Using the Earnings Power Value framework with a WACC of 7.3% and normalized earnings of $2.2B, Biogen Inc. has a fair value of $181.12 per share. The EPV range is $145.58 – $235.10 based on WACC sensitivity (5.8% – 8.8%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,221 | 2,221 | 2,221 |
| (/) WACC | 8.8% | 7.3% | 5.8% |
| Enterprise Value | 25,296 | 30,510 | 38,429 |
| (-) Net debt | 3,940 | 3,940 | 3,940 |
| Equity Value | 21,357 | 26,570 | 34,490 |
| (/) Outstanding shares | 147 | 147 | 147 |
| Fair Price | $145.58 | $181.12 | $235.10 |
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.