Using the Earnings Power Value framework with a WACC of 8.9% and normalized earnings of $1.2B, Copart, Inc. has a fair value of $15.98 per share. The EPV range is $14.08 – $18.67 based on WACC sensitivity (7.4% – 10.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,154 | 1,154 | 1,154 |
| (/) WACC | 10.4% | 8.9% | 7.4% |
| Enterprise Value | 11,083 | 12,949 | 15,571 |
| (-) Net debt | -2,677 | -2,677 | -2,677 |
| Equity Value | 13,760 | 15,626 | 18,248 |
| (/) Outstanding shares | 978 | 978 | 978 |
| Fair Price | $14.08 | $15.98 | $18.67 |
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.