Hello, and EVA analysis
Hello,
First of all, I wanted to say that although this is my first post, I have been following this forum for over a year. Quite simply, it is the best resource available for people wanting to break into the industry, and I advise all prospective monkeys to soak up as much as possible. Being a firm believer that one shouldn't contribute unless they have the experience to back up what they have to say, I have so far refrained from getting involved in any discussion, but Wall Street Oasis was very useful in getting me though my SA last year, and I am sure it will continue to be when I start full time in July.
Aside from saying hi, I have a few questions on EVA (Economic Value Added) analysis, and similar measures of shareholder wealth creation:
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Is it used outside of consultancy?
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What do former consultants think about it as a performance measure?
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General opinion as to whether it is a useful measure.
It would be great to hear some opinion regarding the valuation tools we use, after all, all methodologies are flawed to an extent, and my impression is that accepted industry practice shapes a lot of what we do.
Thanks, and nice “meeting” you all.
Londonbanker
From a consulting perspective, have never used it, have never seen anyone use it. I'd speculate the reason is all our clients are large and public (i.e. F500), no sense in deviating from GAAP.
Consulting is more about trends than dollars and cents (at least strategy consulting) so it really doesn't matter what metric you are using as long as they are all moving in the same direction.
I personally have not seen it used in IB. Remember having a finance teacher who swore by it but I believe she had a background in Asset Management, not banking.
EVA is more of a proxy model: use it in conjunction with the basics.
It does seem the type of thing beloved by academics; fundamentally useful but in practice little real application.
Thanks for the insight.
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