Using the Earnings Power Value framework with a WACC of 7.6% and normalized earnings of $1.7B, PPG Industries, Inc. has a fair value of $77.52 per share. The EPV range is $60.99 – $102.14 based on WACC sensitivity (6.1% – 9.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,749 | 1,749 | 1,749 |
| (/) WACC | 9.1% | 7.6% | 6.1% |
| Enterprise Value | 19,133 | 22,889 | 28,478 |
| (-) Net debt | 5,283 | 5,283 | 5,283 |
| Equity Value | 13,850 | 17,606 | 23,195 |
| (/) Outstanding shares | 227 | 227 | 227 |
| Fair Price | $60.99 | $77.52 | $102.14 |
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.