Using the Earnings Power Value framework with a WACC of 8.4% and normalized earnings of $4.2B, The TJX Companies, Inc. has a fair value of $30.52 per share. The EPV range is $23.70 – $40.32 based on WACC sensitivity (6.9% – 9.9%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 4,225 | 4,225 | 4,225 |
| (/) WACC | 9.9% | 8.4% | 6.9% |
| Enterprise Value | 42,814 | 50,489 | 61,515 |
| (-) Net debt | 16,153 | 16,153 | 16,153 |
| Equity Value | 26,661 | 34,336 | 45,362 |
| (/) Outstanding shares | 1,125 | 1,125 | 1,125 |
| Fair Price | $23.70 | $30.52 | $40.32 |
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.