Using the Earnings Power Value framework with a WACC of 7.4% and normalized earnings of $918.0M, Weyerhaeuser Company has a fair value of $10.18 per share. The EPV range is $7.26 – $14.59 based on WACC sensitivity (5.9% – 8.9%).
| Low | Selected | High | |
|---|---|---|---|
| Normalized Earnings | 918 | 918 | 918 |
| (/) WACC | 8.9% | 7.4% | 5.9% |
| Enterprise Value | 10,351 | 12,458 | 15,642 |
| (-) Net debt | 5,108 | 5,108 | 5,108 |
| Equity Value | 5,243 | 7,350 | 10,534 |
| (/) Outstanding shares | 722 | 722 | 722 |
| Fair Price | $7.26 | $10.18 | $14.59 |
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.