Sensient Tech - WACC Analysis

Sensient Tech (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Sensient Tech's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Sensient Tech'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 Sensient Tech uses a significant proportion of equity capital.