Skechers USA - WACC Analysis

Skechers USA (Weighted Average Cost of Capital (WACC) Analysis)



Helpful Information for Skechers USA's Analysis

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

WACC Analysis Information

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

2. The WACC calculation uses the higher of Skechers USA'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 Skechers USA uses a significant proportion of equity capital.