Using the Earnings Power Value framework with a WACC of 7.2% and normalized earnings of $2.8B, News Corporation has a fair value of $67.73 per share. The EPV range is $55.91 – $85.73 based on WACC sensitivity (5.7% – 8.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,825 | 2,825 | 2,825 |
| (/) WACC | 8.7% | 7.2% | 5.7% |
| Enterprise Value | 32,402 | 39,134 | 49,396 |
| (-) Net debt | 537 | 537 | 537 |
| Equity Value | 31,865 | 38,597 | 48,859 |
| (/) Outstanding shares | 570 | 570 | 570 |
| Fair Price | $55.91 | $67.73 | $85.73 |
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.