Using the Earnings Power Value framework with a WACC of 8.2% and normalized earnings of $968.5M, Martin Marietta Materials, Inc. has a fair value of $108.03 per share. The EPV range is $77.93 – $151.58 based on WACC sensitivity (6.7% – 9.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 969 | 969 | 969 |
| (/) WACC | 9.7% | 8.2% | 6.7% |
| Enterprise Value | 9,971 | 11,792 | 14,426 |
| (-) Net debt | 5,256 | 5,256 | 5,256 |
| Equity Value | 4,715 | 6,536 | 9,170 |
| (/) Outstanding shares | 61 | 61 | 61 |
| Fair Price | $77.93 | $108.03 | $151.58 |
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.