Using the Earnings Power Value framework with a WACC of 7.8% and normalized earnings of $999.3M, IDEXX Laboratories, Inc. has a fair value of $148.65 per share. The EPV range is $122.75 – $186.98 based on WACC sensitivity (6.3% – 9.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 999 | 999 | 999 |
| (/) WACC | 9.3% | 7.8% | 6.3% |
| Enterprise Value | 10,800 | 12,890 | 15,982 |
| (-) Net debt | 897 | 897 | 897 |
| Equity Value | 9,903 | 11,992 | 15,084 |
| (/) Outstanding shares | 81 | 81 | 81 |
| Fair Price | $122.75 | $148.65 | $186.98 |
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.