Using the Earnings Power Value framework with a WACC of 5.1% and normalized earnings of $1.7B, Dollar General Corporation has a fair value of $88.58 per share. The EPV range is $53.23 – $153.72 based on WACC sensitivity (3.6% – 6.6%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,727 | 1,727 | 1,727 |
| (/) WACC | 6.6% | 5.1% | 3.6% |
| Enterprise Value | 26,333 | 34,139 | 48,524 |
| (-) Net debt | 14,580 | 14,580 | 14,580 |
| Equity Value | 11,753 | 19,559 | 33,943 |
| (/) Outstanding shares | 221 | 221 | 221 |
| Fair Price | $53.23 | $88.58 | $153.72 |
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.