Using the Earnings Power Value framework with a WACC of 8.5% and normalized earnings of $734.2M, Deckers Outdoor Corporation has a fair value of $67.15 per share. The EPV range is $58.66 – $79.29 based on WACC sensitivity (7.0% – 10.0%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 734 | 734 | 734 |
| (/) WACC | 10.0% | 8.5% | 7.0% |
| Enterprise Value | 7,344 | 8,640 | 10,492 |
| (-) Net debt | -1,612 | -1,612 | -1,612 |
| Equity Value | 8,956 | 10,252 | 12,104 |
| (/) Outstanding shares | 153 | 153 | 153 |
| Fair Price | $58.66 | $67.15 | $79.29 |
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.