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
Trane Technologies plc, MVA calculation
US$ in thousands
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 »
Trane Technologies exhibits a consistent upward trajectory in Market Value Added (MVA) over the five-year period ending December 31, 2022. The MVA increased from 16.27 billion USD in 2018 to 33.52 billion USD in 2022, representing a substantial expansion in shareholder value creation above the cost of invested capital.
- Market Value Evolution
- The fair market value experienced a significant increase between 2018 and 2019, rising from approximately 29.96 billion USD to 41.37 billion USD. Following this initial jump, the market value maintained a steady growth pattern, reaching 47.04 billion USD by the end of 2022. This indicates sustained investor confidence and an increasing valuation of the entity's future earnings potential.
- Invested Capital Dynamics
- Invested capital remained relatively stable throughout the analyzed period. After a peak of 15.64 billion USD in 2019, the capital base contracted to 13.35 billion USD by 2021 before marginally recovering to 13.52 billion USD in 2022. The relative stability of the capital base, combined with rising market value, suggests that value creation is driven by operational efficiency and market premiums rather than an expansion of the asset base.
- Market Value Added (MVA) Performance
- MVA demonstrates a continuous positive trend, increasing in every consecutive year. The most pronounced growth occurred between 2018 and 2019, with an increase of approximately 9.46 billion USD. By December 31, 2022, the MVA of 33.52 billion USD significantly exceeded the total invested capital of 13.52 billion USD, signifying that the market assigns a premium to the company that is substantially higher than the capital invested in its operations.
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MVA Spread Ratio
Trane Technologies plc, 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 thousands) | ||||||
| Market value added (MVA)1 | 33,520,145) | 29,364,374) | 27,641,146) | 25,732,198) | 16,272,195) | |
| Invested capital2 | 13,518,500) | 13,354,600) | 13,835,000) | 15,640,000) | 13,684,819) | |
| Performance Ratio | ||||||
| MVA spread ratio3 | 247.96% | 219.88% | 199.79% | 164.53% | 118.91% | |
| 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 × 33,520,145 ÷ 13,518,500 = 247.96%
4 Click competitor name to see calculations.
Between 2018 and 2022, a consistent trajectory of value creation is evident, characterized by a substantial increase in market value relative to the capital employed in the business.
- Market Value Added (MVA)
- A sustained upward trend is observed in the MVA, which grew from US$ 16,272,195 thousand in 2018 to US$ 33,520,145 thousand by 2022. This steady progression indicates that the market's valuation of the company's future performance has expanded significantly over the five-year period.
- Invested Capital
- Invested capital remained relatively stable, fluctuating within a narrow range. After reaching a peak of US$ 15,640,000 thousand in 2019, the figure trended slightly downward to US$ 13,518,500 thousand by 2022. The stability of the capital base suggests that the growth in market value was not the result of increased capital investment, but rather an improvement in the efficiency of existing assets.
- MVA Spread Ratio
- The MVA spread ratio experienced aggressive growth, rising from 118.91% in 2018 to 247.96% in 2022. This acceleration reflects a widening gap between the market value and the invested capital, signifying that the organization has become increasingly effective at generating value in excess of its cost of capital.
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MVA Margin
Trane Technologies plc, 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 thousands) | ||||||
| Market value added (MVA)1 | 33,520,145) | 29,364,374) | 27,641,146) | 25,732,198) | 16,272,195) | |
| Net revenues | 15,991,700) | 14,136,400) | 12,454,700) | 16,598,900) | 15,668,200) | |
| Add: Increase (decrease) in deferred revenue | 6,000) | 7,300) | 1,600) | 11,900) | (800) | |
| Adjusted net revenues | 15,997,700) | 14,143,700) | 12,456,300) | 16,610,800) | 15,667,400) | |
| Performance Ratio | ||||||
| MVA margin2 | 209.53% | 207.61% | 221.90% | 154.91% | 103.86% | |
| 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 ÷ Adjusted net revenues
= 100 × 33,520,145 ÷ 15,997,700 = 209.53%
3 Click competitor name to see calculations.
A consistent upward trajectory is observed in the Market Value Added (MVA) from 2018 through 2022, indicating a sustained increase in the premium the market assigns to the company over its invested capital. While adjusted net revenues experienced volatility during this period, the market valuation continued to grow, suggesting that investor confidence remained decoupled from short-term revenue fluctuations.
- Market Value Added (MVA) Growth
- The MVA exhibited steady growth, rising from approximately 16.27 billion USD in 2018 to 33.52 billion USD by 2022. This represents more than a doubling of the value added over the five-year period, with the most significant year-over-year increase occurring between 2018 and 2019.
- Adjusted Net Revenue Volatility
- Revenue patterns show a period of instability, characterized by an increase in 2019 followed by a notable contraction in 2020, where revenues dropped to 12.46 billion USD. A recovery phase followed, with revenues returning to 16.00 billion USD by 2022, effectively returning to levels seen in 2018 and 2019.
- MVA Margin Performance
- The MVA margin shows a significant expansion, starting at 103.86% in 2018 and peaking at 221.90% in 2020. The sharp increase in the margin during 2020 is particularly noteworthy as it coincided with the lowest revenue point in the sequence, implying that the market value grew despite a decrease in top-line performance. From 2021 to 2022, the margin stabilized, remaining consistent at approximately 208% to 210%.
The divergence between the steady growth of MVA and the fluctuating adjusted net revenues suggests that the market valuation is driven by factors beyond immediate annual revenue, such as long-term growth prospects or efficiency improvements. The stabilization of the MVA margin above 200% in the final two years of the period indicates a established level of market confidence in the company's value creation capabilities relative to its revenue scale.
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