What is EVA Momentum?

 
Economic Value Added > Forum > What is EVA Momentum?

What is EVA Momentum?
Marcio Peres, Manager, Brazil, Member
EVA Momentum is the change in a business's EVA divided by the prior period's sales (revenue). It was developed by Bennet Stewart of EVA Dimensions. It is an application of EVA that measures the EVA growth rate, scaled to the size of the company.
As a result, it helps investors determine how much value the company is creating for its shareholders. Because the metric is based on the % change in profit rather than the absolute amount of economic profit, companies of various sizes may be compared.
The formula of EVA Momentum is as follows:

EVA Momentum = (This year’s EVA – Last year’s EVA) / Last year’s Sales

For example, if last year a frim had EVA of $ 6 million and this year they acheeved $ 7 million in EVA, then the comapny increased its EVA by $ 1 million. If last year sales (revenue) were $ 100 million, that represents an EVA Momentum Ratio of 1% ($ 1 million divided by $ 100 million).

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