FIVE WACC - Weighted Average Cost of Capital
The WACC of Five Below Inc (FIVE) is 5.9%.
| Range | Selected | |
| Cost of equity | 6.7% - 10.3% | 8.5% |
| Tax rate | 24.4% - 24.8% | 24.6% |
| Cost of debt | 4.5% - 4.5% | 4.5% |
| WACC | 5.0% - 6.8% | 5.9% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.61 | 0.97 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.7% | 10.3% |
| Tax rate | 24.4% | 24.8% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.5% | 4.5% |
| After-tax WACC | 5.0% | 6.8% |
| Selected WACC | 5.9% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| FIVE | Five Below Inc | 1.11 | 1.86 | 1.02 |
| BNED | Barnes & Noble Education Inc | 0.55 | 1.25 | 0.89 |
| BWTL | Bowlin Travel Centers Inc | 0.4 | 0.07 | 0.05 |
| CLWY | Calloway's Nursery Inc | 0.1 | -0.34 | -0.31 |
| EYE | National Vision Holdings Inc | 0.23 | 1.07 | 0.91 |
| HIBB | Hibbett Sports Inc | 0.05 | 1.91 | 1.84 |
| HZO | MarineMax Inc | 2.41 | 2.05 | 0.73 |
| IDG.TO | Indigo Books and Music Inc | 7.22 | -0.8 | -0.12 |
| RTON | Right On Brands Inc | 0.46 | 0.58 | 0.43 |
| SBH | Sally Beauty Holdings Inc | 1.1 | 0.67 | 0.37 |
| TCS | Container Store Group Inc | 256.2 | 1.69 | 0.01 |
| Low | High | |
| Unlevered beta | 0.37 | 0.73 |
| Relevered beta | 0.42 | 0.96 |
| Adjusted relevered beta | 0.61 | 0.97 |
FIVE'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 FIVE:
cost_of_equity (8.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.61) + 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.