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]
- The Sears acquisition: A retrospective case study of value detection – www.emerald.com [PDF]
- Distressed M&A and corporate strategy: lessons from Marvel Entertainment Group's bankruptcy – www.emerald.com [PDF]
- Berkshire Hathaway and GEICO: an M&A case study – www.emerald.com [PDF]
- Strategic M&A: insights from Buffett's MidAmerican acquisition – www.ingentaconnect.com [PDF]
- Turnaround value and valuation: Reassessing scott paper – jpe.pm-research.com [PDF]
- Do Value Investors Add Value? – joi.pm-research.com [PDF]
