Using the Earnings Power Value framework with a WACC of 5.8% and normalized earnings of $3.6B, The Kraft Heinz Company has a fair value of $37.56 per share. The EPV range is $26.55 – $56.34 based on WACC sensitivity (4.3% – 7.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 3,634 | 3,634 | 3,634 |
| (/) WACC | 7.3% | 5.8% | 4.3% |
| Enterprise Value | 50,116 | 63,186 | 85,479 |
| (-) Net debt | 18,604 | 18,604 | 18,604 |
| Equity Value | 31,512 | 44,582 | 66,875 |
| (/) Outstanding shares | 1,187 | 1,187 | 1,187 |
| Fair Price | $26.55 | $37.56 | $56.34 |
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.