Using the Earnings Power Value framework with a WACC of 6.0% and normalized earnings of $2.9B, DTE Energy Company has a fair value of $107.76 per share. The EPV range is $60.62 – $186.54 based on WACC sensitivity (4.5% – 7.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,900 | 2,900 | 2,900 |
| (/) WACC | 7.5% | 6.0% | 4.5% |
| Enterprise Value | 38,824 | 48,582 | 64,890 |
| (-) Net debt | 26,275 | 26,275 | 26,275 |
| Equity Value | 12,549 | 22,307 | 38,615 |
| (/) Outstanding shares | 207 | 207 | 207 |
| Fair Price | $60.62 | $107.76 | $186.54 |
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.