The WACC of Fanhua Inc (FANH) is 6.3%.
Range | Selected | |
Cost of equity | 5.7% - 8.7% | 7.2% |
Tax rate | 22.2% - 23.6% | 22.9% |
Cost of debt | 4.6% - 4.6% | 4.6% |
WACC | 5.2% - 7.3% | 6.3% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.41 | 0.68 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.7% | 8.7% |
Tax rate | 22.2% | 23.6% |
Debt/Equity ratio | 0.35 | 0.35 |
Cost of debt | 4.6% | 4.6% |
After-tax WACC | 5.2% | 7.3% |
Selected WACC | 6.3% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
FANH | Fanhua Inc | 0.35 | -0.35 | -0.28 |
BRO | Brown & Brown Inc | 0.12 | 0.34 | 0.31 |
BRP | BRP Group Inc | 0.34 | 0.95 | 0.76 |
CUII | China United Insurance Service Inc | 6936.1 | -0.38 | 0 |
EHTH | eHealth Inc | 0.54 | 0.44 | 0.31 |
GOCO | Gohealth Inc | 7.53 | 1.05 | 0.15 |
GSHD | Goosehead Insurance Inc | 0.02 | 0.56 | 0.55 |
HUIZ | Huize Holding Ltd | 0.32 | 0.3 | 0.24 |
NXG.V | NexgenRx Inc | 0.02 | 0.94 | 0.92 |
SLQT | SelectQuote Inc | 1.64 | 0.83 | 0.37 |
Low | High | |
Unlevered beta | 0.28 | 0.34 |
Relevered beta | 0.12 | 0.52 |
Adjusted relevered beta | 0.41 | 0.68 |
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 FANH:
cost_of_equity (7.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.41) + 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.