DTEA WACC - Weighted Average Cost of Capital
The WACC of DAVIDsTEA Inc (DTEA) is 8.2%.
| Range | Selected | |
| Cost of equity | 8.9% - 11.8% | 10.35% |
| Tax rate | 1.1% - 2.1% | 1.6% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.3% - 9.0% | 8.2% |
| Category | Low | High |
| Long-term bond rate | 4.2% | 4.7% |
| Equity market risk premium | 5.0% | 6.0% |
| Adjusted beta | 0.94 | 1.11 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.9% | 11.8% |
| Tax rate | 1.1% | 2.1% |
| Debt/Equity ratio | 0.66 | 0.66 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.3% | 9.0% |
| Selected WACC | 8.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| DTEA | DAVIDsTEA Inc | 0.66 | 2.66 | 1.61 |
| BCI.TO | New Look Vision Group Inc | 0.47 | 1.05 | 0.72 |
| BGFV | Big 5 Sporting Goods Corp | 0.83 | 0.69 | 0.38 |
| BWTL | Bowlin Travel Centers Inc | 0.45 | 0.03 | 0.02 |
| CLWY | Calloway's Nursery Inc | 0.1 | -0.34 | -0.31 |
| ELA | Envela Corp | 0.08 | 0.65 | 0.6 |
| FAF.TO | Fire & Flower Holdings Corp | 2.38 | 1.38 | 0.41 |
| HZO | MarineMax Inc | 2.18 | 2.09 | 0.66 |
| RTON | Right On Brands Inc | 0.4 | 0.96 | 0.69 |
| SIG | Signet Jewelers Ltd | 0.95 | 1.05 | 0.54 |
| WCRS | Western Capital Resources Inc | 0.04 | 0.3 | 0.29 |
| Low | High | |
| Unlevered beta | 0.41 | 0.6 |
| Relevered beta | 0.91 | 1.16 |
| Adjusted relevered beta | 0.94 | 1.11 |
DTEA'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 DTEA:
cost_of_equity (10.35%) = risk_free_rate (4.45%) + equity_risk_premium (5.50%) * adjusted_beta (0.94) + 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.