Allakos WACC - Weighted Average Cost of Capital
The WACC of Allakos Inc (ALLK) is 7.9%.
| Range | Selected | |
| Cost of equity | 10.5% - 13.6% | 12.05% |
| Tax rate | 26.2% - 27.0% | 26.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.1% - 8.6% | 7.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.44 | 1.57 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.5% | 13.6% |
| Tax rate | 26.2% | 27.0% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.1% | 8.6% |
| Selected WACC | 7.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ALLK | Allakos Inc | 1.1 | -0.37 | -0.21 |
| BBIO | BridgeBio Pharma Inc | 0.26 | 0.98 | 0.82 |
| INSM | Insmed Inc | 0.06 | 1.12 | 1.07 |
| MRNA | Moderna Inc | 0.01 | 0.96 | 0.95 |
| NTRA | Natera Inc | 0 | 0.97 | 0.97 |
| ORGO | Organogenesis Holdings Inc | 0 | 1.84 | 1.84 |
| PTCT | PTC Therapeutics Inc | 0.6 | 1.54 | 1.07 |
| SRNE | Sorrento Therapeutics Inc | 30.58 | -0.44 | -0.02 |
| TVTX | Travere Therapeutics Inc | 0.29 | 1.59 | 1.32 |
| VCEL | Vericel Corp | 0 | 0.87 | 0.87 |
| XNCR | Xencor Inc | 0.28 | 2.04 | 1.69 |
| Low | High | |
| Unlevered beta | 0.95 | 1.07 |
| Relevered beta | 1.66 | 1.85 |
| Adjusted relevered beta | 1.44 | 1.57 |
Allakos's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Allakos:
cost_of_equity (12.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.44) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.