Using the Earnings Power Value framework with a WACC of 6.4% and normalized earnings of $2.2B, APA Corporation has a fair value of $82.83 per share. The EPV range is $64.74 – $112.09 based on WACC sensitivity (4.9% – 7.9%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,164 | 2,164 | 2,164 |
| (/) WACC | 7.9% | 6.4% | 4.9% |
| Enterprise Value | 27,536 | 34,030 | 44,533 |
| (-) Net debt | 4,294 | 4,294 | 4,294 |
| Equity Value | 23,242 | 29,736 | 40,239 |
| (/) Outstanding shares | 359 | 359 | 359 |
| Fair Price | $64.74 | $82.83 | $112.09 |
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.