PNTG WACC - Weighted Average Cost of Capital
The WACC of Pennant Group Inc (PNTG) is 7.4%.
| Range | Selected | |
| Cost of equity | 7.7% - 9.8% | 8.75% |
| Tax rate | 20.5% - 22.3% | 21.4% |
| Cost of debt | 4.9% - 10.4% | 7.65% |
| WACC | 5.8% - 8.9% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.83 | 0.88 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.7% | 9.8% |
| Tax rate | 20.5% | 22.3% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 4.9% | 10.4% |
| After-tax WACC | 5.8% | 8.9% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| PNTG | Pennant Group Inc | 0.05 | 0.6 | 0.58 |
| ACHC | Acadia Healthcare Company Inc | 0.95 | 0.62 | 0.36 |
| EHC | Encompass Health Corp | 0.21 | 0.61 | 0.53 |
| ENSG | Ensign Group Inc | 0.02 | 0.27 | 0.27 |
| HCA | HCA Healthcare Inc | 0.46 | 0.33 | 0.24 |
| SEM | Select Medical Holdings Corp | 0.94 | 0.76 | 0.44 |
| SGRY | Surgery Partners Inc | 1.15 | 0.88 | 0.47 |
| THC | Tenet Healthcare Corp | 0.87 | 1.04 | 0.62 |
| UHS | Universal Health Services Inc | 0.37 | 0.53 | 0.41 |
| USPH | U.S. Physical Therapy Inc | 0.14 | 0.89 | 0.8 |
| Low | High | |
| Unlevered beta | 0.43 | 0.49 |
| Relevered beta | 0.75 | 0.82 |
| Adjusted relevered beta | 0.83 | 0.88 |
PNTG'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 PNTG:
cost_of_equity (8.75%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.83) + 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.