Earnings Power Value (EPV)

Earnings power value prices a business on one deliberately brutal assumption: current earnings, properly normalized, continue forever with zero growth. Columbia professor Bruce Greenwald built it as EPV = adjusted after-tax operating earnings / cost of capital — a perpetuity with no forecast, no terminal-value guess, and no credit for a future that has not happened.

The point is separation. If EPV comes out near the market price, you are paying for the business as it exists and getting any growth free. If the price sits far above EPV, the gap is exactly what the market charges for growth — and you can judge that bet on its own. Greenwald's other comparison is against reproduction value of the assets: EPV above asset value implies a moat, since earnings exceed what a new competitor could earn by rebuilding the business.

The normalization step carries the risk. Smoothing margins across a cycle, backing out one-time items, and picking the cost of capital are all judgment calls, and a cyclical company at peak earnings will produce a badly inflated EPV if you take the current year at face value.