Superior Well Services - WACC Analysis

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



Helpful Information for Superior Well Services's Analysis

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

WACC Analysis Information

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