Using the Earnings Power Value framework with a WACC of 9.0% and normalized earnings of $1.4B, Block, Inc. has a fair value of $31.17 per share. The EPV range is $27.69 – $36.04 based on WACC sensitivity (7.5% – 10.5%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,371 | 1,371 | 1,371 |
| (/) WACC | 10.5% | 9.0% | 7.5% |
| Enterprise Value | 13,032 | 15,199 | 18,232 |
| (-) Net debt | -4,216 | -4,216 | -4,216 |
| Equity Value | 17,248 | 19,415 | 22,448 |
| (/) Outstanding shares | 623 | 623 | 623 |
| Fair Price | $27.69 | $31.17 | $36.04 |
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.