The WACC of HealthStream Inc (HSTM) is 6.7%.
Range | Selected | |
Cost of equity | 8.0% - 11.7% | 9.85% |
Tax rate | 20.2% - 21.4% | 20.8% |
Cost of debt | 4.5% - 4.5% | 4.5% |
WACC | 5.8% - 7.6% | 6.7% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.9 | 1.22 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.0% | 11.7% |
Tax rate | 20.2% | 21.4% |
Debt/Equity ratio | 1 | 1 |
Cost of debt | 4.5% | 4.5% |
After-tax WACC | 5.8% | 7.6% |
Selected WACC | 6.7% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
HSTM | HealthStream Inc | 1.01 | 0.6 | 0.33 |
CLNH | Clinigence Holdings Inc | 0 | 0.99 | 0.98 |
CPSI | Computer Programs and Systems Inc | 1.04 | 0.79 | 0.43 |
HLYK | Healthlynked Corp | 0.12 | 1.68 | 1.53 |
KALO | Kallo Inc | 286.59 | -2.09 | -0.01 |
KSI.V | Kneat.com Inc | 0.04 | 0.51 | 0.5 |
MTBC | MTBC Inc | 0.17 | 0.85 | 0.74 |
NH | NantHealth Inc | 29.54 | 0.4 | 0.02 |
OPRX | OPTIMIZERx Corp | 0.13 | 1.64 | 1.49 |
TRHC | Tabula Rasa HealthCare Inc | 1.13 | 1.4 | 0.74 |
VCRA | Vocera Communications Inc | 0.09 | 0.24 | 0.22 |
Low | High | |
Unlevered beta | 0.43 | 0.74 |
Relevered beta | 0.85 | 1.33 |
Adjusted relevered beta | 0.9 | 1.22 |
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 HSTM:
cost_of_equity (9.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.9) + 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.