Using the Earnings Power Value framework with a WACC of 8.1% and normalized earnings of $2.1B, CF Industries Holdings, Inc. has a fair value of $146.45 per share. The EPV range is $121.59 – $182.68 based on WACC sensitivity (6.6% – 9.6%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,075 | 2,075 | 2,075 |
| (/) WACC | 9.6% | 8.1% | 6.6% |
| Enterprise Value | 21,687 | 25,720 | 31,595 |
| (-) Net debt | 1,965 | 1,965 | 1,965 |
| Equity Value | 19,722 | 23,755 | 29,630 |
| (/) Outstanding shares | 162 | 162 | 162 |
| Fair Price | $121.59 | $146.45 | $182.68 |
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.