Using the Earnings Power Value framework with a WACC of 7.2% and normalized earnings of $622.4M, Mid-America Apartment Communities, Inc. has a fair value of $27.88 per share. The EPV range is $15.25 – $47.14 based on WACC sensitivity (5.7% – 8.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 622 | 622 | 622 |
| (/) WACC | 8.7% | 7.2% | 5.7% |
| Enterprise Value | 7,131 | 8,611 | 10,866 |
| (-) Net debt | 5,345 | 5,345 | 5,345 |
| Equity Value | 1,786 | 3,266 | 5,521 |
| (/) Outstanding shares | 117 | 117 | 117 |
| Fair Price | $15.25 | $27.88 | $47.14 |
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.