The WACC of Home Bancorp Inc (HBCP) is 7.5%.
Range | Selected | |
Cost of equity | 6.8% - 9.2% | 8% |
Tax rate | 19.5% - 19.6% | 19.55% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 6.5% - 8.6% | 7.5% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.64 | 0.78 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.8% | 9.2% |
Tax rate | 19.5% | 19.6% |
Debt/Equity ratio | 0.14 | 0.14 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 6.5% | 8.6% |
Selected WACC | 7.5% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
HBCP | Home Bancorp Inc | 0.14 | 1.05 | 0.95 |
CNF | CNFinance Holdings Ltd | 25.36 | 1.44 | 0.07 |
ESSA | ESSA Bancorp Inc | 1.33 | 0.84 | 0.41 |
FSBW | FS Bancorp Inc | 0.15 | 0.75 | 0.67 |
MKP.TO | MCAN Mortgage Corp | 6.2 | 0.69 | 0.12 |
PBFS | Pioneer Bancorp Inc | 0 | 0.43 | 0.43 |
PCSB | PCSB Financial Corp | 0.04 | 0.58 | 0.56 |
SMBC | Southern Missouri Bancorp Inc | 0.04 | 1.03 | 1 |
WBBW | Westbury Bancorp Inc | 0.05 | -0.03 | -0.02 |
WNEB | Western New England Bancorp Inc | 0.1 | 0.77 | 0.72 |
Low | High | |
Unlevered beta | 0.42 | 0.6 |
Relevered beta | 0.46 | 0.67 |
Adjusted relevered beta | 0.64 | 0.78 |
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 HBCP:
cost_of_equity (8.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.64) + 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.