Using the Earnings Power Value framework with a WACC of 6.7% and normalized earnings of $18.8B, Walmart Inc. has a fair value of $27.73 per share. The EPV range is $21.40 – $37.69 based on WACC sensitivity (5.2% – 8.2%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 18,784 | 18,784 | 18,784 |
| (/) WACC | 8.2% | 6.7% | 5.2% |
| Enterprise Value | 228,056 | 278,837 | 358,710 |
| (-) Net debt | 56,368 | 56,368 | 56,368 |
| Equity Value | 171,688 | 222,469 | 302,342 |
| (/) Outstanding shares | 8,022 | 8,022 | 8,022 |
| Fair Price | $21.40 | $27.73 | $37.69 |
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.