Using the Earnings Power Value framework with a WACC of 6.7% and normalized earnings of $636.8M, Federal Realty Investment Trust has a fair value of $52.94 per share. The EPV range is $32.84 – $84.58 based on WACC sensitivity (5.2% – 8.2%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 637 | 637 | 637 |
| (/) WACC | 8.2% | 6.7% | 5.2% |
| Enterprise Value | 7,740 | 9,466 | 12,182 |
| (-) Net debt | 4,921 | 4,921 | 4,921 |
| Equity Value | 2,819 | 4,545 | 7,261 |
| (/) Outstanding shares | 86 | 86 | 86 |
| Fair Price | $32.84 | $52.94 | $84.58 |
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.