Using the Earnings Power Value framework with a WACC of 7.2% and normalized earnings of $13.0B, MetLife, Inc. has a fair value of $274.39 per share. The EPV range is $227.56 – $345.86 based on WACC sensitivity (5.7% – 8.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 13,004 | 13,004 | 13,004 |
| (/) WACC | 8.7% | 7.2% | 5.7% |
| Enterprise Value | 149,469 | 180,607 | 228,132 |
| (-) Net debt | -1,849 | -1,849 | -1,849 |
| Equity Value | 151,318 | 182,456 | 229,981 |
| (/) Outstanding shares | 665 | 665 | 665 |
| Fair Price | $227.56 | $274.39 | $345.86 |
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.