Using the Earnings Power Value framework with a WACC of 9.0% and normalized earnings of $2.6B, Republic Services, Inc. has a fair value of $90.65 per share. The EPV range is $77.42 – $109.20 based on WACC sensitivity (7.5% – 10.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,582 | 2,582 | 2,582 |
| (/) WACC | 10.5% | 9.0% | 7.5% |
| Enterprise Value | 24,667 | 28,794 | 34,579 |
| (-) Net debt | 520 | 520 | 520 |
| Equity Value | 24,147 | 28,274 | 34,059 |
| (/) Outstanding shares | 312 | 312 | 312 |
| Fair Price | $77.42 | $90.65 | $109.20 |
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.