VBTX WACC - Weighted Average Cost of Capital
The WACC of Veritex Holdings Inc (VBTX) is 8.6%.
| Range | Selected | |
| Cost of equity | 8.3% - 10.5% | 9.4% |
| Tax rate | 21.3% - 22.1% | 21.7% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.6% - 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 | 0.96 | 1.01 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 8.3% | 10.5% |
| Tax rate | 21.3% | 22.1% |
| Debt/Equity ratio | 0.18 | 0.18 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.6% | 9.5% |
| Selected WACC | 8.6% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| VBTX | Veritex Holdings Inc | 0.18 | 1.06 | 0.93 |
| BUSE | First Busey Corp | 0.24 | 1 | 0.85 |
| EFSC | Enterprise Financial Services Corp | 0.23 | 0.76 | 0.65 |
| FBK | FB Financial Corp | 0.09 | 1.09 | 1.02 |
| FCF | First Commonwealth Financial Corp | 0.1 | 0.8 | 0.75 |
| NBTB | NBT Bancorp Inc | 0.21 | 0.87 | 0.74 |
| OCFC | OceanFirst Financial Corp | 0.27 | 1.06 | 0.88 |
| TBBK | Bancorp Inc | 0.05 | 1.29 | 1.24 |
| TBK | Triumph Bancorp Inc | 0.12 | 1.15 | 1.05 |
| TCBK | Trico Bancshares | 0.15 | 0.88 | 0.79 |
| Low | High | |
| Unlevered beta | 0.82 | 0.9 |
| Relevered beta | 0.94 | 1.01 |
| Adjusted relevered beta | 0.96 | 1.01 |
VBTX'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 VBTX:
cost_of_equity (9.40%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.96) + 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.