OceanFirst WACC - Weighted Average Cost of Capital
The WACC of OceanFirst Financial Corp (OCFC) is 8.0%.
| Range | Selected | |
| Cost of equity | 8.1% - 10.2% | 9.15% |
| Tax rate | 23.0% - 23.5% | 23.25% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.2% - 8.9% | 8.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.92 | 0.96 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.1% | 10.2% |
| Tax rate | 23.0% | 23.5% |
| Debt/Equity ratio | 0.27 | 0.27 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.2% | 8.9% |
| Selected WACC | 8.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| OCFC | OceanFirst Financial Corp | 0.27 | 1.06 | 0.88 |
| BHLB | Berkshire Hills Bancorp Inc | 0.1 | 0.81 | 0.75 |
| BRKL | Brookline Bancorp Inc | 0.17 | 0.77 | 0.68 |
| BUSE | First Busey Corp | 0.23 | 1.03 | 0.88 |
| CHCO | City Holding Co | 0.19 | 0.51 | 0.44 |
| EFSC | Enterprise Financial Services Corp | 0.22 | 0.8 | 0.69 |
| FCF | First Commonwealth Financial Corp | 0.1 | 0.84 | 0.78 |
| NBTB | NBT Bancorp Inc | 0.2 | 0.9 | 0.78 |
| OBNK | Origin Bancorp Inc | 0.29 | 0.54 | 0.44 |
| VBTX | Veritex Holdings Inc | 0.18 | 1.08 | 0.95 |
| Low | High | |
| Unlevered beta | 0.72 | 0.78 |
| Relevered beta | 0.88 | 0.94 |
| Adjusted relevered beta | 0.92 | 0.96 |
OceanFirst'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 OceanFirst:
cost_of_equity (9.15%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.92) + 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.