Using the Earnings Power Value framework with a WACC of 6.6% and normalized earnings of $1.3B, Global Payments Inc. has a fair value of $23.79 per share. The EPV range is $9.06 – $47.11 based on WACC sensitivity (5.1% – 8.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,273 | 1,273 | 1,273 |
| (/) WACC | 8.1% | 6.6% | 5.1% |
| Enterprise Value | 15,647 | 19,184 | 24,786 |
| (-) Net debt | 13,471 | 13,471 | 13,471 |
| Equity Value | 2,177 | 5,713 | 11,315 |
| (/) Outstanding shares | 240 | 240 | 240 |
| Fair Price | $9.06 | $23.79 | $47.11 |
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.