Using the Earnings Power Value framework with a WACC of 6.4% and normalized earnings of $20.8B, Verizon Communications Inc. has a fair value of $33.78 per share. The EPV range is $19.22 – $57.27 based on WACC sensitivity (4.9% – 7.9%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 20,762 | 20,762 | 20,762 |
| (/) WACC | 7.9% | 6.4% | 4.9% |
| Enterprise Value | 262,864 | 324,487 | 423,850 |
| (-) Net debt | 181,546 | 181,546 | 181,546 |
| Equity Value | 81,318 | 142,941 | 242,304 |
| (/) Outstanding shares | 4,231 | 4,231 | 4,231 |
| Fair Price | $19.22 | $33.78 | $57.27 |
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.