Using the Earnings Power Value framework with a WACC of 6.5% and normalized earnings of $15.3B, The Procter & Gamble Company has a fair value of $85.05 per share. The EPV range is $67.21 – $113.51 based on WACC sensitivity (5.0% – 8.0%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 15,342 | 15,342 | 15,342 |
| (/) WACC | 8.0% | 6.5% | 5.0% |
| Enterprise Value | 190,866 | 234,654 | 304,515 |
| (-) Net debt | 25,907 | 25,907 | 25,907 |
| Equity Value | 164,959 | 208,747 | 278,608 |
| (/) Outstanding shares | 2,454 | 2,454 | 2,454 |
| Fair Price | $67.21 | $85.05 | $113.51 |
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.