Using the Earnings Power Value framework with a WACC of 8.9% and normalized earnings of $1.3B, Fastenal Company has a fair value of $12.15 per share. The EPV range is $10.37 – $14.66 based on WACC sensitivity (7.4% – 10.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,254 | 1,254 | 1,254 |
| (/) WACC | 10.4% | 8.9% | 7.4% |
| Enterprise Value | 12,098 | 14,145 | 17,025 |
| (-) Net debt | 165 | 165 | 165 |
| Equity Value | 11,933 | 13,980 | 16,860 |
| (/) Outstanding shares | 1,150 | 1,150 | 1,150 |
| Fair Price | $10.37 | $12.15 | $14.66 |
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.