Omega Healthcare - WACC Analysis

Omega Healthcare (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Omega Healthcare's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Omega Healthcare'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 Omega Healthcare uses a significant proportion of equity capital.