Using the Earnings Power Value framework with a WACC of 9.7% and normalized earnings of $4.1B, Citizens Financial Group, Inc. has a fair value of $100.41 per share. The EPV range is $87.39 – $118.21 based on WACC sensitivity (8.2% – 11.2%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 4,094 | 4,094 | 4,094 |
| (/) WACC | 11.2% | 9.7% | 8.2% |
| Enterprise Value | 36,611 | 42,283 | 50,034 |
| (-) Net debt | -1,445 | -1,445 | -1,445 |
| Equity Value | 38,056 | 43,728 | 51,479 |
| (/) Outstanding shares | 435 | 435 | 435 |
| Fair Price | $87.39 | $100.41 | $118.21 |
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.