In Exequity’s August 20, 2019 Client Briefing, ISS, EVA, and Economic Voodoo, we responded to contentions made by Institutional Shareholder Services (ISS) and author Bennett Stewart (ISS Senior Advisor) in the white paper EVA, not EBITDA: A Better Measure of Investment Value. ISS and Mr. Stewart identify economic value added (EVA) as a “superior” measure of “investment value” over EBITDA. Readers may recall, EVA is ISS’s latest preferred approach to performance measurement. In contrast to ISS’s analyses, which appear to have been conducted based on data as of a single point in time, we described how EBITDA was better correlated over time with stock price and total enterprise value (TEV) than EVA.
This Client Update is a follow-up to ISS, EVA, and Economic Voodoo and offers further insights into the relationship between EVA and EBITDA versus stock price and TEV.
Read more below or click here to download a copy of this Client Update.
Institutional Shareholder Services (ISS) recently introduced Economic Value Added (EVA) as its latest approach to measuring company performance. Now a purveyor and proponent of EVA, ISS is marketing its product, including a recent publication, EVA, not EBITDA: A Better Measure of Investment Value. This Client Briefing examines ISS’s contention that EVA is a superior gauge of “investment value” to EBITDA.
Download the Client Briefing here (PDF).
Download information on the EVA formula we used and companies analyzed here (PDF).