What are the shortcomings of EVA compared to traditional financial analysis indicators?

The essence of EVA is the "economic" profit generated by business operations. In contrast to the "accounting" profit that people emphasize, the concept of EVA is that there is a cost to the shareholders' capital occupied by the enterprise, so when measuring the performance of the enterprise, the cost of equity must be taken into account. Economic Value Added (EVA) Economic Value Added (EVA) reflects the total amount of value-added income received by shareholders from operating activities over a certain period of time, and it is the value-added income after deducting the opportunity cost of shareholders' equity in the interest of shareholders. Compared with the profit indicator, EVA has the following advantages: Firstly, EVA emphasizes the link between shareholders' wealth and corporate decision-making, which can avoid the confusion of multi-objective decision-making. In order to effectively increase shareholder wealth and motivate managers, many companies use a range of indicators to combine their financial objectives, as a single indicator is often biased. The result of using a series of indicators for simultaneous evaluation is that the inconsistency of multiple criteria often leads to the incoherence of the company's plans, business strategies and business decisions . In contrast, the Economic Value Added (EVA) indicator links all of the company's objectives with a single financial indicator, and as long as a particular decision results in an increase in EVA, then that decision is the most correct. Secondly, the EVA indicator provides a new way of evaluating shareholder value and its growth, i.e., the growth of shareholder value comes from the growth of the economic value added of the company, not from the growth of profits. According to the Capital Asset Pricing Model (CAPM) and the definition of Economic Value Added (EVA), the relationship between the market value of a company and its EVA, without taking inflation into account, is as follows: Market Value = Total Equity Capital + Present Value of Expected Economic Value Added (EVA) The present value of a company's expected EVA is also referred to as Market Value Added (MVA). For the shareholders, the increase in their wealth lies in the increase in market value added. Obviously, an increase in economic value added increases the market value added of the company, while an increase in profits does not necessarily lead to an increase in economic value added, i.e., an increase in profits does not necessarily bring wealth to shareholders above the opportunity cost. Therefore, to study whether there is any increase in the value of the company's shareholders, we should observe the growth of EVA, without considering the growth of profits