Apple EPV | Valurator

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Estimated Fair Value

$75.99

Stock price: $333.69

Fair value below stock price

EPV estimates a company's fair value based on the sustainable earnings of its existing business without assuming future growth. It focuses on current earnings power rather than future growth expectations.

Earnings Power Composition

Normalized EBIT is reduced for taxes to calculate NOPAT, which is then capitalized using WACC to estimate Enterprise Value.

Key Valuation Metrics

Earnings Scenario

Equity Risk Premium

Range: 2–10%

Notes & Assumptions

• The market price is far above estimated earnings power value, meaning the stock may require future growth to justify today's valuation.

• Operating earnings were normalized using the median of recent historical EBIT margins applied to current revenue to better estimate the company's sustainable earnings power.

• EPV intentionally assumes no future growth. Companies with significant expected growth may be worth more than their estimated earnings power value.

EPV Formulas

Unlike a Discounted Cash Flow model, Earnings Power Value assumes no future growth. Instead, it estimates the value of the existing business by capitalizing sustainable after-tax operating earnings using the required rate of return.

Normalized After-Tax Earnings

\text{NOPAT} = \text{Normalized EBIT} \times (1-T)

Enterprise Value

\text{Enterprise Value} = \frac{\text{NOPAT}} {WACC}

Equity Value

\text{Equity Value} = \text{Enterprise Value} - \text{Net Debt}

Fair Value per Share

\text{Fair Value Per Share} = \frac{\text{Equity Value}} {\text{Shares Outstanding}}

What is Earnings Power Value?

Earnings Power Value (EPV) estimates a company's intrinsic value based on the operating earnings its existing business can sustainably generate, without assigning value to future growth.

EPV values the company's existing operations by capitalizing normalized Net Operating Profit After Tax (NOPAT) using the required rate of return.

How This EPV Valuation Works

How the EPV Model Works

Earnings Power Value estimates the intrinsic value of a company by normalizing current operating earnings, converting them into sustainable after-tax earnings, capitalizing those earnings using the required return, and finally determining the value attributable to shareholders.

Normalize EBIT

→

Calculate NOPAT

→

Estimate WACC

→

Capitalize NOPAT

→

Enterprise Value

→

Adjust for Net Debt / Cash

→

Fair Value Per Share

Key Model Assumptions

• EPV assumes the company maintains its current earnings power without future growth.
• Current Revenue and EBIT use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• Sustainable EBIT is estimated by applying a normalized EBIT Margin, based on the median of up to the five most recent valid historical EBIT Margins, to current Revenue.
• The selected Earnings Scenario adjusts Sustainable EBIT to determine the Normalized EBIT used in the valuation.
• WACC represents the required return used to capitalize sustainable after-tax operating earnings.
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• The resulting value reflects the company's existing operations and excludes future growth opportunities.

Step 1 — Estimate Normalized Operating Earnings

Sustainable EBIT = Current Revenue × Normalized EBIT Margin

Sustainable EBIT = $142.7B

Normalized EBIT = Sustainable EBIT × Scenario Adjustment

$142.7B × 1.00 = $142.7B

The EPV model estimates Sustainable EBIT by applying a normalized EBIT Margin to the company's trailing twelve-month (TTM) Revenue. The normalized EBIT Margin is based on the median of up to the five most recent valid historical EBIT Margins, reducing the impact of unusually strong or weak individual years.

The selected Earnings Scenario then adjusts Sustainable EBIT to determine the Normalized EBIT used in the valuation. For Apple, this results in Normalized EBIT of $142.7B.

Step 2 — Calculate Normalized After-Tax Operating Earnings (NOPAT)

NOPAT = Normalized EBIT × (1 − Tax Rate)

$142.7B × (1 − 17.3%) = $118.0B

Normalized EBIT is adjusted for taxes to calculate Net Operating Profit After Tax (NOPAT).

NOPAT represents the company's after-tax operating earnings before financing costs and is used as the sustainable earnings base for EPV. For Apple, NOPAT is estimated at $118.0B.

Step 3 — Calculate WACC

WACC = Equity Weight × Cost of Equity + Debt Weight × After-Tax Cost of Debt

98.3% × 10.5% + 1.7% × 4.0% × (1 − 17.3%) = 10.4%

The Weighted Average Cost of Capital (WACC) represents the required return demanded by shareholders and lenders.

In the EPV model, WACC is used to capitalize normalized after-tax operating earnings into Enterprise Value. For Apple, WACC is 10.4%.

Step 4 — Calculate Enterprise Value

Enterprise Value = NOPAT / WACC

$118.0B / 10.4% = $1138.0B

EPV assumes Apple can maintain its NOPAT indefinitely without future growth. Capitalizing these sustainable earnings using WACC determines an Enterprise Value of $1138.0B.

Step 5 — Calculate Fair Value Per Share

Equity Value = Enterprise Value − Net Debt

$1138.0B − $21.9B = $1116.1B

Fair Value Per Share = Equity Value / Shares Outstanding

$1116.1B / 14.69B shares = $75.99

Enterprise Value is adjusted for Net Debt or Net Cash to determine the Equity Value attributable to common shareholders.

Equity Value is then divided by Shares Outstanding to calculate the estimated Fair Value per Share. For Apple, this results in $75.99 per share.

Because EPV excludes future growth, the result reflects the value of the company's existing earnings power. The complete calculation is summarized in the EPV Reconciliation Table below.

EPV Reconciliation Table

Step	Calculation	Result
Current EBIT	Current Operating Earnings	$155.9B
Sustainable EBIT	Current Revenue × Normalized EBIT Margin	$142.7B
Normalized EBIT	Sustainable EBIT × 1.00	$142.7B
Tax Rate	Effective Tax Rate	17.3%
NOPAT	Normalized EBIT × (1 − Tax Rate)	$118.0B
WACC	Required Return	10.4%
Enterprise Value	NOPAT / WACC	$1138.0B
Net Debt	Total Debt − Cash & Short-Term Investments	$21.9B
Equity Value	Enterprise Value − Net Debt	$1116.1B
Shares Outstanding	Diluted Shares	14.69B shares
Fair Value Per Share	Equity Value / Shares	$75.99