Using the Earnings Power Value framework with a WACC of 5.7% and normalized earnings of $4.7B, Exelon Corporation has a fair value of $32.69 per share. The EPV range is $15.76 – $61.66 based on WACC sensitivity (4.2% – 7.2%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 4,718 | 4,718 | 4,718 |
| (/) WACC | 7.2% | 5.7% | 4.2% |
| Enterprise Value | 65,349 | 82,486 | 111,803 |
| (-) Net debt | 49,402 | 49,402 | 49,402 |
| Equity Value | 15,947 | 33,084 | 62,401 |
| (/) Outstanding shares | 1,012 | 1,012 | 1,012 |
| Fair Price | $15.76 | $32.69 | $61.66 |
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.