Using the Earnings Power Value framework with a WACC of 5.0% and normalized earnings of $1.4B, Alexandria Real Estate Equities, Inc. has a fair value of $90.04 per share. The EPV range is $52.72 – $159.34 based on WACC sensitivity (3.5% – 6.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,378 | 1,378 | 1,378 |
| (/) WACC | 6.5% | 5.0% | 3.5% |
| Enterprise Value | 21,195 | 27,554 | 39,363 |
| (-) Net debt | 12,212 | 12,212 | 12,212 |
| Equity Value | 8,983 | 15,342 | 27,151 |
| (/) Outstanding shares | 170 | 170 | 170 |
| Fair Price | $52.72 | $90.04 | $159.34 |
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.