Using the Earnings Power Value framework with a WACC of 8.2% and normalized earnings of $488.0M, Huntington Ingalls Industries, Inc. has a fair value of $90.45 per share. The EPV range is $67.21 – $124.04 based on WACC sensitivity (6.7% – 9.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 488 | 488 | 488 |
| (/) WACC | 9.7% | 8.2% | 6.7% |
| Enterprise Value | 5,013 | 5,927 | 7,247 |
| (-) Net debt | 2,372 | 2,372 | 2,372 |
| Equity Value | 2,641 | 3,555 | 4,875 |
| (/) Outstanding shares | 39 | 39 | 39 |
| Fair Price | $67.21 | $90.45 | $124.04 |
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.