Is United Parcel Service's Management Creating Value? - Motley Fool
When corporate boards use bad incentives for management's pay, disaster often ensues. (Think Lehman Brothers.) Incentives based on singular metrics such as revenue growth, EBITDA, return on equity, or earnings per share are easily manipulated and gamed. Fortunately, there is a better way: EVA momentum.
So what does this mean for investors? A positive EVA momentum reading means a company has created more value by increasing its EVA, while a negative EVA momentum reading means EVA has decreased, signaling less value creation. EVA momentum is one of the few, if not the only, performance measures with such a clear dividing line between good and bad performance.
With an EVA momentum of 1.9%, United Parcel Service's economic value added increased year over year, placing it in the 55th percentile of all companies in the Russell 3000. Two of the three remaining companies, FedEx and Pacer International, had positive EVA momentum over the past 12 months.
When corporate boards use bad incentives for management's pay, disaster often ensues. (Think Lehman Brothers.) Incentives based on singular metrics such as revenue growth, EBITDA, return on equity, or earnings per share are easily manipulated and gamed. Fortunately, there is a better way: EVA momentum.
So what does this mean for investors? A positive EVA momentum reading means a company has created more value by increasing its EVA, while a negative EVA momentum reading means EVA has decreased, signaling less value creation. EVA momentum is one of the few, if not the only, performance measures with such a clear dividing line between good and bad performance.
With an EVA momentum of 1.9%, United Parcel Service's economic value added increased year over year, placing it in the 55th percentile of all companies in the Russell 3000. Two of the three remaining companies, FedEx and Pacer International, had positive EVA momentum over the past 12 months.
