Using the Earnings Power Value framework with a WACC of 8.6% and normalized earnings of $1.0B, NetApp, Inc. has a fair value of $52.73 per share. The EPV range is $44.38 – $64.60 based on WACC sensitivity (7.1% – 10.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,014 | 1,014 | 1,014 |
| (/) WACC | 10.1% | 8.6% | 7.1% |
| Enterprise Value | 10,025 | 11,770 | 14,251 |
| (-) Net debt | 749 | 749 | 749 |
| Equity Value | 9,276 | 11,021 | 13,502 |
| (/) Outstanding shares | 209 | 209 | 209 |
| Fair Price | $44.38 | $52.73 | $64.60 |
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.