Using the Earnings Power Value framework with a WACC of 6.8% and normalized earnings of $4.8B, Constellation Energy Corporation has a fair value of $208.50 per share. The EPV range is $167.70 – $272.47 based on WACC sensitivity (5.3% – 8.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 4,795 | 4,795 | 4,795 |
| (/) WACC | 8.3% | 6.8% | 5.3% |
| Enterprise Value | 57,903 | 70,712 | 90,799 |
| (-) Net debt | 5,244 | 5,244 | 5,244 |
| Equity Value | 52,659 | 65,468 | 85,555 |
| (/) Outstanding shares | 314 | 314 | 314 |
| Fair Price | $167.70 | $208.50 | $272.47 |
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.