Verizon Communications Inc. (NYSE:VZ)

The financial data over the five-year period indicates several notable trends and changes in the market value and invested capital of the company.

Market (fair) value of company (US$ in millions)

The market value exhibited an initial increase from 414,297 million in 2020 to 422,421 million in 2021. This was followed by a significant decline to 335,435 million in 2022. Subsequently, the market value remained relatively stable around the 335,000 to 340,000 million range for 2023 and 2024, showing little recovery from the 2022 decrease.

Invested capital (US$ in millions)

Invested capital showed a consistent upward trend during the entire period. It grew from 247,730 million in 2020 to 290,004 million in 2021, and then continued to increase each year, reaching 307,881 million by 2024. This indicates ongoing capital investment or accumulation of assets over the five years.

Market Value Added (MVA) (US$ in millions)

The MVA experienced a notable downward trajectory after 2020. In 2020, MVA was 166,567 million but declined sharply to 132,417 million in 2021. The decrease was even more pronounced in 2022 when MVA dropped to 33,957 million. In 2023 and 2024, MVA remained low, fluctuating slightly around 27,000 to 35,000 million, which reflects a diminished gap between market value and invested capital, potentially signaling diminished investor confidence or reduced market premium relative to capital invested.

Overall, the data reflects a scenario where invested capital steadily increased, but market value after peaking in 2021 declined and stabilized at a lower level. The sharp contraction in MVA from 2021 onwards highlights a reduced market appreciation beyond the book value of invested capital, which may warrant further investigation into the underlying operational or market factors influencing this trend.

Market Value Added (MVA)

The Market Value Added shows a marked decline from US$166,567 million in 2020 to US$33,957 million in 2022, representing a significant reduction in value creation perception by investors. Although there is a slight recovery in 2023 to US$35,653 million, the value again decreases in 2024 to US$27,499 million, indicating persistent challenges in increasing market value relative to invested capital.

Invested Capital

Invested capital has steadily increased over the five-year period, growing from US$247,730 million in 2020 to US$307,881 million in 2024. This demonstrates continued investment or asset expansion by the company, albeit with a slowing pace of growth in the last two years.

MVA Spread Ratio

The MVA spread ratio, which reflects the efficiency of investment in generating excess market value, has significantly declined from 67.24% in 2020 to single-digit percentages by 2024, specifically dropping to 8.93%. This trend indicates a shrinking return on invested capital from the perspective of market value generation, suggesting reduced effectiveness in capital deployment or adverse market perceptions.

Overall Analysis

While the invested capital base has consistently grown, the corresponding increase in market value added has not kept pace, as evidenced by declining MVA values and the sharply decreasing MVA spread ratio. This divergence points to diminished market confidence or profitability relative to the capital invested. The slight rebound in MVA during 2023 was not sustained into 2024, and the continued downward trend in the MVA spread ratio underscores challenges in translating investment into shareholder value. The data indicates a need for improved strategies to enhance capital efficiency and value creation.

Market Value Added (MVA)

The Market Value Added shows a significant decline over the observed period. Starting at 166,567 million USD in 2020, it decreased to 132,417 million USD in 2021, followed by a sharp drop to 33,957 million USD in 2022. The figures slightly improved in 2023 to 35,653 million USD but decreased again to 27,499 million USD by 2024. This trend suggests challenges in value creation from 2021 onward, with the company's market value addition shrinking drastically after 2021 and not recovering to previous levels.

Operating Revenues

Operating revenues experienced a moderate but steady increase from 128,292 million USD in 2020 to a peak of 136,835 million USD in 2022. Thereafter, revenues slightly decreased to 133,974 million USD in 2023 before a mild increase to 134,788 million USD in 2024. The overall revenue performance indicates relative stability with modest growth across the five-year period but without significant growth acceleration.

MVA Margin

The MVA margin, representing the ratio of market value added relative to revenues, declined sharply from 129.83% in 2020 to 99.1% in 2021, followed by a steep decline to 24.82% in 2022. Subsequent years show limited recovery with 26.61% in 2023 and a decrease again to 20.4% in 2024. This decline aligns with the decreasing MVA, demonstrating reduced efficiency in generating market value relative to operating revenues.

Summary

The data indicates a divergence between operating revenues and value creation metrics. While operating revenues have remained relatively stable with modest growth, the Market Value Added and associated margin have dramatically decreased since 2021. This suggests a growing disconnection between revenue generation and market valuation, potentially signaling concerns regarding profitability, market perception, or strategic challenges impacting long-term value creation. The company’s ability to convert revenues into market value appears to have weakened substantially over the period analyzed.