Free Earnings Power Value (EPV) Calculator
Calculate earnings power value: normalised earnings capitalised at your required return as a zero-growth perpetuity, plus net cash. A no-growth cross-check on a DCF.
No-growth perpetuity: $55.56 / share
The price sits 10% below earnings power value, before crediting any growth.
What earnings power value is
Earnings power value is what a business is worth on its sustainable, normalised earnings with no growth assumed. It capitalises those earnings at your required return as a perpetuity, then adds net cash. The idea comes from Benjamin Graham and was formalised by Bruce Greenwald: value what the business reliably earns today, before paying anything for growth that may or may not arrive. It is the conservative floor that every more optimistic valuation should have to clear.
How the calculation works
- Estimate normalised earnings per share: a mid-cycle figure stripped of one-off gains and losses, representative of what the business earns in a typical year.
- Divide by your required return to capitalise it as a zero-growth perpetuity. A 9% required return turns $5 of earnings into about $56.
- Add net cash per share (cash minus debt) to move from operating value to equity value, then compare to the price.
Reading EPV against price and DCF
Because EPV assumes no growth, it isolates the part of value that does not depend on forecasts. A price at or below EPV means you are paying little or nothing for growth, which is a strong starting point. The gap between a growth-based DCF and the EPV is the value the market is assigning to growth; seeing it as a separate number lets you judge whether that growth is realistic rather than burying it inside one estimate.
Assumptions and limits
EPV is at its best on stable, mature businesses with predictable earnings. The normalisation is where the judgment lives: a figure pulled from a cyclical peak or trough will mislead, so use a through-cycle estimate. The method is weaker for fast growers and capital-heavy companies, where a single year says little about the steady state, and it deliberately ignores growth, so it understates a genuine compounder on purpose.
Related calculators
- DCF calculator — add growth back in and compare the result to the no-growth EPV.
- WACC calculator — derive the required return that capitalises the earnings.
Frequently asked questions
- What is earnings power value (EPV)?
- Earnings power value is the worth of a business based on its sustainable, normalised earnings with no growth assumed. It capitalises those earnings at the required return as a perpetuity. The idea, from Benjamin Graham and later formalised by Bruce Greenwald, is to value what a business reliably earns today before paying anything for growth that may or may not arrive.
- How is EPV calculated?
- Take normalised earnings per share and divide by the required return expressed as a decimal, which gives the zero-growth perpetuity value. Then add net cash per share (cash minus debt) to get the equity value per share. This calculator handles the perpetuity and the balance-sheet adjustment once you enter the figures.
- How is EPV different from a DCF?
- A discounted cash flow projects future cash flows and usually bakes in growth. EPV deliberately assumes no growth, so it isolates what the business is worth on current earning power alone. If a DCF value sits far above the EPV, the gap is the value the market is assigning to growth, and you can judge whether that growth is realistic.
- When is EPV most useful?
- EPV works best for stable, mature businesses with predictable, normalised earnings. It is a conservative anchor: a price near or below EPV means you are paying little or nothing for growth, which is a strong starting point. It is less reliable for fast-growing or highly cyclical companies, where a single year of earnings says little about the steady state.
This calculator is for education and research only. It is not investment advice and it does not recommend buying or selling any security. The output depends entirely on the assumptions you enter.