Using the Earnings Power Value framework with a WACC of 9.1% and normalized earnings of $42.0B, Wells Fargo & Company has a fair value of $65.55 per share. The EPV range is $45.19 – $93.97 based on WACC sensitivity (7.6% – 10.6%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 42,020 | 42,020 | 42,020 |
| (/) WACC | 10.6% | 9.1% | 7.6% |
| Enterprise Value | 396,905 | 462,423 | 553,848 |
| (-) Net debt | 251,512 | 251,512 | 251,512 |
| Equity Value | 145,393 | 210,911 | 302,336 |
| (/) Outstanding shares | 3,217 | 3,217 | 3,217 |
| Fair Price | $45.19 | $65.55 | $93.97 |
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.