EVA metrics is the second of the three legs in the Financial Radar Screen value-based management software solution from EVA Dimensions. It consists of on-line access to a proprietary file of over 300 key corporate and shareholder performance reference points covering the Russell 3000 companies. Users can map the data into their own internal reports and scorecards, or take advantage of pre-programmed benchmarking and statistical profiling reports and graphs built into the Radar Screen desktop software.
EVAntage: the Authoritative Source of EVA Metrics
EVAntage is the name given to a comprehensive database of economic profit and shareholder wealth statistics provided by EVA Dimensions LLC, which acquired the EVA measurement and valuation modeling technology and related EVA brand name directly from Stern Stewart, the EVA pioneer and global consulting firm.
Updated daily, the file covers all Russell 3000 companies, and converts 20 years of reported 10K and 10Q accounting data into quarterly and annual estimates of nearly 400 key performance, risk, and valuation metrics - the same ones that are stored in the KPI tables created by the EVA Analysis module, permitting direct, one-to-one benchmarking with individual peer companies and statistical profiling versus sector and market aggregates. A sampling of the metrics are:
- Net Operating Profit After Taxes (NOPAT) - the profit attributable to all investors, and after eliminating over 15 key accounting distortions
- Capital - the debt and equity funds invested in a firm's net operating assets, as adjusted
- Return on Capital (ROC) - NOPAT/Capital, a key measure of capital productivity
- Cost of Capital (COC) - the required return from lenders and shareholders, accounting for differences in business risks and capital structures; the "hurdle rate" to create value
- Economic Value Added (EVA) - economic profit, measured as NOPAT less a capital rental charge, or what is the same, capital times the ROC-COC spread
- EVA Margin - EVA/Sales; the true "economic" profit margin
- EVA Spread - EVA/Capital; the productivity rate of capital in producing economic profit
- EVA Per Employee - EVA/employee; the productivity rate of labor in producing economic profit
- EVA Momentum - the periodic change in EVA scaled by Sales or by Capital; an overall index of profitable growth and income statement and balance sheet productivity gains
- Market Value (MV) - the market's current valuation of a company's debt and equity capital
- Market Value Added (MVA) - market value less capital; the market-to-book spread that measures the amount of shareholder wealth a company has created (or destroyed); represents the market's assessment of the "net present value" of a firm's capital projects, including forecast ones.
- Future Growth Reliance (FGR) - the percent of total market value that depends on a firm's ability to increase its EVA over current levels; a measure of forward plan stretch
- Enterprise Multiple - MV(including the present value of rents)/EBITDAR(EBITDA + rent): the most un-leveraged, undistorted P/E ratio available
- Free Cash Flow (FCF) - NOPAT less the change in capital; measures funding liquidity or need.
- Company Type: every company is assigned to one of five value creation categories ("Gamble", "Growth," "Star", "Par", "Sub-Par") based on growth and profitability trends.
Consider these attractive features:
It's rooted in economics, not accounting: EVAntage doesn't take unreliable accounting numbers and ratios at face value, and isn't fooled when firms do things that inflate income - such as slashing research or understating bad debt provisions. It has been programmed to stamp out inconsistencies, unearth corporate cash flow, measure true economic performance, and deduct the full cost of capital.
The result: EVAntage metrics are more strongly and cogently linked to shareholder value and more comparable company to company than reported figures. Whether you're measuring corporate performance, indexing bonus plans, assessing an acquisition's value, benchmarking with peers, or setting corporate goals, EVAntage data gives you a clear leg up on the run-of-the mill variety.
It easily adapts to your preferences: While EVAntage filters reported data in ways that EVA Dimensions believes are sensible and consistent with stock price behavior, EVAntage has built-in flexibility to override default settings and compute custom data.
Should you desire, Dimensions can tailor your EVAntage data to precisely match your requirements - for example, R&D outlays can be written off all at once as accounting rules requires, or capitalized and amortized over 10 years, or any amortization schedule in between. Options can be expensed or reversed. Pension distortions can be removed per EVA Dimensions recommended formulation or left in earnings in accord with GAAP. Bottom line, you choose. Give your board and executive team the financial benchmark measures defined just as you think they should be.
It's proven useful in a wide range of applications, such as to:
- benchmark a firm and its business units with peers - in 300 key dimensions of performance, risk and value
- set return, growth and profitability goals that directly tie to value and are consistent with sector trends
- index results to eliminate common industry fluctuations
- find the best fit relation between shareholder value and performance metrics
- screen to find acquisition candidates and comparable, benchmark-worthy companies
- red-flag the credit risk of your corporate clients
- populate models that measure the propensity of corporate clients to buy your firm's services
