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Strategies & Market Trends : Professional Equity Analysis - the Pursuit of True Value

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To: cape radical who wrote (70)	2/13/1997 10:53:00 PM
From: Winston Chang	of 102

"EVA speaks for itself and is a great means of determining whether a company is creating wealth or not. people who would like to learn more should visit sternstewart.com for more info. joel stern and bennett stewart are the gurus of EVA and economic wealth." If a company is generating EVA, that probably better reflects the reality of internally generated growth than raw GAAP earnings, and may provide a better measurement of such growth. On the other hand, just knowing that a company is returning more than its cost of capital shouldn't necessarily mean it is a worthwhile investment. What valuation measures do you use so that you don't end up purchasing EVA "at any price"? (N.B. I do not totally understand the derivation of EVA, but my sense from reading your prior articles is that it is not market value based, viz. that it is based to a large extent on book value measures (similar to ROE) than on capitalization measures (like PE or PSR).) Regards, Winston

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