The WACC of Globus Medical Inc (GMED) is 7.5%.
Range | Selected | |
Cost of equity | 6.4% - 8.9% | 7.65% |
Tax rate | 18.2% - 20.0% | 19.1% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.3% - 8.7% | 7.5% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.55 | 0.73 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.4% | 8.9% |
Tax rate | 18.2% | 20.0% |
Debt/Equity ratio | 0.06 | 0.06 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.3% | 8.7% |
Selected WACC | 7.5% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
GMED | Globus Medical Inc | 0.06 | 0.78 | 0.75 |
ABT | Abbott Laboratories | 0.07 | 0.28 | 0.27 |
BDX | Becton Dickinson and Co | 0.39 | 0.28 | 0.21 |
CNMD | Conmed Corp | 0.61 | 0.48 | 0.32 |
IART | Integra Lifesciences Holdings Corp | 2.08 | 1.58 | 0.59 |
LIVN | LivaNova PLC | 0.27 | 0.67 | 0.55 |
NTUS | Natus Medical Inc | 0 | 0.23 | 0.23 |
NVRO | Nevro Corp | 1.02 | 1.56 | 0.86 |
PEN | Penumbra Inc | 0 | 0.31 | 0.31 |
TNDM | Tandem Diabetes Care Inc | 0.35 | 1.17 | 0.91 |
Low | High | |
Unlevered beta | 0.32 | 0.56 |
Relevered beta | 0.33 | 0.6 |
Adjusted relevered beta | 0.55 | 0.73 |
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 GMED:
cost_of_equity (7.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.55) + 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.