HRL WACC - Weighted Average Cost of Capital
The WACC of Hormel Foods Corp (HRL) is 5.8%.
| Range | Selected | |
| Cost of equity | 5.5% - 7.0% | 6.25% |
| Tax rate | 20.8% - 21.8% | 21.3% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 5.2% - 6.5% | 5.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.36 | 0.38 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.5% | 7.0% |
| Tax rate | 20.8% | 21.8% |
| Debt/Equity ratio | 0.17 | 0.17 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 5.2% | 6.5% |
| Selected WACC | 5.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| HRL | Hormel Foods Corp | 0.17 | 0.03 | 0.03 |
| CAG | Conagra Brands Inc | 0.87 | -0.14 | -0.08 |
| CPB | Campbell Soup Co | 0.78 | 0.1 | 0.06 |
| HSY | Hershey Co | 0.15 | -0.09 | -0.08 |
| K | Kellogg Co | 0.21 | 0.03 | 0.03 |
| MKC | McCormick & Company Inc | 0.21 | 0.2 | 0.17 |
| POST | Post Holdings Inc | 1.12 | 0.09 | 0.05 |
| PPC | Pilgrims Pride Corp | 0.3 | 0.17 | 0.14 |
| SAP.TO | Saputo Inc | 0.32 | 0.33 | 0.27 |
| SJM | J M Smucker Co | 0.76 | 0.13 | 0.08 |
| Low | High | |
| Unlevered beta | 0.04 | 0.07 |
| Relevered beta | 0.04 | 0.07 |
| Adjusted relevered beta | 0.36 | 0.38 |
HRL's CAPM model and how its cost of Equity is calculated
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 HRL:
cost_of_equity (6.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.36) + 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.