Using the Earnings Power Value framework with a WACC of 9.6% and normalized earnings of $12.2B, The Bank of New York Mellon Corporation has a fair value of $317.99 per share. The EPV range is $293.79 – $351.13 based on WACC sensitivity (8.1% – 11.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 12,167 | 12,167 | 12,167 |
| (/) WACC | 11.1% | 9.6% | 8.1% |
| Enterprise Value | 109,403 | 126,459 | 149,814 |
| (-) Net debt | -97,641 | -97,641 | -97,641 |
| Equity Value | 207,044 | 224,100 | 247,455 |
| (/) Outstanding shares | 705 | 705 | 705 |
| Fair Price | $293.79 | $317.99 | $351.13 |
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.