Using the Earnings Power Value framework with a WACC of 7.0% and normalized earnings of $2.7B, Becton, Dickinson and Company has a fair value of $72.13 per share. The EPV range is $48.18 – $109.11 based on WACC sensitivity (5.5% – 8.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,739 | 2,739 | 2,739 |
| (/) WACC | 8.5% | 7.0% | 5.5% |
| Enterprise Value | 32,164 | 39,041 | 49,658 |
| (-) Net debt | 18,330 | 18,330 | 18,330 |
| Equity Value | 13,834 | 20,711 | 31,328 |
| (/) Outstanding shares | 287 | 287 | 287 |
| Fair Price | $48.18 | $72.13 | $109.11 |
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.