Novanta WACC - Weighted Average Cost of Capital
The WACC of Novanta Inc (NOVT) is 9.7%.
| Range | Selected | |
| Cost of equity | 8.9% - 11.3% | 10.1% |
| Tax rate | 11.9% - 13.8% | 12.85% |
| Cost of debt | 5.2% - 5.3% | 5.25% |
| WACC | 8.6% - 10.8% | 9.7% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.1 | 1.15 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.9% | 11.3% |
| Tax rate | 11.9% | 13.8% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 5.2% | 5.3% |
| After-tax WACC | 8.6% | 10.8% |
| Selected WACC | 9.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| NOVT | Novanta Inc | 0.09 | 1.5 | 1.39 |
| CRAWA | Crawford United Corp | 0.04 | 0.3 | 0.29 |
| HOLI | Hollysys Automation Technologies Ltd | 0.02 | 0.62 | 0.61 |
| LPTH | LightPath Technologies Inc | 0.01 | 1.13 | 1.12 |
| MICT | MICT Inc | 0.01 | 1.14 | 1.13 |
| MVIS | MicroVision Inc | 0.12 | 1.07 | 0.97 |
| NATI | National Instruments Corp | 0.07 | 0.97 | 0.91 |
| OSIS | OSI Systems Inc | 0.13 | 1.5 | 1.35 |
| PAR | PAR Technology Corp | 0.13 | 1.52 | 1.37 |
| VPG | Vishay Precision Group Inc | 0.08 | 1.24 | 1.16 |
| Low | High | |
| Unlevered beta | 1.06 | 1.14 |
| Relevered beta | 1.15 | 1.22 |
| Adjusted relevered beta | 1.1 | 1.15 |
Novanta'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 Novanta:
cost_of_equity (10.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.1) + 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.