RH WACC - Weighted Average Cost of Capital
The WACC of RH (RH) is 7.2%.
| Range | Selected | |
| Cost of equity | 7.9% - 9.9% | 8.9% |
| Tax rate | 16.6% - 18.5% | 17.55% |
| Cost of debt | 5.8% - 7.0% | 6.4% |
| WACC | 6.4% - 7.9% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.87 | 0.9 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.9% | 9.9% |
| Tax rate | 16.6% | 18.5% |
| Debt/Equity ratio | 0.89 | 0.89 |
| Cost of debt | 5.8% | 7.0% |
| After-tax WACC | 6.4% | 7.9% |
| Selected WACC | 7.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| RH | RH | 0.89 | 2.89 | 1.66 |
| BBBY | Bed Bath & Beyond Inc | 54.22 | 1.54 | 0.03 |
| DBI | Designer Brands Inc | 3.5 | 1.82 | 0.47 |
| EYE | National Vision Holdings Inc | 0.18 | 1.16 | 1.01 |
| FND | Floor & Decor Holdings Inc | 0.02 | 1.13 | 1.11 |
| GBT.TO | BMTC Group Inc | 0.07 | 0.27 | 0.26 |
| GES | Guess? Inc | 0.8 | 0.73 | 0.44 |
| KIRK | Kirkland's Inc | 2.2 | 1.38 | 0.49 |
| LNF.TO | Leon's Furniture Ltd | 0.23 | 0.75 | 0.63 |
| SBH | Sally Beauty Holdings Inc | 1.01 | 0.84 | 0.46 |
| ZZZ.TO | Sleep Country Canada Holdings Inc | 0.41 | 0.66 | 0.5 |
| Low | High | |
| Unlevered beta | 0.47 | 0.5 |
| Relevered beta | 0.81 | 0.85 |
| Adjusted relevered beta | 0.87 | 0.9 |
RH'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 RH:
cost_of_equity (8.90%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.87) + 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.