Using the Earnings Power Value framework with a WACC of 7.5% and normalized earnings of $690.0M, STERIS plc has a fair value of $72.02 per share. The EPV range is $56.65 – $95.04 based on WACC sensitivity (6.0% – 9.0%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 690 | 690 | 690 |
| (/) WACC | 9.0% | 7.5% | 6.0% |
| Enterprise Value | 7,643 | 9,166 | 11,447 |
| (-) Net debt | 2,031 | 2,031 | 2,031 |
| Equity Value | 5,612 | 7,135 | 9,416 |
| (/) Outstanding shares | 99 | 99 | 99 |
| Fair Price | $56.65 | $72.02 | $95.04 |
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.