STL WACC - Weighted Average Cost of Capital
The WACC of Sterling Bancorp (STL) is 8.7%.
| Range | Selected | |
| Cost of equity | 8.1% - 10.4% | 9.25% |
| Tax rate | 21.0% - 21.0% | 21% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.7% - 9.8% | 8.7% |
| Category | Low | High |
| Long-term bond rate | 3.2% | 3.7% |
| Equity market risk premium | 4.2% | 5.2% |
| Adjusted beta | 1.15 | 1.18 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.1% | 10.4% |
| Tax rate | 21.0% | 21.0% |
| Debt/Equity ratio | 0.1 | 0.1 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.7% | 9.8% |
| Selected WACC | 8.7% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| STL | Sterling Bancorp | 0.1 | 1.36 | 1.26 |
| BKU | BankUnited Inc | 0.26 | 1.12 | 0.93 |
| CATY | Cathay General Bancorp | 0.04 | 0.96 | 0.93 |
| FNB | F.N.B. Corp | 0.37 | 1.24 | 0.96 |
| HOMB | Home BancShares Inc | 0.11 | 0.84 | 0.77 |
| OZK | Bank Ozk | 0.09 | 1.15 | 1.08 |
| PACW | PacWest Bancorp | 1.4 | 3.67 | 1.74 |
| TCBI | Texas Capital Bancshares Inc | 0.18 | 0.98 | 0.86 |
| UMPQ | Umpqua Holdings Corp | 0.42 | 0.95 | 0.71 |
| WBS | Webster Financial Corp | 0.14 | 1.49 | 1.35 |
| Low | High | |
| Unlevered beta | 0.93 | 1.01 |
| Relevered beta | 1.22 | 1.27 |
| Adjusted relevered beta | 1.15 | 1.18 |
STL'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 STL:
cost_of_equity (9.25%) = risk_free_rate (3.45%) + equity_risk_premium (4.70%) * adjusted_beta (1.15) + 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.