QTWO WACC - Weighted Average Cost of Capital
The WACC of Q2 Holdings Inc (QTWO) is 8.6%.
| Range | Selected | |
| Cost of equity | 7.4% - 10.4% | 8.9% |
| Tax rate | 2.2% - 3.9% | 3.05% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 7.1% - 10.1% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.76 | 1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.4% | 10.4% |
| Tax rate | 2.2% | 3.9% |
| Debt/Equity ratio | 0.09 | 0.09 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 7.1% | 10.1% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| QTWO | Q2 Holdings Inc | 0.09 | 1.55 | 1.43 |
| AYX | Alteryx Inc | 0.35 | 1.31 | 0.98 |
| BL | Blackline Inc | 0.25 | 0.85 | 0.68 |
| BLKB | Blackbaud Inc | 0.34 | 0.54 | 0.4 |
| BOX | Box Inc | 0.14 | 0.46 | 0.4 |
| ENGH.TO | Enghouse Systems Ltd | 0.01 | 0.46 | 0.46 |
| ENV | Envestnet Inc | 0.25 | 0.08 | 0.07 |
| MSTR | MicroStrategy Inc | 0.07 | 1.37 | 1.28 |
| NCNO | nCino Inc | 0.08 | 1.54 | 1.43 |
| WK | Workiva Inc | 0.2 | 1.04 | 0.88 |
| Low | High | |
| Unlevered beta | 0.59 | 0.92 |
| Relevered beta | 0.64 | 1 |
| Adjusted relevered beta | 0.76 | 1 |
QTWO'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 QTWO:
cost_of_equity (8.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.76) + 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.