As of today (2024-06-12), GMX Resources's weighted average cost of capital is 4.87%%. GMX Resources's ROIC % is 0.00% (calculated using TTM income statement data).
GMX Resources earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
For a comprehensive WACC calculation, please access the WACC Calculator.
GMX Resources WACC % Historical Data
The historical data trend for GMX Resources's WACC % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
For the Oil & Gas E&P subindustry, GMX Resources's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
GMX Resources's WACC % Distribution in the Oil & Gas Industry
For the Oil & Gas industry and Energy sector, GMX Resources's WACC % distribution charts can be found below:
* The bar in red indicates where GMX Resources's WACC % falls into.
GMX Resources WACC % Calculation
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.
WACC
=
E
/
(E + D)
*
Cost of Equity
+
D
/
(E + D)
*
Cost of Debt
*
(1 - Tax Rate)
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, GMX Resources's market capitalization (E) is €1.081 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Jun. 2013, GMX Resources's latest one-year quarterly average Book Value of Debt (D) is €321.7343 Mil.
a) weight of equity = E / (E + D) = 1.081 / (1.081 + 321.7343) = 0.0033
b) weight of debt = D / (E + D) = 321.7343 / (1.081 + 321.7343) = 0.9967
2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.4%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. GMX Resources's beta cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.4% + 1 * 6% = 10.4%
3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Jun. 2013, GMX Resources's interest expense (positive number) was €15.62 Mil. Its total Book Value of Debt (D) is €321.7343 Mil.
Cost of Debt = 15.62 / 321.7343 = 4.8549%.
4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 2.156 / -86.664 = -2.49%, which is less than 0%. Therefore it's set to 0%.
GMX Resources's Weighted Average Cost Of Capital (WACC) for Today is calculated as:
WACC
=
E / (E + D)
*
Cost of Equity
+
D / (E + D)
*
Cost of Debt
*
(1 - Tax Rate)
=
0.0033
*
10.4%
+
0.9967
*
4.8549%
*
(1 - 0%)
=
4.87%
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
GMX Resources (FRA:HJ8A) WACC % Explanation
Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, GMX Resources's weighted average cost of capital is 4.87%%. GMX Resources's ROIC % is 0.00% (calculated using TTM income statement data).
GMX Resources earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
Be Aware
1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.
2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.
3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
GMX Resources Inc. is an oil and gas company, which is engaged in the exploration, development and production of oil and natural gas from the Haynesville/Bossier Shale and Cotton Valley Sands in its core area, the Sabine Uplift of the Carthage, North Field of Harrison and Panola counties of East Texas. It also has properties located in Lea and Roosevelt counties, and New Mexico. During the first half of 2011, the company acquired all of the working interest and an average greater than 80% net revenue interest in approximately 35,000 undeveloped net acres of oil and gas leases located in Billings, Stark, McKenzie and Dunn Counties of North Dakota, and Richland, Sheridan and Wibaux Counties of Montana. The company holds Williston Basin leases in approximately 150 1,280-acre units and expects to be the operator in approximately 31 of those units, providing a minimum of 172 operated locations. At the same time it acquired all of the working interest and an 80% net revenue interest in approximately 40,000 undeveloped net acres of oil and gas leases located in Platte, Goshen and Laramie Counties of Wyoming. During 2011, it acquired approximately 35,000 net acres in the Bakken/Three Forks oil resource play, which provides it with over 400 potential horizontal locations. The company intends to continue its multi-year drilling program in 2012, expanding to a multi-rig program based on available liquidity and capital resources. It has three subsidiaries: Diamond Blue Drilling Co. (Diamond Blue), which previously owned three drilling rigs, Endeavor Pipeline Inc. (Endeavor Pipeline), which operates its water supply and salt water disposal systems in its East Texas area, and Endeavor Gathering, LLC (Endeavor Gathering), which owns the natural gas gathering system and related equipment operated by Endeavor Pipeline. Kinder Morgan Endeavor LLC (KME) owns 40% membership interest in Endeavor Gathering. During 2011 and the first two months of 2012, the company successfully drilled and completed five Bakken Petroleum System wells, all in North Dakota. The Wock 21-2-1H, Frank 31-4-1H and the Marsh 21-16 TFH wells are located in Stark County, while the Taboo 1-25-36H and the Evoniuk 21-2-1H are located in McKenzie and Billings County, North Dakota.
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