Economic Value Added (EVA)
Economic Value Added (EVA) is a measure of a company’s financial performance that represents the value created in excess of the required return of the company’s capital providers. It captures whether a company is generating returns above its true cost of capital, which distinguishes it from purely accounting-based measures such as Net Income.
The formula is as follows:
\[\text{NOPAT} = \text{EBIT} \cdot (1 - \text{Effective Tax Rate})\] \[\text{Invested Capital} = \text{Total Equity} + \text{Total Debt}\] \[\text{EVA} = \text{NOPAT} - (\text{Weighted Average Cost of Capital} \cdot \text{Invested Capital})\]Also known as: EVA, economic profit.
Economic Value Added (EVA) in Python
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_economic_value_added as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(["AAPL", "MSFT"], api_key="FINANCIAL_MODELING_PREP_KEY")
toolkit.models.get_economic_value_added().loc["AAPL"]
Which returns:
| 2021 | 2022 | |
|---|---|---|
| Net Operating Profit After Taxes | 9.69732e+10 | 1.02259e+11 |
| Invested Capital | 1.93614e+11 | 1.91382e+11 |
| Weighted Average Cost of Capital | 0.3598 | -0.2326 |
| Economic Value Added | 2.73107e+10 | 1.46775e+11 |
Parameters
The function accepts the following parameters:
- rounding (int, optional): The number of decimals to round the results to. Defaults to None.
- growth (bool, optional): Whether to calculate the growth of the values. Defaults to False.
- lag (int | list[int], optional): The lag to use for the growth calculation. Defaults to 1.
- standardize (bool, optional): Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False.
- trailing (int | None, optional): The trailing period to use for the calculation. Defaults to None.
- show_columns (list[str] | None, optional): List of columns to show in the results. If None, all columns will be shown. Defaults to None.