what does earnings power value tell you 
earnings power value is an analytical metric used to determine if a company s shares are over or under valued the epv formula is used to calculate the level of distributable cash flows that a company could reasonably sustain current earnings are used rather than forecasts or discounted future earnings since current earnings are reliable and knowable it is because many other valuation metrics rely on assumptions or subjective evaluations that they are less reliable than evp epv was developed by columbia university professor bruce greenwald a renowned financial economist and value investor who through this valuation technique tries to overcome the main challenge in discounted cash flow dcf analysis related to making assumptions about future growth cost of capital profit margins and required investments 1limitations of earnings power valueearnings power value is based on the idea the conditions surrounding business operations remain constant and in an ideal state it does not account for any fluctuations either internally or externally that may affect the rate of production in any way these risks can stem from changes within the particular market in which the company operates changes in associated regulatory requirements or other unforeseen events that affect the flow of business in either a positive or negative way 