Earnings Power Value
A DCF values the growth. Earnings Power Value asks the opposite question: what is this business worth if it never grows again — just earns its normalized profit, in perpetuity? Capitalize the steady-state cash at the cost of capital and you get a floor. Whatever the market charges above that floor is the price of growth you haven't been promised.
Inputs — all $ in millions
Earnings Power Value · per share (zero growth)
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Sensitivity
EPV per share across normalized operating margin (rows) and cost of capital (columns) — the two levers that move it most. The center cell is your inputs.
How it works
The idea. Earnings Power Value (Bruce Greenwald) values a company on its current, sustainable earning power with zero growth assumed — no hockey-stick, no terminal-growth guess. It is the most conservative honest number in valuation: what you own even if the business never expands again. For a cyclical, normalize first — use through-cycle margins, not the peak or the trough.
The math. Normalized EBIT (margin × revenue) is taxed to NOPAT. Add back depreciation and subtract maintenance capex — a no-growth business only has to keep the lights on, not build new capacity — to get distributable earnings. Capitalize that into perpetuity at the cost of capital (divide by WACC) for the enterprise EPV, then add cash and subtract debt for the equity EPV, and divide by shares.
How to use it. Compare EPV per share to the price. If price sits at or below EPV, you are buying the steady-state business and getting any future growth for free — the through-cycle investor's favorite setup. If price runs well above EPV, the market is capitalizing growth that hasn't happened yet; the gap is the growth premium you're paying. Triangulate with the reverse DCF — which tells you how much growth that premium implies — and the through-cycle PT for the recovery case.
Garbage in, garbage out: EPV is only as good as the normalization. Pick a margin and a maintenance-capex figure you would defend across a full cycle, not the number printed last quarter. Maintenance capex ≈ depreciation is a reasonable first approximation when you don't have a better estimate. Nothing here is investment advice. Built by Brandon Leon — independent research focused on cyclical industries.