STRO WACC - Weighted Average Cost of Capital
The WACC of Sutro Biopharma Inc (STRO) is 8.2%.
| Range | Selected | |
| Cost of equity | 7.9% - 10.5% | 9.2% |
| Tax rate | 0.6% - 1.5% | 1.05% |
| Cost of debt | 7.0% - 7.6% | 7.3% |
| WACC | 7.4% - 9.0% | 8.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.88 | 1.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.9% | 10.5% |
| Tax rate | 0.6% | 1.5% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 7.0% | 7.6% |
| After-tax WACC | 7.4% | 9.0% |
| Selected WACC | 8.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| STRO | Sutro Biopharma Inc | 1.12 | 4.36 | 2.06 |
| ABBV | Abbvie Inc | 0.21 | 0.33 | 0.28 |
| ADAG | Adagene Inc | 0.23 | 0.55 | 0.45 |
| AMGN | Amgen Inc | 0.41 | 0.38 | 0.27 |
| AQB | AquaBounty Technologies Inc | 0.99 | 0.71 | 0.36 |
| CDMO | Avid Bioservices Inc | 0.2 | 1.95 | 1.63 |
| ENTA | Enanta Pharmaceuticals Inc | 0.01 | 1.77 | 1.75 |
| GILD | Gilead Sciences Inc | 0.2 | 0.38 | 0.31 |
| HRTX | Heron Therapeutics Inc | 0.53 | 0.81 | 0.53 |
| KDMN | Kadmon Holdings Inc | 0 | 1.12 | 1.12 |
| MNKD | MannKind Corp | 0.23 | 0.6 | 0.49 |
| Low | High | |
| Unlevered beta | 0.45 | 0.53 |
| Relevered beta | 0.82 | 1.01 |
| Adjusted relevered beta | 0.88 | 1.01 |
STRO'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 STRO:
cost_of_equity (9.20%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.88) + 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.