Sorry, we do not manage money, but we do provide good quality equity research on 50 blue chip Indian stocks.
Our accuracy is approximately 70% with our algorithm which can be seen in the EVA Accuracy Tab.
We make 3 to 6 month predictions and we have been testing our research for the last 2 years with a continuous accuracy of 70%-85%.
SEBI Research Analyst regulations are strict in this regard and our main job is to write research per SEBI regulations.
Research and valuation of stocks has always been a passion for me. I have worked with many of the large Indian blue chip companies in India during my Investment Banking tenure with Deutsche Bank raising over $1.3 billion from the global equity markets.
The EVA pricing formula uses Economic Profit to determine share prices. We understand it’s a little complicated, but one way to think about Economic Profit is that Real Returns which are Absolute/Nominal Returns minus Opportunity Costs equals Economic Profit.
We need to consider what else the Company could have done with its money besides investing in its own business. Or more specifically what rate should you be charging your own Company to use your own capital?
Yes it is unique. While Economic Profit is taught at leading business schools and Ivy League schools, it is not very practical and is highly quantitative. We have adjusted the formula to make it more consistent with standard multiples and free cash flow valuation approaches while keeping the foundations of the formula intact.
EVA Paisa covers 50 blue chip Indian stocks and we provide you with 100 equity research reports for the yearly subscription.
Economic Profit = Accounting Profit – Opportunity Cost or Rental Cost of Capital.
Economic Value Added means the Economic Profit that a Business earns from its invested capital.
This refers to both equity capital and interest paying debt capital or simply put it is the Total Investments into the Company.
Return on Average Invested Capital is the Total Returns of the Company from its Total Investments. This is calculated as Total Earnings or Accounting Profit of the Company for the year divided by the Total Invested Capital.
Return on Newly Invested Capital or simply put the Returns from New Investments is the new or incremental earnings in the year created out of the new or incremental Investments into the Company.
This is the weighted average cost of capital also known as the Opportunity cost of capital or Rental Cost of Capital. Simply put this is the Cost of Investments for the Company.
This is the Earnings before Interest and Taxes less adjustable taxes. It can also be called Accounting Profit in certain cases.
Economic Profit = Accounting Profit – Opportunity Cost or Rental Cost of Capital. Economic Profit = ROIC – WACC. It is simply the Returns – Costs of Investments.
RONIC and ROIC are important to assess whether the company is having good returns on its new and total investments and therefore translating into good returns for shareholders. If RONIC and ROIC is high, this is a good sign for the stock.
WACC or Opportunity Cost of Capital is important because we need to consider what else the Company could have done with its money besides investing in its own business. Or more specifically what rent should you be charging your own Company to use your own capital?
If ROIC is greater than WACC, it means company is making Economic Profit which is good. If ROIC is less than WACC, it means Company is NOT making Economic Profit which is NOT good for shareholders.
Company is set up with Rs. 100 and Earns Rs. 3 for the year. During the same period risk-free fixed deposit rates were at 5%. What is the Economic Profit?
Accounting Profit = Rs. 3
Return on Invested Capital = Rs. 3 / Rs. 100 = 3%
Opportunity Cost of Capital = Rs. 5 (5% X Rs. 100)
Economic Profit = Accounting Profit – Opportunity Cost of Capital
Rs. 3 – Rs. 5 = Rs. -2 (ECONOMIC VALUE DESTRUCTION)
Economic Profit is Rs.-2 demonstrating that it would have been better to simply invest the Rs. 100 into a fixed deposit and earn Rs. 5 which is risk-free rather than start a Business and earn Rs. 3 which is less than Rs. 5.