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
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 Market Value Added (MVA) between 2015 and 2019 reveals a volatile trajectory characterized by a peak in 2017 followed by a substantial contraction. While the company maintained a positive MVA throughout the period, the gap between market valuation and invested capital narrowed significantly by the end of 2019, suggesting a decrease in the market's perceived value of the company relative to the capital employed.
- Market Valuation Trends
- The market value experienced an upward trend in the early part of the period, increasing from 53,530 million US$ in 2015 to a peak of 61,067 million US$ in 2017. Following this peak, a steady decline occurred, with the market value falling to 55,942 million US$ by December 31, 2019.
- Invested Capital Trajectory
- Invested capital showed a general increase over the five-year span, rising from 42,469 million US$ in 2015 to 50,827 million US$ in 2019. Apart from a minor decrease in 2018, the capital base expanded consistently, indicating a growth in the total funds invested in the business.
- Market Value Added (MVA) Dynamics
- MVA exhibited significant fluctuations, starting at 11,061 million US$ in 2015 and reaching a maximum of 12,059 million US$ in 2017. A sharp downward trend is observed in the final two years, with the MVA dropping to 5,115 million US$ by 2019. This decline is attributed to the simultaneous decrease in market value and the increase in invested capital, which compressed the value premium generated for shareholders.
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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 | 5,115) | 10,748) | 12,059) | 7,931) | 11,061) | |
| Invested capital2 | 50,827) | 48,544) | 49,009) | 46,215) | 42,469) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 10.06% | 22.14% | 24.60% | 17.16% | 26.05% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil 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 × 5,115 ÷ 50,827 = 10.06%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2015 to 2019 reveals a divergence between the growth of the capital base and the creation of market value.
- Market Value Added (MVA)
- The MVA exhibited significant volatility over the five-year period. After a decrease in 2016, the value reached a peak of 12,059 million USD in 2017. However, a sharp downward trend followed, culminating in a period low of 5,115 million USD by December 31, 2019. This indicates a substantial reduction in the market premium attributed to the company over its invested capital toward the end of the period.
- Invested Capital
- Invested capital demonstrated a consistent upward trajectory, increasing from 42,469 million USD in 2015 to 50,827 million USD in 2019. The steady rise in this figure suggests ongoing capital deployment and asset growth, contrasting with the fluctuating market valuation of those assets.
- MVA Spread Ratio
- The MVA spread ratio reflects a declining trend in value creation efficiency. Starting at a high of 26.05% in 2015, the ratio experienced fluctuations before falling sharply to 10.06% by 2019. This contraction suggests that the market's perception of value generated per unit of invested capital diminished significantly, as the growth in invested capital was not matched by a proportional increase in market value added.
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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 | 5,115) | 10,748) | 12,059) | 7,931) | 11,061) | |
| Sales and other operating revenues | 107,293) | 111,461) | 102,354) | 84,279) | 98,975) | |
| Performance Ratio | ||||||
| MVA margin2 | 4.77% | 9.64% | 11.78% | 9.41% | 11.18% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| Exxon Mobil 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 × 5,115 ÷ 107,293 = 4.77%
3 Click competitor name to see calculations.
The financial performance from 2015 through 2019 is characterized by significant volatility in market valuation relative to operational revenue. While revenues generally trended upward until 2018, the market's valuation of value added experienced a sharp contraction by the end of the period.
- Market Value Added (MVA)
- The MVA exhibited a fluctuating pattern, starting at 11,061 million USD in 2015 and declining to 7,931 million USD in 2016. A recovery occurred in 2017, reaching a five-year peak of 12,059 million USD, before entering a downward trajectory. This decline culminated in a substantial drop to 5,115 million USD by December 31, 2019, representing a decrease of over 50% from the 2017 high.
- Sales and Other Operating Revenues
- Revenue streams demonstrated resilience and growth for much of the period. Following a dip to 84,279 million USD in 2016, revenues grew consistently, peaking at 111,461 million USD in 2018. A slight contraction was observed in 2019, with revenues settling at 107,293 million USD, indicating that the collapse in MVA was not primarily driven by a proportional loss in top-line revenue.
- MVA Margin
- The MVA margin, reflecting the relationship between market value added and total revenues, mirrored the volatility of the MVA. The margin peaked at 11.78% in 2017, coinciding with the highest MVA. However, a significant erosion of this margin is evident by 2019, where it fell to 4.77%. This suggests a diminishing market premium attributed to the company's revenue generation capacity toward the end of the analyzed timeframe.
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