Study On The Rationality Of Stock Price Based On EVA

Economic Value Added (EVA) is a measure of companies' financial performance, created by Stern Stewart & Co., based on the residual wealth, calculated by deducting cost of capital from its operating profit, considered the important supplement and amendment to the traditional accounting information. This paper makes a thorough review of the research on stock price and EVA, and then brings forward assumption that the reasonable stock price can reflect capacity of value-creativity (the EVA index) better than the traditional accounting information (EPS index). Choosing the finance report data of the SSE-180 Index component companies as the sample data, this paper makes regression and correlative analysis respectively on EVA &Stock price, EPS &Stock price, then comes to the conclusion that rationality of the stock price in China need to be promoted.In this paper, modified stock price has been calculated based on the EVA value and formula of stock price & EPS. This price reflects the companies'real capacity of value-creativity. The comparison of modified stock price and active stock price shows great difference, and it means the capacity of value-creativity of listed company in China needs improvement. The last part sums up all the paper and gives several great recommendations about company management based on EVA theories.