Using the Earnings Power Value framework with a WACC of 9.1% and normalized earnings of $4.3B, Salesforce, Inc. has a fair value of $39.31 per share. The EPV range is $32.31 – $49.07 based on WACC sensitivity (7.6% – 10.6%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 4,328 | 4,328 | 4,328 |
| (/) WACC | 10.6% | 9.1% | 7.6% |
| Enterprise Value | 40,735 | 47,431 | 56,761 |
| (-) Net debt | 9,849 | 9,849 | 9,849 |
| Equity Value | 30,886 | 37,582 | 46,912 |
| (/) Outstanding shares | 956 | 956 | 956 |
| Fair Price | $32.31 | $39.31 | $49.07 |
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.