Ulta WACC - Weighted Average Cost of Capital
The WACC of Ulta Beauty Inc (ULTA) is 7.6%.
| Range | Selected | |
| Cost of equity | 7.6% - 12.1% | 9.85% |
| Tax rate | 23.9% - 23.9% | 23.9% |
| Cost of debt | 7.0% - 7.0% | 7% |
| WACC | 6.5% - 8.7% | 7.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.82 | 1.29 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 12.1% |
| Tax rate | 23.9% | 23.9% |
| Debt/Equity ratio | 1 | 1 |
| Cost of debt | 7.0% | 7.0% |
| After-tax WACC | 6.5% | 8.7% |
| Selected WACC | 7.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ULTA | Ulta Beauty Inc | 0.9 | 0.61 | 0.36 |
| BGFV | Big 5 Sporting Goods Corp | 0.83 | 0.69 | 0.42 |
| BNED | Barnes & Noble Education Inc | 0.53 | 1.52 | 1.09 |
| DKS | Dick's Sporting Goods Inc | 0.1 | 1.14 | 1.06 |
| EYE | National Vision Holdings Inc | 0.23 | 1 | 0.85 |
| HIBB | Hibbett Sports Inc | 0.05 | 1.91 | 1.84 |
| HZO | MarineMax Inc | 2.18 | 2.09 | 0.79 |
| ODP | ODP Corp | 0.51 | 0.57 | 0.41 |
| SBH | Sally Beauty Holdings Inc | 1.05 | 0.53 | 0.3 |
| SPWH | Sportsmans Warehouse Holdings Inc | 1.3 | -0.34 | -0.17 |
| TCS | Container Store Group Inc | 256.2 | 1.69 | 0.01 |
| Low | High | |
| Unlevered beta | 0.41 | 0.79 |
| Relevered beta | 0.73 | 1.43 |
| Adjusted relevered beta | 0.82 | 1.29 |
Ulta'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 Ulta:
cost_of_equity (9.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.82) + 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.