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.
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Phillips 66 pages available for free this week:
- Income Statement
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2012
- Return on Assets (ROA) since 2012
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MVA
Phillips 66, 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 analysis of the financial data over the five-year period from 2015 to 2019 reveals several notable trends in the market valuation and invested capital of Phillips 66.
- Market (Fair) Value Trend
- The market value exhibited an overall increase from 53,530 million USD in 2015 to a peak of 61,067 million USD in 2017. However, this was followed by a decline over the next two years, reaching 55,942 million USD in 2019. This pattern suggests a period of growth until 2017, with some market value contraction thereafter.
- Invested Capital Trend
- Invested capital showed a consistent upward trend throughout the period. It increased from 42,469 million USD in 2015 to 50,827 million USD in 2019, reflecting ongoing investments or growth in the company’s asset base. The growth was steady without any significant decline, indicating continuous capital deployment over the years.
- Market Value Added (MVA) Trend
- The market value added, representing the difference between market value and invested capital, displayed more variability. It began at 11,061 million USD in 2015, declined sharply to 7,931 million USD in 2016, rose again to a peak of 12,059 million USD in 2017, and then decreased steadily to 5,115 million USD by 2019. This fluctuation implies changing investor perceptions or company performance impacting the premium the market places over invested capital.
In summary, while invested capital steadily grew, indicating expansion or reinvestment, the market value did not maintain the same upward momentum throughout the period. The resultant market value added, after peaking in 2017, experienced a notable decline through 2019, suggesting a reduction in the market’s valuation premium relative to the capital invested. These trends highlight a shifting dynamic between the company’s asset base and market valuation during these years.
MVA Spread Ratio
Phillips 66, 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| MVA spread ratio3 | ||||||
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum 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 × ÷ =
4 Click competitor name to see calculations.
The financial data demonstrates varying trends over the five-year period ending in 2019.
- Market Value Added (MVA)
- The MVA saw a decline from 11,061 million USD in 2015 to 7,931 million USD in 2016. Following this, it increased significantly to 12,059 million USD in 2017, then experienced a moderate decline in 2018 to 10,748 million USD. The year 2019 shows a substantial decline, with MVA dropping to 5,115 million USD, which is less than half of the 2018 figure. Overall, the MVA exhibits volatility with a downward trend emerging towards the end of the period.
- Invested Capital
- Invested capital generally increased over the time frame, rising from 42,469 million USD in 2015 to 50,827 million USD in 2019. The increase was steady, with a slight dip observed in 2018 from the prior year, but it recovered by 2019. This steady growth in invested capital reflects ongoing capital commitment despite fluctuations in market value added.
- MVA Spread Ratio
- The MVA spread ratio follows a pattern similar to MVA, starting at 26.05% in 2015 and decreasing to 17.16% in 2016. It then increased to 24.6% in 2017 before declining to 22.14% in 2018. The ratio sharply decreases to 10.06% in 2019, indicating reduced value creation relative to invested capital in that year. This trend suggests diminishing returns on invested capital towards the end of the period.
In summary, while invested capital steadily increased over the examined period, the company's ability to generate market value added and efficient returns on invested capital, as reflected in the MVA and MVA spread ratio, displayed volatility and a declining trend in the later years, particularly in 2019. This indicates potential challenges in value creation despite ongoing investment efforts.
MVA Margin
Phillips 66, 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 | ||||||
| Sales and other operating revenues | ||||||
| Performance Ratio | ||||||
| MVA margin2 | ||||||
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Chevron Corp. | ||||||
| ConocoPhillips | ||||||
| Exxon Mobil Corp. | ||||||
| Occidental Petroleum 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 ÷ Sales and other operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Market Value Added (MVA)
- The market value added shows a fluctuating trend over the five-year period. It starts at 11,061 million US dollars in 2015 and decreases significantly to 7,931 million in 2016. It then recovers to 12,059 million in 2017, followed by a decline to 10,748 million in 2018 and a further sharp drop to 5,115 million in 2019. Overall, the MVA peaked in 2017 and experienced a notable decrease by the end of 2019, suggesting reduced market valuation relative to capital invested.
- Sales and Other Operating Revenues
- Sales and other operating revenues show a varied trend within the period analyzed. Beginning at 98,975 million US dollars in 2015, revenues declined to 84,279 million in 2016. This drop was followed by a recovery phase, reaching the highest value of 111,461 million in 2018. In 2019, there is a slight reduction to 107,293 million, yet revenues remain substantially higher than the levels in 2015 and 2016. The data indicate general growth in operational revenue with some volatility.
- MVA Margin
- The MVA margin, expressed as a percentage, indicates the efficiency of value creation relative to sales and revenues. It decreases from 11.18% in 2015 to 9.41% in 2016, rises to a peak of 11.78% in 2017, then falls again to 9.64% in 2018 and drastically drops to 4.77% in 2019. This trend mirrors the fluctuations observed in MVA, with 2019 showing the lowest margin, indicative of a significant reduction in value generated per dollar of revenue.