Earnings Power Value: Bruce Greenwald's Valuation Without the Growth Fantasy

Why Zero-Growth Valuation Matters

Most valuation models lean heavily on growth assumptions — and those assumptions are exactly where DCFs go wrong. Bruce Greenwald's Earnings Power Value (EPV) sidesteps the problem by computing what a business is worth assuming no growth, ever: sustainable earnings divided by cost of capital. Any gap between EPV and market cap is the growth premium — what the market is paying for future growth above today's earnings. A stock trading near EPV is priced for stagnation; one trading at 3× EPV is priced for aggressive growth — and you can decide separately whether that growth is believable.

What the EPV Card Shows

The EPV card decomposes valuation into three layers: asset reproduction value (what it'd cost to rebuild the business from scratch), EPV (normalized earnings / WACC), and growth premium (market cap minus EPV, expressed as both absolute and % of market cap). Sustainable earnings are computed from 10-year averages with one-time items backed out, and WACC is pulled from the capital structure with a configurable equity risk premium. A sensitivity strip shows how EPV moves with ±200 bps WACC changes — critical because a small WACC change swings the output substantially.

Reading the Layers

Two patterns are consistently useful. First, growth premium > 60% of market cap means the market is paying heavily for growth — good businesses with real moats can sustain this (MSFT, GOOG historically); low-moat names at this level often disappoint. Second, asset reproduction value > EPV often signals a low-quality industry — the business is worth more dead than alive, which means either management is destroying value or the industry has structural overcapacity; in either case, "cheap on book" is a trap, not an opportunity.

Where It Fits

EPV is the conservative anchor for valuation work. Pair with the full DCF card for the growth scenario, Reverse DCF for the implied-growth view, and Sensitivity for the full sensitivity grid across cost-of-capital and growth assumptions.

Open the EPV card → /app/stocks/AAPL/fundamentals