Financial performance and economic value added: the case of a pharmaceutical company
DOI:
https://doi.org/10.29393/RAN11-17DFGC30017Keywords:
Economic Value Added, Pharmaceuticals, Competitive Forces, Cost of Capital, Traditional MetricsAbstract
Purpose: To analyze leading Mexican pharmaceutical company Genomma Lab's financial performance by examining its value creation from 2010 to 2020.
Method: A case study approach is employed, incorporating an analysis of Porter's Five Forces, the calculation of Economic Value Added (EVA) alongside traditional financial indicators, and a longitudinal and correlational analysis of the relationships among these metrics.
Findings: The firm presented value creation from 2010 to 2014, value destruction in 2015 and 2016, and value creation again from 2017 to 2020. ROA and EVA show a moderate positive correlation; ROE and EVA, a high positive correlation; and a very high positive correlation between EVA and EPS. In contrast, while the ROCE metric showed no correlation.
Practical Implications: The Economic Value-Added model can be applied to Latin American companies to complement traditional methods of analysis of financial performance.
Originality: This study contributes to the literature on financial performance measurement through the implementation of the Economic Value-Added model in the Latin American context. Additionally, it contributes to the comparison of traditional metrics, a topic that has been under-researched.
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Copyright (c) 2025 Gerardo Flores Nava, María Luisa Saavedra García, María del Rosario Cortes Castillo

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