Using the Earnings Power Value framework with a WACC of 10.8% and normalized earnings of $14.4B, U.S. Bancorp has a fair value of $65.60 per share. The EPV range is $55.16 – $79.43 based on WACC sensitivity (9.3% – 12.3%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 14,356 | 14,356 | 14,356 |
| (/) WACC | 12.3% | 10.8% | 9.3% |
| Enterprise Value | 116,862 | 133,116 | 154,623 |
| (-) Net debt | 31,036 | 31,036 | 31,036 |
| Equity Value | 85,826 | 102,080 | 123,587 |
| (/) Outstanding shares | 1,556 | 1,556 | 1,556 |
| Fair Price | $55.16 | $65.60 | $79.43 |
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.