Using the Earnings Power Value framework with a WACC of 9.3% and normalized earnings of $1.3B, AppLovin Corporation has a fair value of $36.77 per share. The EPV range is $31.22 – $44.46 based on WACC sensitivity (7.8% – 10.8%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,264 | 1,264 | 1,264 |
| (/) WACC | 10.8% | 9.3% | 7.8% |
| Enterprise Value | 11,732 | 13,630 | 16,261 |
| (-) Net debt | 1,058 | 1,058 | 1,058 |
| Equity Value | 10,675 | 12,573 | 15,203 |
| (/) Outstanding shares | 342 | 342 | 342 |
| Fair Price | $31.22 | $36.77 | $44.46 |
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.