Using the Earnings Power Value framework with a WACC of 11.0% and normalized earnings of $59.4B, Bank of America Corporation has a fair value of $53.98 per share. The EPV range is $45.36 – $65.35 based on WACC sensitivity (9.5% – 12.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 59,410 | 59,410 | 59,410 |
| (/) WACC | 12.5% | 11.0% | 9.5% |
| Enterprise Value | 476,349 | 541,472 | 627,222 |
| (-) Net debt | 134,059 | 134,059 | 134,059 |
| Equity Value | 342,290 | 407,413 | 493,163 |
| (/) Outstanding shares | 7,547 | 7,547 | 7,547 |
| Fair Price | $45.36 | $53.98 | $65.35 |
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.