Using the Earnings Power Value framework with a WACC of 7.6% and normalized earnings of $73.3B, Berkshire Hathaway Inc. has a fair value of $405.94 per share. The EPV range is $332.44 – $515.53 based on WACC sensitivity (6.1% – 9.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 73,258 | 73,258 | 73,258 |
| (/) WACC | 9.1% | 7.6% | 6.1% |
| Enterprise Value | 804,266 | 962,822 | 1,199,246 |
| (-) Net debt | 87,077 | 87,077 | 87,077 |
| Equity Value | 717,189 | 875,745 | 1,112,169 |
| (/) Outstanding shares | 2,157 | 2,157 | 2,157 |
| Fair Price | $332.44 | $405.94 | $515.53 |
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.