Using the Earnings Power Value framework with a WACC of 5.8% and normalized earnings of $1.6B, Constellation Brands, Inc. has a fair value of $81.68 per share. The EPV range is $51.44 – $132.81 based on WACC sensitivity (4.3% – 7.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 1,570 | 1,570 | 1,570 |
| (/) WACC | 7.3% | 5.8% | 4.3% |
| Enterprise Value | 21,381 | 26,869 | 36,146 |
| (-) Net debt | 12,045 | 12,045 | 12,045 |
| Equity Value | 9,336 | 14,824 | 24,101 |
| (/) Outstanding shares | 181 | 181 | 181 |
| Fair Price | $51.44 | $81.68 | $132.81 |
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.