Helen of Troy (Weighted Average Cost of Capital (WACC) Analysis)
Helpful Information for Helen of Troy's Analysis
What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine Helen of Troy'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 Helen of Troy. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in Helen of Troy before they make value investing decisions. This WACC analysis is used in Helen of Troy's discounted cash flow (DCF) valuation and see how the WACC calculation affect's Helen of Troy's company valuation.
WACC Analysis Information
1. The WACC (discount rate) calculation for Helen of Troy uses comparable companies to produce a single WACC (discount rate). An industry average WACC (discount rate) is the most accurate for Helen of Troy over the long term. If there are any short-term differences between the industry WACC and Helen of Troy's WACC (discount rate), then Helen of Troy is more likely to revert to the industry WACC (discount rate) over the long term.
2. The WACC calculation uses the higher of Helen of Troy'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 Helen of Troy uses a significant proportion of equity capital.