Using the Earnings Power Value framework with a WACC of 6.3% and normalized earnings of $694.4M, The Clorox Company has a fair value of $67.10 per share. The EPV range is $49.96 – $94.98 based on WACC sensitivity (4.8% – 7.8%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 694 | 694 | 694 |
| (/) WACC | 7.8% | 6.3% | 4.8% |
| Enterprise Value | 8,922 | 11,052 | 14,518 |
| (-) Net debt | 2,713 | 2,713 | 2,713 |
| Equity Value | 6,209 | 8,339 | 11,805 |
| (/) Outstanding shares | 124 | 124 | 124 |
| Fair Price | $49.96 | $67.10 | $94.98 |
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.