Best-Practice EVA: The Definitive Guide to Measuring and Maximizing Shareholder Value - Hardcover

Stewart, Bennett

Hardcover

ISBN 10: 1118639383 ISBN 13: 9781118639382

Publisher: Wiley, 2013

Synopsis

Best-Practice EVA tells the new EVA story from the ground up. Stewart covers EVA essentials—the classic economic profit version of EVA—in the first three chapters of the book. He shows readers how simple and intuitive EVA really is, how it is defined, and why it is better than all other measures of corporate profit. You discover how it naturally guides managers into making all the right decisions—the ones that will truly maximize value. You see how to use it in profit-sharing bonus plans that create the powerful incentives of an owner. Later, Stewart introduces new ratios that make EVA much more powerful and much easier to use than ever before. The pinnacle of the new ratio framework is EVA Momentum, calculated by taking the change in EVA versus the prior period, and dividing by the revenues in the prior period. It measures the growth rate in EVA, scaled to the sales size of the business. It is the only corporate performance ratio where bigger always is better, because it gets bigger when EVA does, which means it should be every company's most important financial goal, the one ratio metric that everyone aims to maximize as the key measure of corporate success. Stewart then walks through the nuts and bolts of Best-Practice EVA, kicking off with an in-depth look at EVA Margin, or EVA as a percent of sales. It’s a key productivity metric, and Stewart’s candidate to replace ROI. The last link in the Best-Practice program is PRVit—the EVA market score report. Stewart shows how to read and interpret the report, how the score is determined, and why investors are turning to it to screen and rate stocks. He also shows why it is finding a home with CFOs and IR directors who want insights into how the market is pricing their stock. The book concludes with battle-tested tips from the firing line, practical suggestions for how you can test drive and adopt Best-Practice EVA at your company.

About this title

From the Back Cover:

Praise for Best-Practice EVA

"This is the best-ever guide to using EVA—the most valuable and important corporate finance tool of the past thirty years."
—Geoff Colvin, Senior Editor at Large, Fortune

"We're implementing Best-Practice EVA with EVA Dimensions; I expect that the tools and metrics will become quite common in our vernacular at PepsiCo. The new EVA ratios are a helpful way to dissect EVA and help the organization focus on the opportunities."
—Hugh F. Johnston, Executive Vice President and Chief Financial Officer, PepsiCo

"Throughout my career, I have been intensely interested in how value is created, and how financial leaders and innovations can play a critical role. Best-Practice EVA is as good a guide as I have seen on the subject. It is chock-full of practical techniques that any chief financial leader can use to help improve corporate performance and create owner wealth."
—Jim Lawrence, Chairman, Rothschild North America and Co-Head of Global Investment Banking, Rothschild Group, and former CFO of Unilever and General Mills

"Best-Practice EVA provides practical tools for my everyday world of equity analysis—particularly EVA Margin and EVA Momentum, two universally scalable metrics that provide insight into how CEO strategies and shifts in the competitive landscape change shareholder value."
—Joe Joseph, Portfolio Manager, Putnam Investments

"This book should be the go-to guide for executives seeking to improve how they set objectives, align strategy efforts with value creation, and ensure crystal-clear success measurement. Business unit leaders will like the simple and practical approaches that clearly link EVA with actionable operating levers. The book is filled with examples that vividly bring the concepts to life. I recommend it highly."
—Fareed A. Khan, Chief Financial Officer, United Stationers

"Bennett Stewart has liberated EVA for all. His new ratio-based version is a real innovation that takes the perceived complexity out of EVA and enables an organization to connect all its efforts to the creation of value . . . from the sales floor to the boardroom. I like it. We'll use it."
—Michael Archbold, CEO, Talbots, and former CFO of Vitamin Shoppe and AutoZone

"I believe EVA can be one of the tools that help corporate boards to safeguard and enhance shareholder value. Bennett Stewart exposes the flaws in conventional financial ratios—pitfalls every director should understand. He cleverly explains the nuts and bolts of EVA and how board members can use it to rate business plans, set targets, judge and benchmark performance and even to value acquisition candidates on their real financial merits. A recommended read!"
—T. K. Kerstetter, Chairman, Corporate Board Member

"Bennett Stewart has written an insightful and provocative reexamination of the EVA concept that he pioneered two decades ago. This is an important read for those interested in executive incentive structure and the practical applications of finance theory."
—Charles M. Elson, Edgar S. Woolard Jr., Chair in Corporate Governance, Director, John L. Weinberg Center for Corporate Governance

"Best-Practice EVA provides fresh insights into the power of EVA—the creative and important metric developed by Bennett Stewart. This is must-reading for anyone interested in increasing shareholder value."
—Ira Kay, Managing Partner, Pay Governance

From the Inside Flap:

When it was introduced by Bennett Stewart in the early 1990s, EVA (short for economic value added) made headlines in the business press, with pundits enthusiastically touting it as the be-all and end-all metric of enterprise value creation. Soon, EVA was being embraced by many of the world's most powerful corporations as an indispensable tool for measuring business performance and strategy outcomes. At the same time, many investors and analysts came to rely on EVA in place of traditional metrics, such as EPS and P/E ratio.

But over time, several shortcomings in EVA became apparent—shortcomings that rendered EVA unwieldy and somewhat impractical for business managers and equity analysts alike.

Enter Best-Practice EVA. Not simply a new iteration of EVA—EVA 2.0, if you will—but a quantum leap forward, Best-Practice EVA brings together powerful new tools and processes for measuring and improving the wealth-creation strategies and decisions of enterprises, while making EVA more intuitive, transparent, and simpler to use than ever before.

The official user's manual to understanding and using Best-Practice EVA, this book is far from academic. It is leavened with the author's energetic and engaging style, and brimming with telling anecdotes and case examples from companies as diverse as Amazon.com and Tiffany that:

• Show why EVA is the best tool to help CFOs and line teams measure and improve the value of business plans, investment projects, acquisitions, and decisions of all kinds
• Introduce EVA Momentum, an alternative to ROI and a powerful diagnostic tool that connects value creation to specific performance levers managers can understand and control
• Distill the power of EVA into a simple profit-sharing bonus formula that almost every company can use to turn managers into charged-up owner-operators
• Arm investors with proven EVA metrics that can predict share prices and isolate valuation pressure points, including a precise formula for using EVA to explain total shareholder returns
• Outline techniques for using EVA ratios to set more credible and actionable corporate performance targets
• Describe how to use EVA to repair the inherent flaws in conventional accounting profit measures and better reveal the true value of business decisions
• Unveil a present-value version of the EVA profit margin that replaces IRR and helps managers more accurately rate capital projects and evaluate any business decision in which cost-benefit trade-offs spread out over time and across income statement and balance sheet effects
• Provide powerful new valuation multiples that offer reality checks on valuations and plan projections

The official how-to guide for the powerful new generation of EVA tools and techniques, Best-Practice EVA: The Definitive Guide to Measuring and Maximizing Shareholder Value is an indispensable working resource for business executives and managers, finance professionals, board members, and institutional investors alike.

About this edition

• Publisher: Wiley
• Publication date: 2013
• ISBN 10: 1118639383
• ISBN 13: 9781118639382
• Binding: Hardcover
• Edition number: 1
• Number of pages: 352