USAC WACC - Weighted Average Cost of Capital
The WACC of USA Compression Partners LP (USAC) is 8.6%.
| Range | Selected | |
| Cost of equity | 10.2% - 13.5% | 11.85% |
| Tax rate | 2.1% - 2.6% | 2.35% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.8% - 9.5% | 8.6% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 1.39 | 1.54 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 10.2% | 13.5% |
| Tax rate | 2.1% | 2.6% |
| Debt/Equity ratio | 0.85 | 0.85 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.8% | 9.5% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| USAC | USA Compression Partners LP | 0.85 | 0.64 | 0.35 |
| AROC | Archrock Inc | 0.5 | 1.33 | 0.89 |
| CFW.TO | Calfrac Well Services Ltd | 1.12 | 0.79 | 0.38 |
| CLB | Core Laboratories NV | 0.21 | 1.17 | 0.97 |
| HLX | Helix Energy Solutions Group Inc | 0.32 | 1.06 | 0.81 |
| LBRT | Liberty Oilfield Services Inc | 0.24 | 1.23 | 1 |
| PUMP | ProPetro Holding Corp | 0.12 | 1.42 | 1.28 |
| RES | RPC Inc | 0 | 1.19 | 1.18 |
| SLCA | U.S. Silica Holdings Inc | 0.69 | 0.47 | 0.28 |
| WTTR | Select Energy Services Inc | 0.08 | 1.4 | 1.3 |
| Low | High | |
| Unlevered beta | 0.86 | 0.98 |
| Relevered beta | 1.58 | 1.81 |
| Adjusted relevered beta | 1.39 | 1.54 |
USAC'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 USAC:
cost_of_equity (11.85%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (1.39) + 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.