invested Capital Trends
- Invested capital remained relatively stable through 2019 before entering a period of consistent annual growth. From a low of 23.51 billion USD in 2019, the capital base rose steadily to 30.11 billion USD by 2022, indicating an increase in the company's deployed resources.
- MVA Evolution and Insights
- The MVA reached a significant peak in 2019 at 57.30 billion USD, driven by the simultaneous rise in market value and a slight reduction in invested capital. A subsequent contraction occurred in 2020, with MVA falling to 41.62 billion USD. However, the metric recovered progressively over the following two years, reaching 51.66 billion USD in 2022. The fact that the MVA remained substantially positive throughout the period suggests that the market continues to value the organization significantly higher than the nominal cost of its invested capital.
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MVA Spread Ratio
Northrop Grumman Corp., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 51,655) | 47,305) | 41,621) | 57,299) | 38,384) | |
| Invested capital2 | 30,111) | 27,632) | 26,642) | 23,507) | 24,076) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 171.55% | 171.19% | 156.23% | 243.75% | 159.43% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Boeing Co. | 250.73% | 256.11% | — | — | — | |
| Caterpillar Inc. | 194.33% | 165.08% | — | — | — | |
| Eaton Corp. plc | 149.39% | 132.30% | — | — | — | |
| GE Aerospace | 84.87% | 110.77% | — | — | — | |
| Honeywell International Inc. | 224.23% | 209.78% | — | — | — | |
| Lockheed Martin Corp. | 399.68% | 319.28% | — | — | — | |
| RTX Corp. | 59.03% | 61.85% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 MVA. See details »
2 Invested capital. See details »
3 2022 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 51,655 ÷ 30,111 = 171.55%
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2018 to 2022 reveals a general increase in both total market value added and the capital base, characterized by a period of significant volatility in value creation efficiency between 2019 and 2020.
- Market Value Added (MVA)
- MVA demonstrated a volatile but overall positive trend, increasing from 38,384 million USD in 2018 to 51,655 million USD in 2022. A substantial peak occurred in 2019 at 57,299 million USD, followed by a sharp contraction in 2020 to 41,621 million USD. A recovery phase followed, with values rising consistently through 2021 and 2022.
- Invested Capital
- Invested capital showed a steady upward trajectory after a slight decrease in 2019. From a low of 23,507 million USD in 2019, the capital base expanded annually, reaching 30,111 million USD by the end of 2022. This indicates a consistent increase in the total resources deployed into the business over the final four years of the period.
- MVA Spread Ratio
- The MVA spread ratio experienced a significant spike in 2019, reaching 243.75%, which suggests an exceptional period of value creation relative to the capital invested. This was followed by a correction in 2020, where the ratio fell to 156.23%. For the subsequent two years, the ratio stabilized, remaining nearly constant at 171.19% in 2021 and 171.55% in 2022, indicating a stabilized relationship between market value and invested capital.
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MVA Margin
Northrop Grumman Corp., MVA margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 51,655) | 47,305) | 41,621) | 57,299) | 38,384) | |
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Performance Ratio | ||||||
| MVA margin2 | 141.13% | 132.63% | 113.10% | 169.32% | 127.54% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Boeing Co. | 191.47% | 203.39% | — | — | — | |
| Caterpillar Inc. | 188.24% | 190.31% | — | — | — | |
| Eaton Corp. plc | 221.57% | 198.58% | — | — | — | |
| GE Aerospace | 76.94% | 111.81% | — | — | — | |
| Honeywell International Inc. | 295.90% | 293.22% | — | — | — | |
| Lockheed Martin Corp. | 161.14% | 136.30% | — | — | — | |
| RTX Corp. | 96.78% | 107.41% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 MVA. See details »
2 2022 Calculation
MVA margin = 100 × MVA ÷ Sales
= 100 × 51,655 ÷ 36,602 = 141.13%
3 Click competitor name to see calculations.
An analysis of the financial metrics from 2018 to 2022 reveals a general upward trajectory in both market value creation and revenue, although the efficiency of market value generation relative to sales experienced significant volatility.
- Market Value Added (MVA) Trends
- The Market Value Added exhibited considerable fluctuations over the five-year period. A substantial increase occurred between 2018 and 2019, with MVA rising from US$ 38,384 million to a peak of US$ 57,299 million. This was followed by a sharp contraction in 2020 to US$ 41,621 million. However, a recovery phase ensued over the subsequent two years, with values climbing to US$ 47,305 million in 2021 and reaching US$ 51,655 million by the end of 2022.
- Sales Performance
- Revenue demonstrated a more stable and consistent growth pattern compared to market value. Sales increased steadily from US$ 30,095 million in 2018 to US$ 36,799 million in 2020. A marginal decline was observed in 2021, where sales dipped to US$ 35,667 million, before returning to a growth path in 2022 to close at US$ 36,602 million.
- MVA Margin Analysis
- The MVA margin, which measures the relationship between market value added and sales, mirrored the volatility of the MVA. The margin peaked in 2019 at 169.32%, suggesting a period of high market optimism or significant value creation relative to the revenue base. This figure dropped to its lowest point of 113.10% in 2020. From 2021 onward, the margin showed a consistent recovery, rising to 132.63% and eventually 141.13% in 2022, indicating a strengthening of the market's valuation of the company's operational scale.
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