The WACC of Home BancShares Inc (HOMB) is 9.2%.
Range | Selected | |
Cost of equity | 8.4% - 11.0% | 9.7% |
Tax rate | 22.9% - 23.1% | 23% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 8.0% - 10.3% | 9.2% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 1 | 1.1 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.4% | 11.0% |
Tax rate | 22.9% | 23.1% |
Debt/Equity ratio | 0.1 | 0.1 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 8.0% | 10.3% |
Selected WACC | 9.2% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
HOMB | Home BancShares Inc | 0.1 | 0.87 | 0.81 |
ABCB | Ameris Bancorp | 0.07 | 1.23 | 1.16 |
BOH | Bank of Hawaii Corp | 0.04 | 0.69 | 0.67 |
CADE | Cadence Bancorp | 0.01 | 1.27 | 1.26 |
CATY | Cathay General Bancorp | 0.04 | 1.02 | 0.99 |
GBCI | Glacier Bancorp Inc | 0.36 | 1.1 | 0.86 |
ONB | Old National Bancorp | 0.11 | 1.39 | 1.28 |
UBSI | United Bankshares Inc | 0.09 | 0.88 | 0.83 |
UMBF | UMB Financial Corp | 0.36 | 1.23 | 0.96 |
WBS | Webster Financial Corp | 0.13 | 1.54 | 1.4 |
Low | High | |
Unlevered beta | 0.92 | 1.06 |
Relevered beta | 1 | 1.15 |
Adjusted relevered beta | 1 | 1.1 |
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 HOMB:
cost_of_equity (9.70%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1) + 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.