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
Walgreens Boots Alliance Inc., MVA calculation
US$ in millions
Based on: 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-31), 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31).
1 Fair value of debt. See details »
2 Invested capital. See details »
Market Value Added (MVA) exhibited significant volatility over the analyzed six-year period, peaking in 2015 before entering a sustained and substantial decline. This trajectory indicates a progressive reduction in the premium the market assigned to the entity over its invested capital, suggesting a contraction in perceived future growth or value creation.
- Market Value Trajectory
- A sharp increase in market value is observed between 2014 and 2015, rising from US$ 88,385 million to a peak of US$ 137,264 million. Following this peak, a consistent downward trend occurred over the subsequent four years, with the valuation contracting to US$ 94,484 million by August 31, 2019.
- Invested Capital Dynamics
- Invested capital grew significantly from US$ 55,001 million in 2014 to a maximum of US$ 85,356 million in 2016. After 2016, the capital base stabilized, showing a slight decrease and subsequent plateau, ending the period at US$ 77,429 million in 2019.
- MVA Erosion and Value Analysis
- The MVA reached its zenith in 2015 at US$ 56,534 million, marking the period of highest value creation relative to the capital employed. From 2016 onward, a steady erosion of this value is evident. By August 31, 2019, the MVA fell to US$ 17,056 million, representing a decline of approximately 70% from the 2015 peak. This decline is primarily attributed to the fact that the market value decreased at a much faster rate than the reduction in invested capital.
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MVA Spread Ratio
Walgreens Boots Alliance Inc., MVA spread ratio calculation, comparison to benchmarks
| Aug 31, 2019 | Aug 31, 2018 | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 17,056) | 32,555) | 34,013) | 50,349) | 56,534) | 33,384) | |
| Invested capital2 | 77,429) | 76,286) | 76,485) | 85,356) | 80,730) | 55,001) | |
| Performance Ratio | |||||||
| MVA spread ratio3 | 22.03% | 42.67% | 44.47% | 58.99% | 70.03% | 60.70% | |
| Benchmarks | |||||||
| MVA Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | — | — | — | — | — | — | |
| Target Corp. | — | — | — | — | — | — | |
| Walmart Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-31), 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31).
1 MVA. See details »
2 Invested capital. See details »
3 2019 Calculation
MVA spread ratio = 100 × MVA ÷ Invested capital
= 100 × 17,056 ÷ 77,429 = 22.03%
4 Click competitor name to see calculations.
The analysis of the financial data from 2014 to 2019 reveals a period of initial value expansion followed by a sustained decline in market value creation relative to the capital invested. While the company saw a significant peak in value added during the early part of the period, the subsequent years are characterized by a consistent erosion of the market's valuation of the company's added value.
- Market Value Added (MVA)
- A sharp increase in MVA was observed between August 31, 2014, and August 31, 2015, with the value rising from US$ 33,384 million to a peak of US$ 56,534 million. Following this peak, a continuous downward trend occurred over the next four years. By August 31, 2019, the MVA decreased to US$ 17,056 million, representing a reduction of approximately 70% from its 2015 high.
- Invested Capital
- Invested capital experienced rapid growth in the first two years, increasing from US$ 55,001 million in 2014 to a peak of US$ 85,356 million in 2016. After 2016, the capital base stabilized, remaining relatively flat between US$ 76,286 million and US$ 77,429 million through August 31, 2019.
- MVA Spread Ratio
- The MVA spread ratio mirrors the trajectory of the total MVA, peaking at 70.03% in 2015. A consistent decline followed, with the ratio falling to 44.47% in 2017 and further dropping to 22.03% by 2019. This contraction indicates a diminishing ability to generate market value above the cost of the invested capital, especially as the capital base remained high while the market value added plummeted.
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MVA Margin
Walgreens Boots Alliance Inc., MVA margin calculation, comparison to benchmarks
| Aug 31, 2019 | Aug 31, 2018 | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Market value added (MVA)1 | 17,056) | 32,555) | 34,013) | 50,349) | 56,534) | 33,384) | |
| Sales | 136,866) | 131,537) | 118,214) | 117,351) | 103,444) | 76,392) | |
| Performance Ratio | |||||||
| MVA margin2 | 12.46% | 24.75% | 28.77% | 42.90% | 54.65% | 43.70% | |
| Benchmarks | |||||||
| MVA Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | — | — | — | — | — | — | |
| Target Corp. | — | — | — | — | — | — | |
| Walmart Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-08-31), 10-K (reporting date: 2018-08-31), 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31).
1 MVA. See details »
2 2019 Calculation
MVA margin = 100 × MVA ÷ Sales
= 100 × 17,056 ÷ 136,866 = 12.46%
3 Click competitor name to see calculations.
The financial data reveals a significant divergence between the growth in top-line revenue and the market's perception of value creation over the six-year period from 2014 to 2019. While sales exhibited consistent growth, the market value added (MVA) and the resulting MVA margin experienced a sharp decline after an initial peak.
- Market Value Added (MVA)
- The MVA experienced a period of volatility, starting at 33,384 million USD in 2014 and reaching a peak of 56,534 million USD in 2015. Following this peak, a sustained downward trend occurred, with value eroding to 17,056 million USD by August 31, 2019. This represents a substantial reduction in the market's valuation of the company's value added relative to its invested capital.
- Sales Growth
- In contrast to the MVA, sales demonstrated a steady and uninterrupted upward trajectory. Revenue increased from 76,392 million USD in 2014 to 136,866 million USD in 2019. This indicates a successful expansion of business volume and market reach during the period analyzed.
- MVA Margin
- The MVA margin, which measures the ratio of market value added to total sales, highlights a deteriorating efficiency in value creation. The margin peaked in 2015 at 54.65% but declined precipitously thereafter, ending at 12.46% in 2019. The simultaneous increase in sales and decrease in MVA margin suggests that the market began to assign less value to each dollar of revenue generated, indicating a potential decline in investor confidence or a compression in the perceived future growth prospects of the business.
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