The WACC of Lexinfintech Holdings Ltd (LX) is 7.6%.
Range | Selected | |
Cost of equity | 7.8% - 11.7% | 9.75% |
Tax rate | 17.5% - 19.1% | 18.3% |
Cost of debt | 4.0% - 4.5% | 4.25% |
WACC | 6.3% - 9.0% | 7.6% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.85 | 1.22 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.8% | 11.7% |
Tax rate | 17.5% | 19.1% |
Debt/Equity ratio | 0.5 | 0.5 |
Cost of debt | 4.0% | 4.5% |
After-tax WACC | 6.3% | 9.0% |
Selected WACC | 7.6% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
LX | Lexinfintech Holdings Ltd | 0.5 | 1.34 | 0.95 |
ATLC | Atlanticus Holdings Corp | 3.46 | 1.68 | 0.44 |
ELVT | Elevate Credit Inc | 8.59 | 2.09 | 0.26 |
HX | Xiaobai Maimai Inc | 0.18 | 1.4 | 1.22 |
MFIN | Medallion Financial Corp | 1.31 | 0.46 | 0.22 |
MIT.V | Mint Corp | 0.05 | 1.9 | 1.83 |
QFIN | 360 DigiTech Inc | 0.03 | 1.32 | 1.28 |
RM | Regional Management Corp | 5.57 | 0.99 | 0.18 |
WEI | Weidai Ltd | 0.01 | 0.63 | 0.63 |
WRLD | World Acceptance Corp | 0.6 | 1.39 | 0.93 |
Low | High | |
Unlevered beta | 0.55 | 0.94 |
Relevered beta | 0.78 | 1.33 |
Adjusted relevered beta | 0.85 | 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 LX:
cost_of_equity (9.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.85) + 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.