True Religion - WACC Analysis

True Religion (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for True Religion's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of True Religion'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 True Religion uses a significant proportion of equity capital.