STRL WACC - Weighted Average Cost of Capital
The WACC of Sterling Construction Company Inc (STRL) is 10.8%.
| Range | Selected | |
| Cost of equity | 9.3% - 12.8% | 11.05% |
| Tax rate | 26.8% - 28.7% | 27.75% |
| Cost of debt | 4.6% - 5.5% | 5.05% |
| WACC | 9.1% - 12.4% | 10.8% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.18 | 1.42 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 9.3% | 12.8% |
| Tax rate | 26.8% | 28.7% |
| Debt/Equity ratio | 0.04 | 0.04 |
| Cost of debt | 4.6% | 5.5% |
| After-tax WACC | 9.1% | 12.4% |
| Selected WACC | 10.8% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| STRL | Sterling Construction Company Inc | 0.04 | 2.46 | 2.38 |
| AEGN | Aegion Corp | 0.24 | 1.31 | 1.12 |
| AMRC | Ameresco Inc | 1.73 | 1.34 | 0.6 |
| BAD.TO | Badger Daylighting Ltd | 0.11 | 1.33 | 1.23 |
| BDT.TO | Bird Construction Inc | 0.16 | 1.93 | 1.73 |
| GLDD | Great Lakes Dredge & Dock Corp | 0.6 | 1.38 | 0.96 |
| IEA | Infrastructure and Energy Alternatives Inc | 0.53 | 1.71 | 1.24 |
| LMB | Limbach Holdings Inc | 0.02 | 1.78 | 1.76 |
| MYRG | MYR Group Inc | 0.03 | 1.93 | 1.89 |
| ORN | Orion Group Holdings Inc | 0.13 | 2.05 | 1.87 |
| ROAD | Construction Partners Inc | 0.09 | 1.57 | 1.47 |
| Low | High | |
| Unlevered beta | 1.24 | 1.73 |
| Relevered beta | 1.27 | 1.63 |
| Adjusted relevered beta | 1.18 | 1.42 |
STRL'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 STRL:
cost_of_equity (11.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.18) + 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.