Using the Earnings Power Value framework with a WACC of 6.9% and normalized earnings of $2.0B, Monster Beverage Corporation has a fair value of $31.97 per share. The EPV range is $26.66 – $40.22 based on WACC sensitivity (5.4% – 8.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,036 | 2,036 | 2,036 |
| (/) WACC | 8.4% | 6.9% | 5.4% |
| Enterprise Value | 24,157 | 29,386 | 37,504 |
| (-) Net debt | -2,088 | -2,088 | -2,088 |
| Equity Value | 26,246 | 31,474 | 39,592 |
| (/) Outstanding shares | 984 | 984 | 984 |
| Fair Price | $26.66 | $31.97 | $40.22 |
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.