Using the Earnings Power Value framework with a WACC of 10.5% and normalized earnings of $8.6B, State Street Corporation has a fair value of $633.44 per share. The EPV range is $598.25 – $680.33 based on WACC sensitivity (9.0% – 12.0%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 8,579 | 8,579 | 8,579 |
| (/) WACC | 12.0% | 10.5% | 9.0% |
| Enterprise Value | 71,349 | 81,519 | 95,070 |
| (-) Net debt | -101,558 | -101,558 | -101,558 |
| Equity Value | 172,907 | 183,077 | 196,628 |
| (/) Outstanding shares | 289 | 289 | 289 |
| Fair Price | $598.25 | $633.44 | $680.33 |
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.