Environmental Protection Enterprise Evaluation Based On Economic Value Added

In recent years,China's environmental problems,whether it is regarding air,water or waste disposal,are facing a serious situation.As per capita GDP reached the US$5000 moderate developed threshold,China has come to a stage of intensive environmental stress.Environmental protection as a new industry with strategic importance,has maintained rapid growth in recent years.Investment in the industry has been intensified,but there is still a big gap compared with its counterparts in developed countries.Thus this industry is recognized to have very broad prospects for future growth.Eco-business played the frontier to handle environmental pollution,and occupied an important position in the economic.In 2015 and 2016,various policies were introduced,laws were made to protect the environment and regulate pollution.This cause the heat in environment protection industry to build.It also affects the stock market,all of a sudden there were so many firms claiming themselves to environment protection,while it is in fact a mixed bag.How to identify stocks with true value and hitch hike the growth of the industry became an urgent problem for investors.Economic Value Added(EVA)as an indicator of performance has provided investors new insights to assess a company.Compared to other evaluation methods,the unique of EVA approach is that it takes into account the cost of capital comprehensively,it includes the cost of equity.The idea here is to measure the economic profit of a company.On top of that,EVA approach can more precisely measure the value created by a company over certain period of time,by applying accounting adjustments.Using the EVA method to evaluate an enterprise can better reflect the real value of a company.Based on this model,four sample companies in the solid waste sub-industry is selected and evaluated respectively.The purpose of this article is to study how EVA evaluation method can be used to help investors identify valuable companies.By comparing the evaluation result with market capital and finding the reason for the difference,this article discussed the applicability and limitation of the EVA method.Most evaluation results are very close to their corresponding market capital,but there are certain cases where the evaluation result deviates from MC badly.This indicates that EVA method has its own limitations,apart from the fact that corresponding enterprise is under-valuated or over-valuated.