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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (43495)	7/22/2011 12:41:08 PM
From: Paul Senior	Respond to of 78470

LEI/PVA. EKS, I'll pass on PVA for now. It's still too gassy, not oily enough for me. NAV is based on extensive gas holdings, and since I believe we're in a gas glut situation now, those nav numbers make me uncomfortable. I've added more to my position in e&p LEI today as stock continues to fall.

To: E_K_S who wrote (43495)	7/30/2011 6:10:30 PM
From: E_K_S	Read Replies (1) \| Respond to of 78470

Re: Penn Virginia Corp. (PVA) Never really looked at EVA as a metric as it seems too difficult to calculate. In theory it sounds good but I do not know how applicable it is at deriving a fair value for a stock. According to the article PVA has a high EVA but the stock continues to test new lows. I do believe that PVA could have a fair value of between $19.00/share - $40.00/share based on the price of natural gas. The company has over the last year increased it's "oily" reserves (discovering several new wells on their Eagle Ford Shale acreage) and perhaps their EVA metric is now reflecting the added economic value of their investment into this asset. I figure these new oil wells have added at least $4.00/share in value to the company (based on Ip well results to date) and when completed with their Eagle Ford Shale drilling program could add another $16.00/share. Economic Value Added - EVA wiki.fool.com Developed by consulting firm Stern Stewart & Co., the idea behind EVA is that if a company’s operating income is larger than its cost of capital, that business is creating value for shareholders. Stern Stewart originally created EVA to help managers gauge the performance of their own businesses, but investors have since adopted it as a useful metric for sizing up a company. EVA helps you tack together all of the tinier pieces of the puzzle so that you have a more accurate picture of the profit a company is actually churning out -- and it’s this economic profit that translates into shareholder value. The equation is: (NOPAT) - ([Total Assets - Current Liabilities] x WACC) ===================================================================================================== Penn Virginia's Management Is Creating Value fool.com From the article:"...So what does this mean for investors? A positive reading on EVA momentum means a company has created value by increasing its EVA, and a negative EVA momentum means EVA has decreased and less value is being created. EVA momentum is one of the few performance measurements, if not the only one, with such a clear dividing line between good and bad performance. The best companies, then, create value in excess of their cost of capital, as reflected by positive EVA momentum. The higher the EVA momentum, the faster management is creating value...." "...With an EVA momentum of 27.1%, Penn Virginia's economic value added increased year over year, placing it in the ninth percentile of all companies in the Russell 3000. One of the three remaining companies had positive EVA momentum over the past 12 months...." "...Businesses with high EVA momentum are effectively creating value. It will be interesting to see how useful this extremely new metric proves to be for companies and investors. If it lives up to its promise, it will be an essential tool in investors' arsenals...." ----------------------------------------------------------------------------------------------------------------------------------------- I wonder if EVA is used in other company valuations and if it is a good predictor ( ie leading indicator) of undervalued companies. Have not really seen the metric used before when comparing other similar companies. FWIW, I continue adding to my under water shares in PVA and will be making another add on any price around $12.60/share. They have 3 rigs drilling on their 14,000 Eagle Ford Shale acreage, spending $187M and plan on completing 24 wells during this investment cycle (2011). Note: First six wells completed produce oil ranging from 582-1,876 BOE/d. EKS