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.

BREAKING DOWN '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.

RELATED TERMS
  1. Accounting Earnings

    The amount of money a company has earned during a given period, ...
  2. Asset Earning Power - AEP

    The earnings generated by a business relative to its asset base. ...
  3. Capitalization Of Earnings

    A method of determining the value of an organization by calculating ...
  4. Normalized Earnings

    1. Earnings adjusted for cyclical ups and downs in the economy. ...
  5. Forward Price To Earnings - Forward ...

    A measure of the price-to-earnings ratio (P/E) using forecasted ...
  6. Depreciated Cost

    1. The value of an asset net of all accumulated depreciation ...
Related Articles
  1. Markets

    What are Earnings?

    The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year.
  2. Markets

    IBM Stock: An Earnings Case Study

    Learn the main drivers behind IBM's earnings model and why analysts predict a decline in 2016 followed by a strong recovery in 2017.
  3. Personal Finance

    Everything Investors Need To Know About Earnings

    We go over the concepts behind the excitement over the most important figure in the stock market.
  4. Investing

    The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  5. Investing

    Core Earnings Strip Away "Creative" Accounting

    This metric is an attempt to counteract creative accounting, but it poses its own set of challenges.
  6. Investing

    Earnings Forecasts: A Primer

    Learn how this key metric is calculated and how it is used to judge market performance.
  7. Investing

    How To Find P/E And PEG Ratios

    If these numbers have you in the dark, these easy calculations should help light the way.
  8. Investing

    Stock-Picking Strategies: Value Investing

    Value investing is one of the best known stock-picking methods. In the 1930s, Benjamin Graham and David Dodd, finance professors at Columbia University, laid out what many consider to be the ...
  9. Trading

    Shareholders' Equity

    Learn how to calculate this common formula in finance.
  10. ETFs & Mutual Funds

    Value Investing Strategies in a Volatile Market

    Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount.
RELATED FAQS
  1. What is earnings management?

    Before diving into what earnings management is, it is important to have a solid understanding of what we mean when we refer ... Read Answer >>
  2. Is maximizing stock price the same thing as maximizing profit?

    Simply put: yes. A company's stock price will factor in many different variables including the type of industry the firm ... Read Answer >>
  3. What's the difference between EaR, Value at Risk (VaR), and EVE?

    Learn about earnings at risk, value at risk and economic value added, how these risk measures are used, and the difference ... Read Answer >>
  4. What is the difference between earnings and revenue?

    Understand how a company makes revenue and how it makes earnings. Learn the difference between revenue and earnings and how ... Read Answer >>
  5. Why would my stock's value decline despite good news being released?

    More often than not, when a firm releases an earnings report the market will react to this news by adjusting the firm's stock ... Read Answer >>
  6. What is the difference between intrinsic value and current market value?

    Discover the differences between intrinsic and market values, what makes the former difficult to determine and how investor ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center