Sriram - True, As mentioned earlier a discounted EVA and DCF will yield the same result. and you're right eva is nothing but a dcf that takes into account capital costs.
However EVA and dcf still share a common problem. They require one to make projections into the future, and discount future earnings to today. So the final answer therefore is highly sensitive to the assumptions made.
And to be honest how can someone (sell side equity research analysts) possibly claim to forecast a company's capital structure 5 years from now? Or anticipate growth with a reasonable degree of accuracy 5 - 10 years out. In 2002 if someone told me that 5 years from now, even the most economically disadvantaged people in India would have a cell phone, I would have called them crazy. So if I were trying to do a DCF or an EVA analysis on Airtel, I would have been wrong by a lot.
My personal view on valuation is that no matter what one does / method one uses, their forecasts / valuation will be wrong. So i just use it as a go - no go filter.
