Using the Earnings Power Value framework with a WACC of 6.0% and normalized earnings of $5.2B, Centene Corporation has a fair value of $176.72 per share. The EPV range is $140.94 – $236.43 based on WACC sensitivity (4.5% – 7.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 5,247 | 5,247 | 5,247 |
| (/) WACC | 7.5% | 6.0% | 4.5% |
| Enterprise Value | 70,102 | 87,671 | 116,993 |
| (-) Net debt | 889 | 889 | 889 |
| Equity Value | 69,213 | 86,782 | 116,104 |
| (/) Outstanding shares | 491 | 491 | 491 |
| Fair Price | $140.94 | $176.72 | $236.43 |
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.