Using the Earnings Power Value framework with a WACC of 9.2% and normalized earnings of $842.3M, ServiceNow, Inc. has a fair value of $9.20 per share. The EPV range is $7.99 – $10.89 based on WACC sensitivity (7.7% – 10.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 842 | 842 | 842 |
| (/) WACC | 10.7% | 9.2% | 7.7% |
| Enterprise Value | 7,838 | 9,110 | 10,874 |
| (-) Net debt | -523 | -523 | -523 |
| Equity Value | 8,361 | 9,633 | 11,397 |
| (/) Outstanding shares | 1,047 | 1,047 | 1,047 |
| Fair Price | $7.99 | $9.20 | $10.89 |
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.