The WACC of Valmont Industries Inc (VMI) is 9.0%.
Range | Selected | |
Cost of equity | 8.4% - 10.7% | 9.55% |
Tax rate | 25.5% - 27.4% | 26.45% |
Cost of debt | 4.6% - 5.4% | 5% |
WACC | 7.9% - 10.0% | 9.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.98 | 1.04 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 8.4% | 10.7% |
Tax rate | 25.5% | 27.4% |
Debt/Equity ratio | 0.11 | 0.11 |
Cost of debt | 4.6% | 5.4% |
After-tax WACC | 7.9% | 10.0% |
Selected WACC | 9.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
VMI | Valmont Industries Inc | 0.11 | 1.02 | 0.94 |
ARE.TO | Aecon Group Inc | 0.36 | 0.77 | 0.61 |
DY | Dycom Industries Inc | 0.13 | 1.15 | 1.05 |
GVA | Granite Construction Inc | 0.18 | 1.01 | 0.89 |
MYRG | MYR Group Inc | 0.03 | 1.89 | 1.85 |
NWPX | Northwest Pipe Co | 0.11 | 0.98 | 0.91 |
OEG | Orbital Energy Group Inc | 4.42 | 1.28 | 0.3 |
PRIM | Primoris Services Corp | 0.17 | 1.91 | 1.7 |
WSC | Willscot Mobile Mini Holdings Corp | 0.72 | 1.82 | 1.19 |
Low | High | |
Unlevered beta | 0.91 | 1.03 |
Relevered beta | 0.97 | 1.06 |
Adjusted relevered beta | 0.98 | 1.04 |
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 VMI:
cost_of_equity (9.55%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.98) + 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.