The WACC of Vertex Inc (VERX) is 8.6%.
Range | Selected | |
Cost of equity | 7.6% - 10.3% | 8.95% |
Tax rate | 35.9% - 48.4% | 42.15% |
Cost of debt | 5.0% - 5.0% | 5% |
WACC | 7.3% - 9.8% | 8.6% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.8 | 0.96 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.6% | 10.3% |
Tax rate | 35.9% | 48.4% |
Debt/Equity ratio | 0.06 | 0.06 |
Cost of debt | 5.0% | 5.0% |
After-tax WACC | 7.3% | 9.8% |
Selected WACC | 8.6% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
VERX | Vertex Inc | 0.06 | 0.99 | 0.95 |
BLKB | Blackbaud Inc | 0.35 | 0.62 | 0.52 |
CGNT | Cognyte Software Ltd | 0 | 0.19 | 0.19 |
EGHT | 8x8 Inc | 1.35 | 1.75 | 0.96 |
FUBO | Fubotv Inc | 0.3 | -0.85 | -0.72 |
KXS.TO | Kinaxis Inc | 0.01 | 0.79 | 0.79 |
MDLA | Medallia Inc | 0.08 | 1.07 | 1.02 |
MIME | Mimecast Ltd | 0.02 | 1.35 | 1.33 |
NEWR | New Relic Inc | 0.08 | 0.93 | 0.89 |
UPLD | Upland Software Inc | 5.31 | 1.88 | 0.45 |
Low | High | |
Unlevered beta | 0.68 | 0.91 |
Relevered beta | 0.7 | 0.94 |
Adjusted relevered beta | 0.8 | 0.96 |
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 VERX:
cost_of_equity (8.95%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.8) + 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.