PCYO WACC - Weighted Average Cost of Capital
The WACC of Pure Cycle Corp (PCYO) is 7.1%.
| Range | Selected | |
| Cost of equity | 6.0% - 8.5% | 7.25% |
| Tax rate | 24.4% - 24.4% | 24.4% |
| Cost of debt | 4.5% - 4.5% | 4.5% |
| WACC | 5.9% - 8.3% | 7.1% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.46 | 0.64 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.0% | 8.5% |
| Tax rate | 24.4% | 24.4% |
| Debt/Equity ratio | 0.03 | 0.03 |
| Cost of debt | 4.5% | 4.5% |
| After-tax WACC | 5.9% | 8.3% |
| Selected WACC | 7.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PCYO | Pure Cycle Corp | 0.03 | 0.61 | 0.6 |
| ARTNA | Artesian Resources Corp | 0.5 | 0.4 | 0.29 |
| CDZI | Cadiz Inc | 0.23 | 1.27 | 1.09 |
| CWCO | Consolidated Water Co Ltd | 0 | 0.4 | 0.39 |
| GWRS | Global Water Resources Inc | 0.43 | 0.73 | 0.55 |
| GWTR | Global Water Technologies Inc | 1.67 | -0.7 | -0.31 |
| MSEX | Middlesex Water Co | 0.36 | -0.11 | -0.09 |
| WATR.V | Current Water Technologies Inc | 0.22 | 0.82 | 0.71 |
| WTNW | Water Now Inc | 109.09 | 2.05 | 0.02 |
| Low | High | |
| Unlevered beta | 0.31 | 0.52 |
| Relevered beta | 0.19 | 0.46 |
| Adjusted relevered beta | 0.46 | 0.64 |
PCYO'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 PCYO:
cost_of_equity (7.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.46) + 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.