Using the Earnings Power Value framework with a WACC of 8.8% and normalized earnings of $791.2M, Fortive Corporation has a fair value of $19.27 per share. The EPV range is $15.17 – $25.04 based on WACC sensitivity (7.3% – 10.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 791 | 791 | 791 |
| (/) WACC | 10.3% | 8.8% | 7.3% |
| Enterprise Value | 7,676 | 8,984 | 10,828 |
| (-) Net debt | 2,831 | 2,831 | 2,831 |
| Equity Value | 4,846 | 6,153 | 7,998 |
| (/) Outstanding shares | 319 | 319 | 319 |
| Fair Price | $15.17 | $19.27 | $25.04 |
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.