The WACC of Meridian Bancorp Inc (MARYLAND) (EBSB) is 6.7%.
Range | Selected | |
Cost of equity | 8.3% - 11.1% | 9.7% |
Tax rate | 24.9% - 28.8% | 26.85% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.0% - 7.3% | 6.7% |
Category | Low | High |
Long-term bond rate | 3.2% | 3.7% |
Equity market risk premium | 4.2% | 5.2% |
Adjusted beta | 1.22 | 1.33 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.3% | 11.1% |
Tax rate | 24.9% | 28.8% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.0% | 7.3% |
Selected WACC | 6.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
EBSB | Meridian Bancorp Inc (MARYLAND) | 0.95 | 1.07 | 0.62 |
CASH | Meta Financial Group Inc | 0.22 | 0.96 | 0.82 |
FSBW | FS Bancorp Inc | 0.16 | 0.74 | 0.66 |
HMST | HomeStreet Inc | 3.25 | 0.35 | 0.1 |
KRNY | Kearny Financial Corp | 0.24 | 0.95 | 0.8 |
MBIN | Merchants Bancorp | 0.14 | 1.01 | 0.92 |
NASB | NASB Financial Inc | 0.11 | -0.07 | -0.06 |
NFBK | Northfield Bancorp Inc | 0.14 | 1.14 | 1.04 |
SMBC | Southern Missouri Bancorp Inc | 0.04 | 1 | 0.98 |
TF.TO | Timbercreek Financial Corp | 1.52 | 1.07 | 0.5 |
TRST | TrustCo Bank Corp N Y | 0.13 | 0.81 | 0.73 |
Low | High | |
Unlevered beta | 0.66 | 0.8 |
Relevered beta | 1.33 | 1.49 |
Adjusted relevered beta | 1.22 | 1.33 |
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 EBSB:
cost_of_equity (9.70%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.22) + 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.