SSD WACC - Weighted Average Cost of Capital
The WACC of Simpson Manufacturing Co Inc (SSD) is 9.0%.
| Range | Selected | |
| Cost of equity | 8.2% - 10.5% | 9.35% |
| Tax rate | 25.6% - 25.7% | 25.65% |
| Cost of debt | 4.5% - 4.5% | 4.5% |
| WACC | 7.9% - 10.1% | 9.0% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.94 | 1 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.2% | 10.5% |
| Tax rate | 25.6% | 25.7% |
| Debt/Equity ratio | 0.06 | 0.06 |
| Cost of debt | 4.5% | 4.5% |
| After-tax WACC | 7.9% | 10.1% |
| Selected WACC | 9.0% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SSD | Simpson Manufacturing Co Inc | 0.06 | 0.99 | 0.95 |
| AAON | Aaon Inc | 0.03 | 1.62 | 1.59 |
| AMWD | American Woodmark Corp | 0.47 | 1.12 | 0.83 |
| APOG | Apogee Enterprises Inc | 0.31 | 0.87 | 0.7 |
| AWI | Armstrong World Industries Inc | 0.08 | 0.96 | 0.91 |
| CSTE | Caesarstone Ltd | 0.08 | 0.78 | 0.73 |
| DOOR | Masonite International Corp | 0.38 | 1.54 | 1.2 |
| NX | Quanex Building Products Corp | 0.84 | 0.83 | 0.51 |
| PGTI | PGT Innovations Inc | 0.25 | 1.15 | 0.97 |
| WMS | Advanced Drainage Systems Inc | 0.16 | 1.11 | 0.99 |
| Low | High | |
| Unlevered beta | 0.88 | 0.95 |
| Relevered beta | 0.91 | 1 |
| Adjusted relevered beta | 0.94 | 1 |
SSD'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 SSD:
cost_of_equity (9.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.94) + 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.