Using the Earnings Power Value framework with a WACC of 6.9% and normalized earnings of $13.4B, Pfizer Inc. has a fair value of $22.62 per share. The EPV range is $16.48 – $32.18 based on WACC sensitivity (5.4% – 8.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 13,398 | 13,398 | 13,398 |
| (/) WACC | 8.4% | 6.9% | 5.4% |
| Enterprise Value | 159,970 | 194,870 | 249,248 |
| (-) Net debt | 66,274 | 66,274 | 66,274 |
| Equity Value | 93,696 | 128,596 | 182,974 |
| (/) Outstanding shares | 5,686 | 5,686 | 5,686 |
| Fair Price | $16.48 | $22.62 | $32.18 |
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.