Earning Power Value (EPV) Calculator

  1. Home
  2. Calculators
  3. Earning Power Value (EPV)
Not investment advice. EPV is a mechanical formula — it doesn't account for business-, industry-, or situation-specific context (management changes, regulatory shifts, segment mix, accounting one-offs, cyclicality the chosen inputs don't average over, etc.). The output is not a forecast, a price target, or a suggestion to buy or sell any stock. It's a starting point for further analysis, not a conclusion.

Inputs

Earnings power (TTM)
$
%
$
$
Capitalisation rate
%
Same WACC you'd use to discount cash flows in a DCF.
Equity bridge
$
$
$
$

Results

EPV per share
—
vs share price —
—
NOPAT (TTM) —
− Growth CapEx —
= Earnings power —
÷ WACC —
= Enterprise EPV —
+ Excess cash —
− Total debt —
− Minority interest —
= Equity EPV —
÷ Diluted shares —

Notes

Formula (basic): Equity EPV = NOPAT ÷ WACC + Excess Cash − Total Debt − NCI

Capex-adjusted: (NOPAT − max(0, CapEx − D&A)) ÷ WACC as the enterprise step.

  • NOPAT: EBIT × (1 − tax rate). The cash earnings the business throws off in steady state.
  • Growth CapEx: Greenwald's heuristic — TTM CapEx in excess of TTM D&A. Floored at 0 so a shrinking asset base doesn't get a "negative growth CapEx" bonus.
  • WACC: Capitalisation rate. Lower WACC → higher EPV. Sensitive: a 1pp move can swing EPV/share by tens of percent.
  • Equity bridge: Add cash an acquirer pockets at close, subtract debt with senior claim, subtract NCI in consolidated subs that doesn't accrue to common shareholders.
  • Calculations run securely in your browser.

About Earning Power Value

How it works

Earning Power Value (EPV) was popularised by Bruce Greenwald (Columbia Business School). It estimates a company's value assuming today's earnings continue forever at zero growth: capitalise after-tax operating earnings (NOPAT) at the cost of capital, then bridge to equity by adding cash, subtracting debt, and subtracting minority interest. EPV is a deliberate simplification of DCF — no forecasts, no terminal value gymnastics.

When it's useful

EPV serves as a no-growth fair-value floor: if EPV per share is meaningfully above the market price, the market is pricing in shrinkage, and the buyer's growth premium is implicitly negative. If EPV per share is meaningfully below the market price, the market is pricing in growth, and the question becomes whether that growth is plausible. EPV is most informative for stable, mature businesses; cyclical filers and high-growth filers will look mispriced for reasons EPV does not capture.

Capex-adjusted variant

Greenwald flagged that depreciation is an accounting estimate of wear, not an estimate of what it costs to keep the business running. When CapEx exceeds D&A, the excess is roughly the spend on growth that NOPAT silently subsidised. The capex-adjusted variant subtracts that excess from NOPAT before capitalising — a conservative reading of steady-state earnings power.