Abstract
M.Comm.
Share price prediction is considered key information to any broker undertaking an investment in
the form of acquiring shares. As part of an investment decision; investors generally rely on the
past performance of the stock coupled with the economic outlook. The applicability of EVA™ as
a performance measure and corporate philosophy is well understood and documented. Little
information exists in literature on EVA™ as a share predictor and no information exists on
EVA™ as a share predictor within the telecommunications industry. A study concerned with
testing the applicability of EVA™ as a share predictor within the South African
telecommunications industry was therefore undertaken. The study focussed on predicting the
existed share prices of Telkom and MTN between 2003 and 2008.
Through this investigation it was revealed that the EVA™ is a good predictor of the share price
for both companies investigated. Different growth rates in EVA™ ranging from 2 to 8 percent
were tested. Upon conducting sensitivity analysis on the data for both firms, the model was found
to be sensitive to minor adjustments on EVA™ growth rates.
Based on the data analysed it was concluded that the EVA™ is a powerful mathematical tool that
is usable in predicting the share price within the South African telecommunications industry.