Using the Earnings Power Value framework with a WACC of 8.2% and normalized earnings of $3.2B, TransDigm Group Incorporated has a fair value of $208.74 per share. The EPV range is $103.63 – $361.25 based on WACC sensitivity (6.7% – 9.7%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 3,210 | 3,210 | 3,210 |
| (/) WACC | 9.7% | 8.2% | 6.7% |
| Enterprise Value | 33,253 | 39,371 | 48,247 |
| (-) Net debt | 27,222 | 27,222 | 27,222 |
| Equity Value | 6,031 | 12,149 | 21,025 |
| (/) Outstanding shares | 58 | 58 | 58 |
| Fair Price | $103.63 | $208.74 | $361.25 |
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.