• user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:480848e1a4052635bae378cbb562d7f3' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<h1>Shareholder Value Added</h1>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:480848e1a4052635bae378cbb562d7f3' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:0f62672361093cf4b2c229857a2c8f33' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<h2>Shareholder value added definition</h2><br />Shareholder value added, or <b class=\"normalize\">SVA</b>, is defined as the measurement of the actual worth of a stock or portfolio of stocks as it compares to the worth of other investments. Typically, this is determined by calculating the likely profitability of the investment without factoring in risk. <b class=\"normalize\">Shareholder value added</b> is used to evaluate the probable return on investment in order to determine the desirability of the stock or portfolio under consideration; as such, it is one of a number of evaluation tools used by investors and analysts to select among investment choices.<br /><br /><h2>Shareholder value added formula</h2><br />Depending on the specific investment, the formula for calculating shareholder value added may vary slightly. However, the general <b class=\"normalize\">shareholder value added formula</b> can be expressed as the weighted average cost of capital subtracted from the company&rsquo;s net operating profit after tax, or:<br /><br />&bull; SVA = Net operating profit after tax (<a href=\"/fundamental-analysis/nopat.html\" title=\"nopat\">NOPAT</a>) &ndash; <a href=\"/fundamental-analysis/weighted-average-cost-of-capital-wacc.html\" title=\" weighted average cost of capital\">weighted average cost of capital</a> (WACC)<br /><br />In order to understand this formula fully, it&rsquo;s essential to understand the component parts of the formula.<br /><br />NOPAT is defined as the potential cash earnings of a company without regard to any outstanding debt or liabilities other than tax obligations. In general terms, NOPAT is the gross profit produced by a specific company or group of companies after taxes owed have been deducted. NOPAT is generally derived by multiplying the current operating income of a company by one minus the prevailing tax rate percentage, as in:<br /><br />&bull; NOPAT = Operating Income * (1 &ndash; Current Tax Rate)<br /><br />WACC is derived by calculating the average cost of capital by taking each component of capital cost and multiplying it by its proportional weight in the overall value of the company or portfolio of companies. Analysts then average the results to determine how much the company or group is paying, on average, for the capital it has accumulated. WACC is derived using a fairly complex formula that integrates the cost of equity and debt, the market value of that equity and debt, and the percentage of financing costs attributable to each as well as the current corporate tax rate for the company.<br /><br /><h2>Shareholder value added vs. market value added</h2><br />Shareholder value added is derived from the actual or projected profits of a company and the actual or projected cost of capital; it should not be confused with market value added calculations, which are derived by subtracting the current market value of the company&rsquo;s debt from the current market value of the company and provide a more general view of a company&rsquo;s relative profitability in the marketplace.<br /><hr />&lt;&lt; <a title=\"risk management\" href=\"../../../../../../fundamental-analysis/risk-management.html\">Risk Management</a><br />&lt;&lt; <a href=\"/fundamental-analysis/types-of-risk.html\" title=\"types of risk\">Types of Risk</a><br />&lt;&lt; <a href=\"/fundamental-analysis/economic-capital.html\" title=\"economic capital\">Economic Capital</a><br />&lt;&lt; <a title=\"Value at Risk (VAR)\" href=\"../../../../../../fundamental-analysis/value-at-risk.html\">Value at Risk (VAR)</a>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:0f62672361093cf4b2c229857a2c8f33' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:2fda152348bc4ae73408bf0b82608e9a' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide to navigating through the markets.</p><p>Tim is in the Timers Digest Top 10 Rankings for his newsletter and is the Author of \"The Secret Science of Price and Volume”. Ord also contributes to the Stocks &amp; Commodities Magazine.</p>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:2fda152348bc4ae73408bf0b82608e9a' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:4dd69529abed14a5c1c8f3ba7e22f8eb' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>Tradingsim.com provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for every symbol on the Nasdaq, NYSE, and AMEX.</p><p>Use the fast forward and pause features to analyze your trading decisions with more precision.</p>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:4dd69529abed14a5c1c8f3ba7e22f8eb' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:151e49b034b3ac8a98c1331980da8b69' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<h2>Related Videos</h2>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:151e49b034b3ac8a98c1331980da8b69' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:e6ff5fe7efa34d641d697991ec512c61' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<h2>Related Articles</h2>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:e6ff5fe7efa34d641d697991ec512c61' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '4:64dc950e564b7bb494892459d2858add' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<div class=\"left\">\n <p>copyright &copy; 2011 MYSMP.com. All rights reserved.</p>\n <a href=\"/\">Home</a> • <a href=\"/advertise\">Advertise</a> • <a href=\"/sitemap\">Sitemap</a> • <a href=\"/privacy-policy\">Privacy Policy</a>\n</div>\n\n<div class=\"right\">\n <p>Designed &amp; Developed by: bxCreative.com: <a target=\"_blank\" href=\"http://bxcreative.com\">Web design</a></p>\n</div>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '4:64dc950e564b7bb494892459d2858add' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:ef414e50ef3bcd60831c79a8ccac7f37' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<h2 class=\"pane-title\"><a href=\"/investment-articles\">Investment Articles</a></h2><h2 class=\"pane-title\"><a href=\"/premium-services\">Premium Services</a></h2> <h2 class=\"pane-title\"><a href=\"/free-offers\">Free Offers</a></h2> <h2 class=\"pane-title\"><a href=\"/video\">Videos</a></h2>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:ef414e50ef3bcd60831c79a8ccac7f37' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:7ab206dca588aa9858fab14b55f27503' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>16192 Coastal Highway<br />\nLewes, Delaware 19958</p>\n', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:7ab206dca588aa9858fab14b55f27503' in /var/www/html/mysmp/includes/cache.inc on line 109.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '1:fb9bc3d8197c3f70b5a896cc8bae29d6' in /var/www/html/mysmp/includes/cache.inc on line 26.
  • user warning: Table './mysmp_drupal/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<a href=\"/\"><img src=\"/sites/all/themes/bx/images/logo.png\" /></a>', created = 1576112730, expire = 1576199130, headers = '', serialized = 0 WHERE cid = '1:fb9bc3d8197c3f70b5a896cc8bae29d6' in /var/www/html/mysmp/includes/cache.inc on line 109.

Shareholder Value Added

Shareholder value added definition


Shareholder value added, or SVA, is defined as the measurement of the actual worth of a stock or portfolio of stocks as it compares to the worth of other investments. Typically, this is determined by calculating the likely profitability of the investment without factoring in risk. Shareholder value added is used to evaluate the probable return on investment in order to determine the desirability of the stock or portfolio under consideration; as such, it is one of a number of evaluation tools used by investors and analysts to select among investment choices.

Shareholder value added formula


Depending on the specific investment, the formula for calculating shareholder value added may vary slightly. However, the general shareholder value added formula can be expressed as the weighted average cost of capital subtracted from the company’s net operating profit after tax, or:

• SVA = Net operating profit after tax (NOPAT) – weighted average cost of capital (WACC)

In order to understand this formula fully, it’s essential to understand the component parts of the formula.

NOPAT is defined as the potential cash earnings of a company without regard to any outstanding debt or liabilities other than tax obligations. In general terms, NOPAT is the gross profit produced by a specific company or group of companies after taxes owed have been deducted. NOPAT is generally derived by multiplying the current operating income of a company by one minus the prevailing tax rate percentage, as in:

• NOPAT = Operating Income * (1 – Current Tax Rate)

WACC is derived by calculating the average cost of capital by taking each component of capital cost and multiplying it by its proportional weight in the overall value of the company or portfolio of companies. Analysts then average the results to determine how much the company or group is paying, on average, for the capital it has accumulated. WACC is derived using a fairly complex formula that integrates the cost of equity and debt, the market value of that equity and debt, and the percentage of financing costs attributable to each as well as the current corporate tax rate for the company.

Shareholder value added vs. market value added


Shareholder value added is derived from the actual or projected profits of a company and the actual or projected cost of capital; it should not be confused with market value added calculations, which are derived by subtracting the current market value of the company’s debt from the current market value of the company and provide a more general view of a company’s relative profitability in the marketplace.

<< Risk Management
<< Types of Risk
<< Economic Capital
<< Value at Risk (VAR)
Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

Tradingsim.com
Day Trading Simulator

Tradingsim.com provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for...

Send this article to a friend.

Enter multiple addresses on separate lines or separate them with commas.