Fundamental Glossary / Valuation Methods
Earnings Power Value
The value of current, sustainable earnings with no credit for growth, discounted as a perpetuity.
Formula
Adjusted EBIT x (1 - tax rate) / WACC, or a similar no-growth free-cash-flow perpetuity. Growth investments are not added.
What it means
Bruce Greenwald's earnings power value asks what the business is worth if it never grows and simply keeps earning what it earns now, on the assets it already has.
It is a bridge between asset value and a full growth DCF. If earnings power value is far above asset value, the firm has a franchise. If a DCF is far above earnings power value, you are paying for growth.
How to read it
Use it as a base case. Growth is then something you add only when the company can reinvest at high returns. You do not bury the growth assumption inside a terminal rate from the first step.
What to watch
The sustainable earnings have to be sustainable. Peak-cycle EBIT in the numerator produces a peak-cycle value and calls it a base. Normalise first.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.