Using the Earnings Power Value framework with a WACC of 5.6% and normalized earnings of $1.1B, Campbell Soup Company has a fair value of $42.81 per share. The EPV range is $28.72 – $67.30 based on WACC sensitivity (4.1% – 7.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,109 | 1,109 | 1,109 |
| (/) WACC | 7.1% | 5.6% | 4.1% |
| Enterprise Value | 15,695 | 19,923 | 27,269 |
| (-) Net debt | 7,080 | 7,080 | 7,080 |
| Equity Value | 8,615 | 12,843 | 20,189 |
| (/) Outstanding shares | 300 | 300 | 300 |
| Fair Price | $28.72 | $42.81 | $67.30 |
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.