Using the Earnings Power Value framework with a WACC of 6.9% and normalized earnings of $41.3B, Elevance Health Inc. has a fair value of $2,578.16 per share. The EPV range is $2,100.72 – $3,319.10 based on WACC sensitivity (5.4% – 8.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 41,310 | 41,310 | 41,310 |
| (/) WACC | 8.4% | 6.9% | 5.4% |
| Enterprise Value | 489,683 | 595,581 | 759,919 |
| (-) Net debt | 23,744 | 23,744 | 23,744 |
| Equity Value | 465,939 | 571,837 | 736,175 |
| (/) Outstanding shares | 222 | 222 | 222 |
| Fair Price | $2,100.72 | $2,578.16 | $3,319.10 |
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.