The WACC of CarGurus Inc (CARG) is 5.4%.
Range | Selected | |
Cost of equity | 6.0% - 9.0% | 7.5% |
Tax rate | 24.4% - 27.3% | 25.85% |
Cost of debt | 4.5% - 4.5% | 4.5% |
WACC | 4.7% - 6.1% | 5.4% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.45 | 0.74 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.0% | 9.0% |
Tax rate | 24.4% | 27.3% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 4.5% | 4.5% |
After-tax WACC | 4.7% | 6.1% |
Selected WACC | 5.4% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
CARG | CarGurus Inc | 1.18 | 1.18 | 0.63 |
CARS | Cars.com Inc | 0.71 | 1.11 | 0.73 |
EB | Eventbrite Inc | 1.06 | 0.7 | 0.39 |
LKCO | Luokung Technology Corp | 88.72 | 0.11 | 0 |
LOV | Spark Networks SE | 20.48 | 0.45 | 0.03 |
MAX | MediaAlpha Inc | 0.24 | 0.72 | 0.61 |
MFON | Mobivity Holdings Corp | 0.4 | -0.19 | -0.15 |
MOMO | Momo Inc | 0.6 | 0.47 | 0.33 |
MVEN | Themaven Inc | 0.57 | 0.21 | 0.15 |
SFUN | Fang Holdings Ltd | 28.89 | 1.01 | 0.04 |
YY | JOYY Inc | 0.03 | 0.56 | 0.55 |
Low | High | |
Unlevered beta | 0.15 | 0.39 |
Relevered beta | 0.18 | 0.61 |
Adjusted relevered beta | 0.45 | 0.74 |
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 CARG:
cost_of_equity (7.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.45) + 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.