Shareholder Value Added - SVA

What is 'Shareholder Value Added - SVA'

Shareholder value added (SVA) is a value-based performance measure of a company's worth to shareholders. The basic calculation is net operating profit after tax (NOPAT) minus the cost of capital from the issuance of debt and equity, based on the company's weighted average cost of capital:

Shareholder Value Added (SVA)

BREAKING DOWN 'Shareholder Value Added - SVA'

Using the market value of the company, rather than the accounting-based value in the above calculation, will give the market value added to shareholders.

RELATED TERMS
  1. Net Operating Profit After Tax ...

    A company's potential cash earnings if its capitalization were ...
  2. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
  3. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating ...
  4. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
  5. Shareholder Value Transfer - SVT

    A metric intended to guide shareholders in how much equity compensation ...
  6. Shareholders' Agreement

    An arrangement among a company's shareholders describing how ...
Related Articles
  1. Economics

    Explaining Net Operating Profit After Tax

    Net operating profit after tax (NOPAT) describes a company’s potential cash earnings.
  2. Markets

    EVA: Pulling It All Together

    By David Harper, (Editor In Chief - Investopedia Advisor) Contact David By working through the components of economic profit over the previous chapters, we've been building an economic profit ...
  3. Markets

    EVA: Calculating NOPAT

    By David Harper, (Contributing Editor - Investopedia Advisor) Contact David In finding economic profit, the essential step is to calculate net operating profit after taxes (NOPAT), and this ...
  4. Term

    What is the Shareholder Equity Ratio?

    The shareholder equity ratio shows how much money shareholders will receive if a company has to liquidate its assets.
  5. Markets

    EVA: Calculating Invested Capital

    By David Harper, (Contributing Editor- Investopedia Advisor) Contact David Calculating invested capital is an important step in finding economic profit because a key idea underlying this metric ...
  6. Markets

    EVA: Overview

    By David Harper, (Contributing Editor- Investopedia Advisor) Contact David Examining the components of economic profit and studying the finer points of its calculation require an understanding ...
  7. Economics

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  8. Investing Basics

    Who is a Shareholder?

    A shareholder is a person, company or other entity that owns at least one share of a company’s stock.
  9. Markets

    EVA: What Does It Really Mean?

    By David Harper, (Contributing Editor - Investopedia Advisor) Contact David As we performed a sequence of calculations to find Disney's (DIS) 2004 economic profit, we discovered that despite ...
  10. Investing

    Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
RELATED FAQS
  1. What is Shareholder Value Added (SVA) and how is it used in value investing?

    Read about shareholder value added (SVA), a corporate profitability metric, and why value investors disagree about its usefulness. Read Answer >>
  2. Why is it useful for investors to calculate Net Operating Profit After Tax for over-leveraged ...

    Understand why it is useful for investors to calculate net operating profit after tax (NOPAT) for overleveraged companies ... Read Answer >>
  3. How can I use Net Operating Profit After Tax (NOPAT) to compare companies and make ...

    Learn what net operating profit after tax (NOPAT) measures. Understand how an investor can use NOPAT after tax to compare ... Read Answer >>
  4. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Understand how net operating profit after tax gives a clearer view of the operating efficiency of a company in relation to ... Read Answer >>
  5. Why is it beneficial to use Net Operating Profit After Tax to compare companies within ...

    Understand why it's beneficial to use net operating profit after tax (NOPAT) to compare companies within the same industry ... Read Answer >>
  6. Why is it beneficial to use Net Operating Profit After Tax as opposed to net income ...

    Understand why it is beneficial to use net operating profit after tax as opposed to net income when making an investment ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center