What does SVA analysis primarily consider?

SVA, or Shareholder Value Added, analysis primarily focuses on the future free cash flows that a company is expected to generate. This approach evaluates how much value a company is creating for its shareholders over time by taking into account the cash flows that are available for distribution to equity investors after covering all operating expenses and investments. By concentrating on future cash flows, SVA analysis provides insights into the potential growth and profitability of the business, allowing stakeholders to assess its performance in terms of value creation.

This forward-looking perspective distinguishes SVA analysis from other approaches that may focus on historical data or the current state of assets. Efficiently generating future free cash flows is crucial, as it not only indicates the company's ability to sustain operations but also its effectiveness in creating additional shareholder value. Thus, basing the analysis on future expectations aligns SVA with the goal of maximizing shareholder wealth.