Dril-Quip - WACC Analysis

Dril-Quip (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Dril-Quip's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Dril-Quip's investment risk. WACC Formula = Cost of Equity (CAPM) * Common Equity + (Cost of Debt) * Total Debt. The result of this calculation is an essential input for the discounted cash flow (DCF) analysis for Dril-Quip. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Dril-Quip before they make value investing decisions. This WACC analysis is used in Dril-Quip's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Dril-Quip's company valuation.

WACC Analysis Information

1. The WACC (discount rate) calculation for Dril-Quip uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Dril-Quip over the long term. If there are any short-term differences between the industry WACC and Dril-Quip's WACC (discount rate), then Dril-Quip is more likely to revert to the industry WACC (discount rate) over the long term.

2. The WACC calculation uses the higher of Dril-Quip's WACC or the risk free rate, because no investment can have a cost of capital that is better than risk free. This situation may occur if the beta is negative and Dril-Quip uses a significant proportion of equity capital.