Using the Earnings Power Value framework with a WACC of 7.4% and normalized earnings of $9.9B, Amgen Inc. has a fair value of $163.35 per share. The EPV range is $121.78 – $225.99 based on WACC sensitivity (5.9% – 8.9%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 9,945 | 9,945 | 9,945 |
| (/) WACC | 8.9% | 7.4% | 5.9% |
| Enterprise Value | 111,479 | 134,013 | 167,963 |
| (-) Net debt | 45,475 | 45,475 | 45,475 |
| Equity Value | 66,004 | 88,538 | 122,488 |
| (/) Outstanding shares | 542 | 542 | 542 |
| Fair Price | $121.78 | $163.35 | $225.99 |
Earnings Power Value (EPV) estimates what a company is worth based on its current normalized earnings, assuming zero growth. It values the business as a perpetuity: Normalized Earnings / WACC. This gives a conservative floor value — the company's worth if it never grows but maintains its current profitability.
The model normalizes earnings by: (1) using sustainable gross margins (5-year average) applied to current revenue, (2) deducting maintenance-level operating expenses (average R&D + SG&A as % of revenue), (3) applying the average effective tax rate, and (4) subtracting the average excess of CapEx over D&A (net reinvestment needed to maintain current capacity).
EPV is most useful as a comparison anchor: if the market price is below EPV, the stock may be undervalued even without any growth. If market price exceeds EPV, the premium reflects growth expectations — which may or may not materialize.