Using the Earnings Power Value framework with a WACC of 8.6% and normalized earnings of $2.5B, TE Connectivity Ltd. has a fair value of $78.06 per share. The EPV range is $63.90 – $98.15 based on WACC sensitivity (7.1% – 10.1%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 2,477 | 2,477 | 2,477 |
| (/) WACC | 10.1% | 8.6% | 7.1% |
| Enterprise Value | 24,402 | 28,634 | 34,641 |
| (-) Net debt | 5,295 | 5,295 | 5,295 |
| Equity Value | 19,107 | 23,339 | 29,346 |
| (/) Outstanding shares | 299 | 299 | 299 |
| Fair Price | $63.90 | $78.06 | $98.15 |
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.