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Herbalife Nutrition WACC %

:7.03% (As of Today)
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As of today (2021-10-27), Herbalife Nutrition's weighted average cost of capital is 7.03%. Herbalife Nutrition's ROIC % is 41.30% (calculated using TTM income statement data). Herbalife Nutrition generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.


Herbalife Nutrition WACC % Historical Data

The historical data trend for Herbalife Nutrition'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.

* Premium members only.

Herbalife Nutrition Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.24 4.13 5.72 5.32 6.34

Herbalife Nutrition Quarterly Data
Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.47 6.32 6.34 6.77 6.76

Competitive Comparison

For the Packaged Foods subindustry, Herbalife Nutrition'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.

   

Herbalife Nutrition WACC % Distribution

For the Consumer Packaged Goods industry and Consumer Defensive sector, Herbalife Nutrition's WACC % distribution charts can be found below:

* The bar in red indicates where Herbalife Nutrition's WACC % falls into.



Herbalife Nutrition 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, Herbalife Nutrition's market capitalization (E) is $5387.899 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 two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Jun. 2021, Herbalife Nutrition's latest two-year average Short-Term Debt & Capital Lease Obligation was $59.95 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $2280.5 Mil. The total Book Value of Debt (D) is $2340.45 Mil.
a) weight of equity = E / (E + D) = 5387.899 / (5387.899 + 2340.45) = 0.6972
b) weight of debt = D / (E + D) = 2340.45 / (5387.899 + 2340.45) = 0.3028

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 1.68000000%. 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. Herbalife Nutrition's beta is 1.11.
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 = 1.68000000% + 1.11 * 6% = 8.34%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Dec. 2020, Herbalife Nutrition's interest expense (positive number) was $133 Mil. Its total Book Value of Debt (D) is $2340.45 Mil.
Cost of Debt = 133 / 2340.45 = 5.6827%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation. The calculated average tax rate is limited to between 0% and 100%. If the calculated average tax rate is higher than 100%, it is set to 100%. If the calculated average tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 29.475%.

Herbalife Nutrition'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)
=0.6972*8.34%+0.3028*5.6827%*(1 - 29.475%)
=7.03%

* 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.


Herbalife Nutrition  (NYSE:HLF) 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, Herbalife Nutrition's weighted average cost of capital is 7.03%. Herbalife Nutrition's ROIC % is 41.30% (calculated using TTM income statement data). Herbalife Nutrition generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

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 last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.


Related Terms

Herbalife Nutrition Business Description

Herbalife Nutrition logo
Industry
Traded in Other Exchanges
Address
Ugland House, South Church Street, P.O. Box 309GT, Grand Cayman, CYM
Herbalife Nutrition Ltd is an international nutrition company. The company has five revenue segments: weight management; targeted nutrition; energy, sports, and fitness; outer nutrition; and literature, promotional, and other. The most important segment, weight management, contributing more than 50% of revenue, has as representative products protein drinks, powder, and bars, and herbal tea concentrates, among others. The targeted nutrition segment offers dietary and nutritional supplements rich in herbs, minerals, and vitamins. Energy, sports, and fitness offers energy drinks, while outer nutrition offers facial skin-care, body-care, and hair-care products. Geographically, the main segments are North America, Mexico, South and Central America, EMEA, Asia-Pacific, and China.
Executives
Nelson James Larry director 2747 PARADISE ROAD PH2804 LAS VEGAS NV 89109
Carmona Richard H director 1221 BROADWAY OAKLAND CA 94612
Icahn Carl C 10 percent owner C/O ICAHN ENTERPRISES L.P. 16690 COLLINS AVE., PH-1 SUNNY ISLES BEACH FL 33160
Icahn Partners Lp 10 percent owner 16690 COLLINS AVE. PH SUNNY ISLES FL 33160
Icahn Partners Master Fund Lp 10 percent owner 16690 COLLINS AVE. PH SUNNY ISLES FL 33160
Desimone John officer: President 800 W. OLYMPIC BLVD., SUITE 406 LOS ANGELES CA 90015
Irani Jehangir D officer: SVP, PAO 800 WEST OLYMPIC BLVD. SUITE 406 LOS ANGELES CA 90015
Harms Thomas officer: SVP, China & APAC 800 W. OLYMPIC BLVD., SUITE 406 LOS ANGELES CA 90015
Tartol John director C/O HERBALIFE INTERNATIONAL, INC. 1800 CENTURY PARK EAST LOS ANGELES CA 90025
Christodoro Jonathan director C/O ICAHN ENTERPRISES L.P. 16690 COLLINS AVE., PH SUNNY ISLES FL 33160
Graziano Nick director C/O ICAHN ENTERPRISES L.P. 16690 COLLINS AVE., PH SUNNY ISLES FL 33160
Palau Hernandez Margarita director 300 N. SAN RAFAEL AVE. PASADENA CA 91105
Montelongo Michael director 203 EAST MAIN STREET SPARTANBURG SC 29319
Gary Hunter Clark director C/O ICAHN ENTERPRISES L.P. 16690 COLLINS AVE., PH SUNNY ISLES FL 33160
Otero Maria director 800 W OLYMPIC BLVD SUITE 406 LOS ANGELES CA 90015

Herbalife Nutrition Headlines

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