The WACC of Guardant Health Inc (GH) is 6.9%.
Range | Selected | |
Cost of equity | 5.9% - 8.7% | 7.3% |
Tax rate | 0.2% - 0.2% | 0.2% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 5.8% - 8.1% | 6.9% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.45 | 0.68 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.9% | 8.7% |
Tax rate | 0.2% | 0.2% |
Debt/Equity ratio | 0.18 | 0.18 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 5.8% | 8.1% |
Selected WACC | 6.9% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
GH | Guardant Health Inc | 0.18 | 1.31 | 1.1 |
AHCO | Adapthealth Corp | 1.62 | 0.39 | 0.15 |
AMED | Amedisys Inc | 0.12 | 0.16 | 0.15 |
CSTL | Castle Biosciences Inc | 0.02 | 0.54 | 0.53 |
FLGT | Fulgent Genetics Inc | 0.01 | 0.39 | 0.38 |
INFU | InfuSystem Holdings Inc | 0.2 | 1.9 | 1.59 |
MJNA | Medical Marijuana Inc | 10.81 | 0.12 | 0.01 |
PINC | Premier Inc | 0.43 | 0.16 | 0.11 |
PROG | Progenity Inc | 0.78 | 1.02 | 0.58 |
RCM | R1 RCM Inc | 0.27 | -0.11 | -0.09 |
Low | High | |
Unlevered beta | 0.15 | 0.44 |
Relevered beta | 0.18 | 0.52 |
Adjusted relevered beta | 0.45 | 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 GH:
cost_of_equity (7.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.45) + 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.