Using the Earnings Power Value framework with a WACC of 7.5% and normalized earnings of $1.5B, MSCI Inc. has a fair value of $191.55 per share. The EPV range is $147.14 – $258.17 based on WACC sensitivity (6.0% – 9.0%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,545 | 1,545 | 1,545 |
| (/) WACC | 9.0% | 7.5% | 6.0% |
| Enterprise Value | 17,167 | 20,600 | 25,749 |
| (-) Net debt | 5,794 | 5,794 | 5,794 |
| Equity Value | 11,372 | 14,805 | 19,954 |
| (/) Outstanding shares | 77 | 77 | 77 |
| Fair Price | $147.14 | $191.55 | $258.17 |
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.