SWS Group - WACC Analysis

SWS Group (Weighted Average Cost of Capital (WACC) Analysis)

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Helpful Information for SWS Group's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of SWS Group'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 SWS Group uses a significant proportion of equity capital.