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Earnings Power Value (EPV)

What does 'Earnings Power Value - EPV' mean

Earnings power value (EPV) is a technique for valuing stocks by making an assumption about the sustainability of current earnings and the cost of capital but assuming no further growth. Earnings power value (EPV) is a specific formula: Adjusted Earnings / Cost of Capital. While the formula is simple, finding the adjusted earnings can be difficult and must consider operating earnings, taxation adjustments, depreciation and more.

Explaining 'Earnings Power Value - EPV'

EPV was developed by Columbia University Professor Bruce Greenwald. One of the ways that it helps investors evaluate the intrinsic value of a position is by removing the difficulties of other evaluation formulas. However, that can mean that EPV is less accurate than other, more thorough methods. EPV does give a clear look at a company's present situation though.


Further Reading


Disney's Marvel acquisition: a strategic financial analysis
www.emerald.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

The Sears acquisition: A retrospective case study of value detectionThe Sears acquisition: A retrospective case study of value detection
www.emerald.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

Distressed M&A and corporate strategy: lessons from Marvel Entertainment Group's bankruptcyDistressed M&A and corporate strategy: lessons from Marvel Entertainment Group's bankruptcy
www.emerald.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

Berkshire Hathaway and GEICO: an M&A case studyBerkshire Hathaway and GEICO: an M&A case study
www.emerald.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

Strategic M&A: insights from Buffett's MidAmerican acquisitionStrategic M&A: insights from Buffett's MidAmerican acquisition
www.ingentaconnect.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

Turnaround value and valuation: Reassessing scott paperTurnaround value and valuation: Reassessing scott paper
jpe.pm-research.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …

Do Value Investors Add Value?Do Value Investors Add Value?
joi.pm-research.com [PDF]
… Note (12E) is the cash listed on the balance sheet that when added to earnings power equals Marvel's EPV (note (13E … A “reinvestment rate” is the return that Marvel's incremental earnings are expected generate on average forever to grow its value … Select Marvel movie revenue …



Q&A About Earnings Power Value (EPV)


What does EPV assume about future growth?

EPV assumes no further growth.

What is Earnings Power Value?

Earnings power value (EPV) is a technique for valuing stocks by making an assumption about the sustainability of current earnings and the cost of capital but assuming no further growth.

How do you calculate adjusted earnings?

Adjusted earnings are calculated by considering operating earnings, taxation adjustments, depreciation and more.

What does EPV help investors avoid when evaluating intrinsic value of a position?

It helps investors avoid other evaluation formulas that may be difficult to understand or inaccurate.