Assessing Value: Present Value vs Future Value

When we look at the value of a player, the simplest approach is to consider the value they bring to their team for the current season. That approach may be the most appropriate measure of value for a contending team looking to win now, but it doesn’t give us much for a team in the midst of a rebuild. In the latter case, future value is more important and that’s what we’ll tackle in this post.

We’ll be building on the concepts from earlier posts on assessing value, so if you missed them or would like a refresher you can find them here:

• Part 1 (Player Impact)
• Part 2 (Other Factors for Players)
• Part 3 (Prospects and Picks)

Current Value

Before we dive into future value, let’s do a quick refresher on the current value of a player. The output we get from the models gives us a projected impact for each player in terms of 5v5 Net G/60. By plotting Impact versus cap hit, we’re able to put together a value curve at each position that provides an average cap hit for any given Impact rating.

When we look at current value, we need to consider two things. Player Impact tells us how much the player contributes to the team’s success for the current season, while opportunity cost give us a measure of how much the team is paying in cap dollars to have that impact on their roster. These were covered in detail in Part 1 and Part 2 of the series.

Current Value Example – Mikael Backlund

Mikael Backlund’s projected impact for the 21/22 season translates to a player impact value of $5,072,000 using the overall value curve for the 21/22 season. His cap hit is $5,350,000 which means he’s very slightly overpaid relative to his projected value, which results in a negative value from opportunity cost of $278,000. Put together, we get an overall current value of $4.794M for Backlund.

Future Value

We’ve covered a few aspects of future value in the previous posts in this series. The value of prospects and draft picks is clearly entirely future value since they aren’t expected to have an impact at the NHL level in the current season. But what about players already at the NHL level? While they clearly have an impact on the current season, they also bring value for future seasons.

Players under contract

We have age curves at our disposal that can be used to extrapolate the projected player impact from our model into future seasons. For future value, we want to look at the projected value of a player over multiple seasons to capture development for young players and declining impact of older players. We’ll use a 5 year window, starting with the season following the current one. For a player under contract through the full five seasons, their future value will simply be the average of their projected value over the 5 seasons, including their player impact value and their opportunity cost.

Future Value Example – Josh Anderson

Josh Anderson’s projected impact for the 22/23 season translates to a value of $4.284M using the 22/23 value curve. We use the age curve for forwards to extrapolate his 22/23 impact out to the following four seasons and use the 22/23 value curve to convert to value. His cap hit is $5.5M through all five seasons, so the difference between his player impact and cap hit is the opportunity cost that we factor into his overall value. With value for each of the five seasons in hand, we take the average to get a future value of $2.79M that considers his impact over the next five seasons.

Players with expiring contracts

Things get more complicated when a player’s contract ends within the five year window we’re using to define future value. There are two scenarios we can run into here, with the expiring contract resulting in an unrestricted or restricted free agent.

Let’s start with the simpler UFA case. Here, we can use an age curve to project value for the years where the player remains under contract as we did in the previous example. Upon contract expiry, the picture changes. We no longer have the value of a contracted player, but we aren’t left emptyhanded. Instead, we have the value of the cap space that is no longer tied up in the now free agent player. We can use that cap space to re-sign the same player or acquire another player to fill the hole in our roster. We’ll assume that the team spends the newly available cap space at an average efficiency, so for seasons after the player becomes a UFA, we use their prior cap hit for value.

Future Value Example – Nikolaj Ehlers

Nikolaj Ehlers has 3 years remaining on his current deal following the 21/22 season before he becomes an unrestricted free agent. We use the same approach as we did previously to determine his projected value for each of the three remaining years on his deal. There’s no guarantee Ehlers will return for the final two seasons in our five year window, but we do know the team will have his $6M cap hit free to use as they see fit. We assume they spend it with average efficiency so they get the same amount in value for the final two years. All together, it leaves us with a future value of $6.354M for Ehlers.

With RFAs, we’ll follow the same approach as with UFAs but with one additional wrinkle. As we covered in Part 2 of this series, there is a difference between the market rate for RFAs and UFAs. Since most RFAs are legitimate NHL players that are re-signed, we want to take this into account in the future value assessment so we’ll include the adjustment for RFAs in our assessment and assume they are re-signed with average spending efficiency.

Future Value Example – Evan Bouchard

Evan Bouchard has only one year remaining on his entry-level deal following the 21/22 season. We follow the same approach as we did in the previous example to determine his value, except we make the adjustment for the relative cost of an RFA for the seasons following his contract expiry.

There’s an additional key point that comes out in this example. It’s obvious from Bouchard’s projected value due to player impact in Y1 that he’s a very capable NHL defenseman. Yet we don’t see that reflected in the value calculations for Y2 to Y5. This does not suggest that Bouchard isn’t a valuable player to re-sign. Rather, it builds into his future value the fact that the team will have to re-allocate cap space to re-sign him, giving up value elsewhere in their roster in the process.

Current Value vs Future Value

We now have methods in place to determine both current value and future value for each player, prospect, and draft pick. While it’s now a more complex system, it gives us a better set of information to evaluate roster moves from. Contenders are clearly more interested in current value and will look to maximize it in the roster moves they make. Re-building teams, on the other hand, will be less interested in the immediate returns and will be more interested in future value.

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