Using the Earnings Power Value framework with a WACC of 8.3% and normalized earnings of $108.0B, Amazon.com, Inc. has a fair value of $114.41 per share. The EPV range is $95.92 – $141.09 based on WACC sensitivity (6.8% – 9.8%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 107,990 | 107,990 | 107,990 |
| (/) WACC | 9.8% | 8.3% | 6.8% |
| Enterprise Value | 1,104,684 | 1,304,913 | 1,593,795 |
| (-) Net debt | 66,177 | 66,177 | 66,177 |
| Equity Value | 1,038,507 | 1,238,736 | 1,527,618 |
| (/) Outstanding shares | 10,827 | 10,827 | 10,827 |
| Fair Price | $95.92 | $114.41 | $141.09 |
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.