As of today (2023-03-26), Ollie's Bargain Outlet Holdings's weighted average cost of capital is 7.51%. Ollie's Bargain Outlet Holdings's ROIC % is 6.18% (calculated using TTM income statement data).
Ollie's Bargain Outlet Holdings earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Ollie's Bargain Outlet Holdings WACC % Historical Data
The historical data trend for Ollie's Bargain Outlet Holdings'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.
Ollie's Bargain Outlet Holdings Annual Data
Trend
Jan14
Jan15
Jan16
Jan17
Jan18
Jan19
Jan20
Jan21
Jan22
Jan23
WACC %
11.93
8.28
8.67
7.83
7.59
Ollie's Bargain Outlet Holdings Quarterly Data
Apr18
Jul18
Oct18
Jan19
Apr19
Jul19
Oct19
Jan20
Apr20
Jul20
Oct20
Jan21
Apr21
Jul21
Oct21
Jan22
Apr22
Jul22
Oct22
Jan23
WACC %
7.83
7.46
6.50
7.31
7.59
Competitive Comparison
For the Discount Stores subindustry, Ollie's Bargain Outlet Holdings'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.
Ollie's Bargain Outlet Holdings WACC % Distribution
For the Retail - Defensive industry and Consumer Defensive sector, Ollie's Bargain Outlet Holdings's WACC % distribution charts can be found below:
* The bar in red indicates where Ollie's Bargain Outlet Holdings's WACC % falls in comparison to its industry or sector. The grey bar indicates the WACC %'s extreme value range as defined by GuruFocus.
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, Ollie's Bargain Outlet Holdings's market capitalization (E) is $3616.087 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 Jan. 2023, Ollie's Bargain Outlet Holdings's latest two-year average Short-Term Debt & Capital Lease Obligation was $82.4665 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $353.5605 Mil. The total Book Value of Debt (D) is $436.027 Mil.
a) weight of equity = E / (E + D) = 3616.087 / (3616.087 + 436.027) = 0.8924
b) weight of debt = D / (E + D) = 436.027 / (3616.087 + 436.027) = 0.1076
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 3.37200000%. 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. Ollie's Bargain Outlet Holdings's beta is 0.84.
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 = 3.37200000% + 0.84 * 6% = 8.412%
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 Jan. 2023, Ollie's Bargain Outlet Holdings's interest expense (positive number) was $0.209 Mil. Its total Book Value of Debt (D) is $436.027 Mil.
Cost of Debt = 0.209 / 436.027 = 0.0479%.
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 23.09%.
Ollie's Bargain Outlet Holdings'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)
=
0.8924
*
8.412%
+
0.1076
*
0.0479%
*
(1 - 23.09%)
=
7.51%
* 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.
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, Ollie's Bargain Outlet Holdings's weighted average cost of capital is 7.51%. Ollie's Bargain Outlet Holdings's ROIC % is 6.18% (calculated using TTM income statement data).
Ollie's Bargain Outlet Holdings earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Ollie's Bargain Outlet Holdings Inc is a retailer of brand name merchandise at drastically reduced prices. It offers customers a selection of brand name products, including housewares, food, books and stationery, bed and bath, floor coverings, toys, and hardware. It operates stores across the Eastern half of the United States. Its differentiated go-to-market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns. These attributes have driven rapid growth and strong and consistent store performance for the company.
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