Superior Energy Services - WACC Analysis

Superior Energy Services (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Superior Energy Services's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Superior Energy Services'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 Superior Energy Services uses a significant proportion of equity capital.