Parker-Hannifin Corp. (NYSE:PH)

The analysis of the financial data reveals notable trends over the examined periods regarding the market value, invested capital, and market value added of the company.

Market (fair) value of Parker

This metric exhibits a generally increasing trend from June 30, 2017, through June 30, 2022. The value rose from approximately $27.3 billion in 2017 to nearly $47.9 billion in 2022. There was a slight decline observed between 2018 and 2019, where the value decreased marginally from about $27.97 billion to $27.88 billion. However, from 2019 onward, the value grew substantially, with a notable jump in 2020 exceeding $36.3 billion, followed by continued growth each subsequent year.

Invested capital

The invested capital followed a different trajectory with fluctuations over the years. Beginning at about $13.5 billion in 2017, it slightly decreased to $13.0 billion in 2018, then increased to $15.3 billion in 2019 and further to around $17.5 billion in 2020. A minor decline occurred in 2021, reducing to approximately $16.9 billion, before significantly rising to $22.0 billion by mid-2022. The data reflects varying capital investments with an overall upward movement by the end of the period.

Market value added (MVA)

The market value added shows variability that corresponds somewhat with the market (fair) value trends but with pronounced fluctuations. Initial growth from $13.8 billion in 2017 peaked to about $14.9 billion in 2018, followed by a decrease to approximately $12.6 billion in 2019. A considerable increase occurred in 2020, reaching nearly $18.8 billion, with a further sharp rise to almost $29.9 billion in 2021. However, in 2022, MVA declined to about $25.9 billion, indicating a reduction in value creation relative to the previous year.

Overall, the market (fair) value demonstrates strong expansion, particularly post-2019, while invested capital also grows but with some periods of contraction. The MVA trend shows that value creation has been robust from 2020 through 2021 but softened in the most recent year, which may warrant further investigation into underlying factors affecting value generation efficiency.

Market Value Added (MVA)

The Market Value Added (MVA) exhibited fluctuations over the six-year period. It increased from approximately $13.79 billion in 2017 to nearly $14.95 billion in 2018, indicating a positive movement. However, in 2019, MVA declined to about $12.61 billion before recovering sharply in 2020 to $18.82 billion. The upward trajectory continued in 2021, reaching a peak of roughly $29.89 billion, followed by a decline to approximately $25.90 billion in 2022. This suggests a period of volatility with overall growth, though the recent decrease in 2022 may warrant closer examination.

Invested Capital

Invested Capital showed a general upward trend across the years with some variation. Starting at $13.51 billion in 2017, it slightly decreased in 2018 to $13.02 billion. From 2019 onwards, invested capital increased steadily reaching $21.99 billion by 2022. This demonstrates a continuous expansion in capital investment, reflecting ongoing resource commitment and potential capacity growth within the organization.

MVA Spread Ratio

The MVA spread ratio fluctuated significantly throughout the observed period. It was at 102.11% in 2017, rising to 114.84% in 2018, indicating an improving premium over invested capital. In 2019, the ratio dropped substantially to 82.58%, reflecting lower value creation relative to capital invested. It recovered above 100% in 2020 at 107.37%, surged dramatically to 176.61% in 2021, and then declined to 117.78% in 2022. The elevated ratio in 2021 highlights exceptional value generation, but the decline in the subsequent year could suggest some normalization or increased competitive or operational challenges.

Market Value Added (MVA)

The Market Value Added demonstrates fluctuating behavior over the analyzed period. Initially, from June 2017 to June 2018, there is a noticeable increase from approximately 13.8 billion to 14.9 billion US dollars. However, in the fiscal year ending June 2019, MVA declined to around 12.6 billion US dollars. Subsequently, a sharp increase occurred in June 2020, raising MVA to roughly 18.8 billion US dollars. The upward trend continued significantly into June 2021, with the peak reaching about 29.9 billion US dollars before experiencing a decline in June 2022 to approximately 25.9 billion US dollars. Despite the fluctuations, the overall trend points to growth when comparing the start and end of the period.

Net Sales

Net sales reveal a general upward trend across the six years. Starting from approximately 12.0 billion US dollars in June 2017, net sales increase steadily to about 14.3 billion in June 2018 and maintain a similar level in June 2019. In June 2020, net sales experience a slight dip, falling to around 13.7 billion US dollars, likely reflecting broader economic or market challenges. Nevertheless, recovery and growth resumed in the following years, with net sales rising to approximately 14.3 billion in 2021 and further increasing to nearly 15.9 billion US dollars by June 2022. This suggests resilience and expansion in revenue-generating activities.

MVA Margin (%)

The MVA margin, representing the ratio of Market Value Added to net sales, shows significant variability. It begins at a high level of 114.66% in June 2017 but gradually decreases over the next two years, reaching a low of 88.05% by June 2019. A strong rebound follows, with the margin sharply increasing to 137.43% in June 2020, peaking at an impressive 208.36% in June 2021. This peak suggests a period of exceptional value creation relative to sales. In the final year reported, June 2022, the MVA margin moderates to 163.31%, still substantially higher than the earlier years. The fluctuations indicate varying degrees of market valuation efficiency relative to sales performance.

Overall Insights

The analyzed data reveal an organization that, while experiencing periodic dips, displays a strong capacity for value generation and sales growth over the studied timeframe. Market Value Added and net sales exhibit parallel movements, with sales generally trending upward, while MVA shows more pronounced volatility. The MVA margin's behavior suggests changes in market perception or operational efficiency that influence the value created per dollar of sales. The peak in MVA margin around fiscal year 2021 indicates a particularly favorable period of value creation, possibly due to strategic initiatives, market conditions, or other factors enhancing valuation beyond sales growth alone. The subsequent moderate decline in 2022 may reflect market corrections or adjustments following the high level achieved the previous year.