Using the Earnings Power Value framework with a WACC of 5.9% and normalized earnings of $1.3B, The J. M. Smucker Company has a fair value of $129.85 per share. The EPV range is $88.64 – $199.43 based on WACC sensitivity (4.4% – 7.4%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,260 | 1,260 | 1,260 |
| (/) WACC | 7.4% | 5.9% | 4.4% |
| Enterprise Value | 17,123 | 21,508 | 28,911 |
| (-) Net debt | 7,692 | 7,692 | 7,692 |
| Equity Value | 9,431 | 13,816 | 21,219 |
| (/) Outstanding shares | 106 | 106 | 106 |
| Fair Price | $88.64 | $129.85 | $199.43 |
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.