ERII WACC - Weighted Average Cost of Capital
The WACC of Energy Recovery Inc (ERII) is 7.4%.
| Range | Selected | |
| Cost of equity | 7.7% - 12.5% | 10.1% |
| Tax rate | 6.8% - 8.8% | 7.8% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 6.2% - 8.6% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.83 | 1.37 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.7% | 12.5% |
| Tax rate | 6.8% | 8.8% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 6.2% | 8.6% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ERII | Energy Recovery Inc | 1.14 | 1.14 | 0.56 |
| ARCW | ARC Group Worldwide Inc | 0.4 | 0.28 | 0.2 |
| GHM | Graham Corp | 0 | 1.96 | 1.96 |
| GRC | Gorman-Rupp Co | 0.38 | 1.15 | 0.85 |
| LIQT | LiqTech International Inc | 0.45 | 1.19 | 0.84 |
| MUEL | Paul Mueller Co | 0.02 | -0.28 | -0.28 |
| REKO.V | Reko International Group Inc | 0.54 | -0.35 | -0.23 |
| SIS.TO | Savaria Corp | 0.21 | 0.94 | 0.79 |
| VJET | Voxeljet AG | 2.89 | 0.77 | 0.21 |
| XBC.TO | Xebec Adsorption Inc | 1.12 | 1.05 | 0.52 |
| XONE | ExOne Co | 0.01 | 1.32 | 1.31 |
| Low | High | |
| Unlevered beta | 0.52 | 0.79 |
| Relevered beta | 0.75 | 1.55 |
| Adjusted relevered beta | 0.83 | 1.37 |
ERII'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 ERII:
cost_of_equity (10.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.83) + 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.