The WACC of Penumbra Inc (PEN) is 8.5%.
Range | Selected | |
Cost of equity | 7.2% - 9.8% | 8.5% |
Tax rate | 26.2% - 27.0% | 26.6% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.2% - 9.7% | 8.5% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.72 | 0.87 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.2% | 9.8% |
Tax rate | 26.2% | 27.0% |
Debt/Equity ratio | 0 | 0 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.2% | 9.7% |
Selected WACC | 8.5% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
PEN | Penumbra Inc | 0 | 0.31 | 0.31 |
CNMD | Conmed Corp | 0.57 | 0.48 | 0.34 |
GMED | Globus Medical Inc | 0.06 | 0.78 | 0.75 |
ITGR | Integer Holdings Corp | 0.24 | 0.7 | 0.59 |
LIVN | LivaNova PLC | 0.26 | 0.66 | 0.56 |
MASI | Masimo Corp | 0.09 | 1.11 | 1.04 |
NVCR | Novocure Ltd | 0.33 | 1.27 | 1.02 |
NVRO | Nevro Corp | 1.02 | 1.56 | 0.9 |
SWAV | Shockwave Medical Inc | 0.06 | 0.57 | 0.55 |
TNDM | Tandem Diabetes Care Inc | 0.34 | 1.19 | 0.96 |
Low | High | |
Unlevered beta | 0.58 | 0.81 |
Relevered beta | 0.58 | 0.81 |
Adjusted relevered beta | 0.72 | 0.87 |
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 PEN:
cost_of_equity (8.50%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.72) + 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.