SM
SM Energy Co
Price:  
23.18 
USD
Volume:  
1,507,039.00
United States | Oil, Gas & Consumable Fuels
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SM WACC - Weighted Average Cost of Capital

The WACC of SM Energy Co (SM) is 8.3%.

The Cost of Equity of SM Energy Co (SM) is 12.35%.
The Cost of Debt of SM Energy Co (SM) is 5.35%.

Range Selected
Cost of equity 10.40% - 14.30% 12.35%
Tax rate 20.20% - 20.30% 20.25%
Cost of debt 4.80% - 5.90% 5.35%
WACC 7.1% - 9.5% 8.3%
WACC

SM WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.43 1.68
Additional risk adjustments 0.0% 0.5%
Cost of equity 10.40% 14.30%
Tax rate 20.20% 20.30%
Debt/Equity ratio 0.99 0.99
Cost of debt 4.80% 5.90%
After-tax WACC 7.1% 9.5%
Selected WACC 8.3%

SM'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 SM:

cost_of_equity (12.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.43) + 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.