The WACC of Griffon Corp (GFF) is 8.0%.
Range | Selected | |
Cost of equity | 8.8% - 11.1% | 9.95% |
Tax rate | 30.4% - 33.0% | 31.7% |
Cost of debt | 5.1% - 6.6% | 5.85% |
WACC | 7.1% - 9.0% | 8.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1.06 | 1.11 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.8% | 11.1% |
Tax rate | 30.4% | 33.0% |
Debt/Equity ratio | 0.47 | 0.47 |
Cost of debt | 5.1% | 6.6% |
After-tax WACC | 7.1% | 9.0% |
Selected WACC | 8.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
GFF | Griffon Corp | 0.47 | 0.9 | 0.68 |
AMWD | American Woodmark Corp | 0.43 | 1.07 | 0.83 |
APOG | Apogee Enterprises Inc | 0.33 | 0.87 | 0.71 |
AWI | Armstrong World Industries Inc | 0.09 | 0.92 | 0.87 |
DOOR | Masonite International Corp | 0.38 | 1.54 | 1.22 |
JELD | JELD-WEN Holding Inc | 3.28 | 0.46 | 0.14 |
NX | Quanex Building Products Corp | 0.94 | 0.58 | 0.35 |
PGTI | PGT Innovations Inc | 0.25 | 1.15 | 0.98 |
SSD | Simpson Manufacturing Co Inc | 0.06 | 0.93 | 0.89 |
WMS | Advanced Drainage Systems Inc | 0.15 | 1.04 | 0.94 |
Low | High | |
Unlevered beta | 0.78 | 0.88 |
Relevered beta | 1.09 | 1.16 |
Adjusted relevered beta | 1.06 | 1.11 |
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 GFF:
cost_of_equity (9.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.06) + 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.