The WACC of Merit Medical Systems Inc (MMSI) is 7.8%.
Range | Selected | |
Cost of equity | 7.3% - 9.3% | 8.3% |
Tax rate | 13.5% - 17.4% | 15.45% |
Cost of debt | 4.0% - 5.1% | 4.55% |
WACC | 6.8% - 8.7% | 7.8% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.74 | 0.79 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.3% | 9.3% |
Tax rate | 13.5% | 17.4% |
Debt/Equity ratio | 0.13 | 0.13 |
Cost of debt | 4.0% | 5.1% |
After-tax WACC | 6.8% | 8.7% |
Selected WACC | 7.8% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
MMSI | Merit Medical Systems Inc | 0.13 | 0.64 | 0.57 |
AVNS | Avanos Medical Inc | 0.24 | 0.6 | 0.5 |
HAE | Haemonetics Corp | 0.34 | 0.81 | 0.63 |
ICUI | ICU Medical Inc | 0.49 | 0.74 | 0.52 |
LNTH | Lantheus Holdings Inc | 0.1 | 0.73 | 0.67 |
LUNG | Pulmonx Corp | 0.32 | 0.76 | 0.6 |
NEOG | Neogen Corp | 0.76 | 0.85 | 0.52 |
OSUR | OraSure Technologies Inc | 0 | 0.67 | 0.67 |
STAA | STAAR Surgical Co | 0 | 0.76 | 0.76 |
VIVO | Meridian Bioscience Inc | 0.02 | 0.23 | 0.23 |
Low | High | |
Unlevered beta | 0.55 | 0.61 |
Relevered beta | 0.61 | 0.69 |
Adjusted relevered beta | 0.74 | 0.79 |
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 MMSI:
cost_of_equity (8.30%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.74) + 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.