The WACC of Vital Farms Inc (VITL) is 6.0%.
Range | Selected | |
Cost of equity | 5.2% - 6.8% | 6% |
Tax rate | 22.6% - 37.2% | 29.9% |
Cost of debt | 4.5% - 14.4% | 9.45% |
WACC | 5.2% - 6.8% | 6.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.3 | 0.34 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 5.2% | 6.8% |
Tax rate | 22.6% | 37.2% |
Debt/Equity ratio | 0.01 | 0.01 |
Cost of debt | 4.5% | 14.4% |
After-tax WACC | 5.2% | 6.8% |
Selected WACC | 6.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
VITL | Vital Farms Inc | 0.01 | 0.5 | 0.49 |
CAG | Conagra Brands Inc | 0.79 | -0.19 | -0.12 |
CPB | Campbell Soup Co | 0.72 | 0.04 | 0.03 |
GIS | General Mills Inc | 0.44 | -0.16 | -0.12 |
HSY | Hershey Co | 0.16 | -0.15 | -0.13 |
K | Kellogg Co | 0.2 | 0.01 | 0.01 |
KHC | Kraft Heinz Co | 0.64 | -0.06 | -0.04 |
MDLZ | Mondelez International Inc | 0.21 | -0.06 | -0.05 |
MKC | McCormick & Company Inc | 0.23 | 0.11 | 0.1 |
TSN | Tyson Foods Inc | 0.49 | 0.05 | 0.04 |
Low | High | |
Unlevered beta | -0.05 | 0.02 |
Relevered beta | -0.04 | 0.01 |
Adjusted relevered beta | 0.3 | 0.34 |
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 VITL:
cost_of_equity (6.00%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.3) + 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.