SFD.TO WACC - Weighted Average Cost of Capital
The WACC of NXT Energy Solutions Inc (SFD.TO) is 5.7%.
| Range | Selected | |
| Cost of equity | 5.2% - 7.1% | 6.15% |
| Tax rate | 25.9% - 26.5% | 26.2% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 4.9% - 6.4% | 5.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 5.1% | 6.1% |
| Adjusted beta | 0.4 | 0.48 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.2% | 7.1% |
| Tax rate | 25.9% | 26.5% |
| Debt/Equity ratio | 0.24 | 0.24 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 4.9% | 6.4% |
| Selected WACC | 5.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SFD.TO | NXT Energy Solutions Inc | 0.24 | 1.29 | 1.09 |
| CPS.V | Canadian Premium Sand Inc | 0.16 | -0.3 | -0.27 |
| DWSN | Dawson Geophysical Co | 0.06 | 0.29 | 0.27 |
| ENG | ENGlobal Corp | 0.8 | 0.39 | 0.25 |
| LRDC | Laredo Oil Inc | 0.15 | 0.18 | 0.16 |
| PSD.TO | Pulse Seismic Inc | 0 | 0.15 | 0.15 |
| RPC.V | Raise Production Inc | 0.62 | 0.37 | 0.25 |
| SDPI | Superior Drilling Products Inc | 0.2 | -0.37 | -0.33 |
| GTC.L | Getech Group PLC | 0.24 | -0.77 | -0.65 |
| Low | High | |
| Unlevered beta | 0.15 | 0.23 |
| Relevered beta | 0.1 | 0.22 |
| Adjusted relevered beta | 0.4 | 0.48 |
SFD.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 SFD.TO:
cost_of_equity (6.15%) = risk_free_rate (3.45%) + equity_risk_premium (5.60%) * adjusted_beta (0.4) + 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.