Using the Earnings Power Value framework with a WACC of 7.8% and normalized earnings of $583.8M, Incyte Corporation has a fair value of $52.30 per share. The EPV range is $46.31 – $61.13 based on WACC sensitivity (6.3% – 9.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 584 | 584 | 584 |
| (/) WACC | 9.3% | 7.8% | 6.3% |
| Enterprise Value | 6,266 | 7,468 | 9,241 |
| (-) Net debt | -3,028 | -3,028 | -3,028 |
| Equity Value | 9,294 | 10,496 | 12,269 |
| (/) Outstanding shares | 201 | 201 | 201 |
| Fair Price | $46.31 | $52.30 | $61.13 |
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.