Using the Earnings Power Value framework with a WACC of 6.3% and normalized earnings of $1.7B, Kimberly-Clark Corporation has a fair value of $61.79 per share. The EPV range is $46.20 – $87.10 based on WACC sensitivity (4.8% – 7.8%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,709 | 1,709 | 1,709 |
| (/) WACC | 7.8% | 6.3% | 4.8% |
| Enterprise Value | 21,870 | 27,064 | 35,492 |
| (-) Net debt | 6,480 | 6,480 | 6,480 |
| Equity Value | 15,390 | 20,584 | 29,012 |
| (/) Outstanding shares | 333 | 333 | 333 |
| Fair Price | $46.20 | $61.79 | $87.10 |
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.