SigmaTron Intl - WACC Analysis

SigmaTron Intl (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for SigmaTron Intl's Analysis

What is the WACC Formula? Analyst use the WACC Discount Rate (weighted average cost of capital) to determine SigmaTron Intl'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 SigmaTron Intl. Value Investing Importance? This method is widely used by investment professionals to determine the correct price for investments in SigmaTron Intl before they make value investing decisions. This WACC analysis is used in SigmaTron Intl's discounted cash flow (DCF) valuation and see how the WACC calculation affect's SigmaTron Intl's company valuation.

WACC Analysis Information

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

2. The WACC calculation uses the higher of SigmaTron Intl'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 SigmaTron Intl uses a significant proportion of equity capital.