Zillow WACC - Weighted Average Cost of Capital
The WACC of Zillow Group Inc (ZG) is 7.4%.
| Range | Selected | |
| Cost of equity | 6.6% - 8.7% | 7.65% |
| Tax rate | 2.1% - 3.0% | 2.55% |
| Cost of debt | 4.0% - 7.0% | 5.5% |
| WACC | 6.3% - 8.5% | 7.4% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.59 | 0.68 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 6.6% | 8.7% |
| Tax rate | 2.1% | 3.0% |
| Debt/Equity ratio | 0.1 | 0.1 |
| Cost of debt | 4.0% | 7.0% |
| After-tax WACC | 6.3% | 8.5% |
| Selected WACC | 7.4% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| ZG | Zillow Group Inc | 0.1 | 2.49 | 2.27 |
| BIDU | Baidu Inc | 0.32 | 0.97 | 0.74 |
| EB | Eventbrite Inc | 1.13 | 0.69 | 0.33 |
| IAC | IAC/Interactivecorp | 0.68 | 0.98 | 0.59 |
| MAX | MediaAlpha Inc | 0.24 | 0.71 | 0.58 |
| MOMO | Momo Inc | 0.6 | 0.48 | 0.3 |
| MTCH | Match Group Inc | 0.54 | 0.32 | 0.21 |
| TRIP | Tripadvisor Inc | 0.45 | 1.17 | 0.82 |
| TWTR | Twitter Inc | 0.1 | 0.52 | 0.47 |
| WB | Weibo Corp | 0.25 | 1.02 | 0.82 |
| ZI | ZoomInfo Technologies Inc | 0.35 | 1.66 | 1.23 |
| Low | High | |
| Unlevered beta | 0.58 | 0.74 |
| Relevered beta | 0.39 | 0.52 |
| Adjusted relevered beta | 0.59 | 0.68 |
Zillow'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 Zillow:
cost_of_equity (7.65%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.59) + 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.