PD.TO WACC - Weighted Average Cost of Capital
The WACC of Precision Drilling Corp (PD.TO) is 9.0%.
| Range | Selected | |
| Cost of equity | 10.8% - 15.6% | 13.2% |
| Tax rate | 9.6% - 17.2% | 13.4% |
| Cost of debt | 5.4% - 6.8% | 6.1% |
| WACC | 7.7% - 10.3% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 1.5 | 1.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.8% | 15.6% |
| Tax rate | 9.6% | 17.2% |
| Debt/Equity ratio | 1.11 | 1.11 |
| Cost of debt | 5.4% | 6.8% |
| After-tax WACC | 7.7% | 10.3% |
| Selected WACC | 9.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PD.TO | Precision Drilling Corp | 1.11 | 1.48 | 0.74 |
| ESI.TO | Ensign Energy Services Inc | 3.07 | 1.57 | 0.42 |
| HLX | Helix Energy Solutions Group Inc | 0.32 | 1.24 | 0.96 |
| PHX.TO | PHX Energy Services Corp | 0.15 | 1.51 | 1.33 |
| PKDC | Parker Drilling Co | 1.07 | 0.5 | 0.26 |
| PTEN | Patterson-UTI Energy Inc | 0.54 | 1.54 | 1.04 |
| PUMP | ProPetro Holding Corp | 0.14 | 1.51 | 1.34 |
| STEP.TO | Step Energy Services Ltd | 0.3 | 1.76 | 1.38 |
| VTDRF | Vantage Drilling International | 1.19 | 0.39 | 0.19 |
| WTTR | Select Energy Services Inc | 0.09 | 1.51 | 1.4 |
| Low | High | |
| Unlevered beta | 0.87 | 1.15 |
| Relevered beta | 1.75 | 2.31 |
| Adjusted relevered beta | 1.5 | 1.88 |
PD.TO'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 PD.TO:
cost_of_equity (13.20%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (1.5) + 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.