Using the Earnings Power Value framework with a WACC of 8.1% and normalized earnings of $1.3B, Gen Digital Inc. has a fair value of $13.15 per share. The EPV range is $9.27 – $18.77 based on WACC sensitivity (6.6% – 9.6%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,261 | 1,261 | 1,261 |
| (/) WACC | 9.6% | 8.1% | 6.6% |
| Enterprise Value | 13,095 | 15,512 | 19,023 |
| (-) Net debt | 7,309 | 7,309 | 7,309 |
| Equity Value | 5,786 | 8,203 | 11,714 |
| (/) Outstanding shares | 624 | 624 | 624 |
| Fair Price | $9.27 | $13.15 | $18.77 |
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.