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A Comparison of EPS and EVA as Explanatory Variables for Share Price

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  • J U de Villiers
  • C J Auret

Abstract

This paper compares the explanatory power of earnings per share (EPS) and economic value added (EVA) in explaining share prices. We follow a procedure developed by Demsetz (1995) in which he estimates multiple linear regressions with share price as the dependent variable and contemporaneous EPS, leading EPS and lagged EPS as explanatory variables. We replicate this study using South African EPS data, and then repeat the calculations using South African EVA data as the explanatory variables. We find that EPS has more explanatory power than EVA in explaining share prices. The benefit of using EVA instead of EPS in share analysis is therefore not evident from our analysis.

Suggested Citation

  • J U de Villiers & C J Auret, 1998. "A Comparison of EPS and EVA as Explanatory Variables for Share Price," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 22(2), pages 47-63, July.
    • Handle: RePEc:taf:rseexx:v:22:y:1998:i:2:p:47-63
    DOI: 10.1080/03796205.1998.12129124
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