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
Reynolds American Inc., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
Market Value Added (MVA) exhibited a sustained and significant increase between 2012 and 2016, growing from US$ 19,393 million to US$ 55,679 million. This consistent upward trajectory indicates a substantial expansion in the wealth created for shareholders over the analyzed five-year period.
- Market Value Trends
- The fair market value demonstrated accelerated growth, particularly between 2014 and 2015, where it rose from US$ 42,684 million to US$ 87,213 million. By December 31, 2016, the market value surpassed US$ 100 billion, representing a total increase of approximately 238% from 2012 levels.
- Invested Capital Analysis
- Invested capital remained relatively stable from 2012 through 2014, fluctuating slightly around the US$ 10 billion mark. A significant structural shift occurred in 2015, characterized by a sharp increase in invested capital to US$ 45,105 million, which remained nearly constant through the end of 2016.
- Value Creation Dynamics
- The growth in MVA remained positive and accelerating despite the massive increase in invested capital during 2015. The fact that MVA continued to rise from US$ 32,956 million in 2014 to US$ 55,679 million in 2016 suggests that the market perceived the significant capital expansion as value-accretive, with the increase in market value outpacing the increase in capital employed.
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MVA Spread Ratio
Reynolds American Inc., MVA spread ratio calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 55,679) | 42,108) | 32,956) | 20,505) | 19,393) | |
| Invested capital2 | 44,972) | 45,105) | 9,728) | 10,479) | 10,375) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 123.81% | 93.36% | 338.79% | 195.68% | 186.91% | |
| Benchmarks | ||||||
| MVA Spread Ratio, Competitors4 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 MVA. See details »
2 Invested capital. See details »
3 2016 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 55,679 ÷ 44,972 = 123.81%
4 Click competitor name to see calculations.
An analysis of the financial metrics from 2012 to 2016 reveals a sustained growth in market valuation contrasted by a significant structural shift in the capital base during the latter half of the period.
- Market Value Added (MVA)
- A consistent upward trajectory is observed in MVA, which increased from 19,393 million US$ in 2012 to 55,679 million US$ by 2016. This steady growth indicates a continuous expansion in the premium the market assigns to the company over its invested capital, signifying strong value creation for shareholders over the five-year interval.
- Invested Capital
- Invested capital remained relatively stable from 2012 through 2014, maintaining a range between 9,728 million US$ and 10,479 million US$. A dramatic increase occurred in 2015, where the figure rose to 45,105 million US$, representing a more than fourfold increase. This elevated capital level persisted into 2016 at 44,972 million US$, suggesting a major strategic event such as a large-scale acquisition or a significant capital restructuring.
- MVA Spread Ratio
- The MVA spread ratio experienced high volatility linked to the fluctuations in invested capital. The ratio climbed from 186.91% in 2012 to a peak of 338.79% in 2014, reflecting high efficiency in value creation relative to capital. However, the massive surge in invested capital in 2015 caused the ratio to drop sharply to 93.36%. A partial recovery was noted in 2016, as the ratio rose to 123.81%, indicating that the market value began to scale upward again relative to the new, higher capital base.
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MVA Margin
Reynolds American Inc., MVA margin calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Market value added (MVA)1 | 55,679) | 42,108) | 32,956) | 20,505) | 19,393) | |
| Net sales, includes excise taxes | 16,846) | 14,884) | 12,096) | 11,966) | 12,227) | |
| Add: Increase (decrease) in deferred revenue, related party | 72) | 1) | (16) | 6) | —) | |
| Adjusted net sales, includes excise taxes | 16,918) | 14,885) | 12,080) | 11,972) | 12,227) | |
| Performance Ratio | ||||||
| MVA margin2 | 329.11% | 282.89% | 272.82% | 171.28% | 158.60% | |
| Benchmarks | ||||||
| MVA Margin, Competitors3 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 MVA. See details »
2 2016 Calculation
MVA margin = 100 × MVA ÷ Adjusted net sales, includes excise taxes
= 100 × 55,679 ÷ 16,918 = 329.11%
3 Click competitor name to see calculations.
Between 2012 and 2016, a consistent and accelerating upward trend is observed in both the absolute market value added and the efficiency of value creation relative to sales. The period is characterized by a significant expansion in investor-perceived value that far outpaced the growth in adjusted net sales.
- Market Value Added (MVA)
- A sustained increase in MVA is evident, rising from 19,393 million US dollars in 2012 to 55,679 million US dollars by 2016. The most substantial growth occurred between 2013 and 2014, where the value increased by approximately 60.7%, signaling a sharp rise in the market's valuation of the company's capital investments over its cost of capital.
- Adjusted Net Sales
- Sales figures remained relatively stagnant during the initial period, with a slight decline from 12,227 million US dollars in 2012 to 11,972 million US dollars in 2013, followed by a marginal recovery to 12,080 million US dollars in 2014. However, a strong growth phase began in 2015, with sales reaching 14,885 million US dollars, and continuing upward to 16,918 million US dollars by the end of 2016.
- MVA Margin
- The MVA margin exhibited a strong positive correlation with the growth in MVA, increasing from 158.60% in 2012 to 329.11% in 2016. The sharp increase in the margin, particularly the jump to 272.82% in 2014, indicates that the creation of market value was not merely a result of sales growth, but rather a significant increase in the market's valuation of the company's future earning potential and operational efficiency.
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