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GEA Group AG WACC %

:5.52% (As of Today)
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As of today (2021-10-21), GEA Group AG's weighted average cost of capital is 5.52%. GEA Group AG's ROIC % is 4.20% (calculated using TTM income statement data). GEA Group AG earns returns that do not match up to its cost of capital. It will destroy value as it grows.


GEA Group AG WACC % Historical Data

The historical data trend for GEA Group AG'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.

GEA Group AG 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 5.25 5.73 2.11 0.97 3.26

GEA Group AG 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 4.84 4.63 3.26 3.77 3.84

Competitive Comparison

For the Specialty Industrial Machinery subindustry, GEA Group AG'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.

   

GEA Group AG WACC % Distribution

For the Industrial Products industry and Industrials sector, GEA Group AG's WACC % distribution charts can be found below:

* The bar in red indicates where GEA Group AG's WACC % falls into.



GEA Group AG 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, GEA Group AG's market capitalization (E) is $8472.067 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, GEA Group AG's latest two-year average Short-Term Debt & Capital Lease Obligation was $92.908901054339 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $540.16223033252 Mil. The total Book Value of Debt (D) is $633.07113138686 Mil.
a) weight of equity = E / (E + D) = 8472.067 / (8472.067 + 633.07113138686) = 0.9305
b) weight of debt = D / (E + D) = 633.07113138686 / (8472.067 + 633.07113138686) = 0.0695

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 -0.36272727%. 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. GEA Group AG's beta is 0.98.
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 = -0.36272727% + 0.98 * 6% = 5.5173%

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, GEA Group AG's interest expense (positive number) was $34.839416058394 Mil. Its total Book Value of Debt (D) is $633.07113138686 Mil.
Cost of Debt = 34.839416058394 / 633.07113138686 = 5.5032%.

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 less than 0%, and it's set to 0%.

GEA Group AG'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)
=0.9305*5.5173%+0.0695*5.5032%*(1 - 0%)
=5.52%

* 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.


GEA Group AG  (OTCPK:GEAGF) 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, GEA Group AG's weighted average cost of capital is 5.52%. GEA Group AG's ROIC % is 4.20% (calculated using TTM income statement data). GEA Group AG earns returns that do not match up to its cost of capital. It will destroy value as it grows.


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

GEA Group AG Business Description

GEA Group AG logo
Industry
Industrials » Industrial Products NAICS : 333999 SIC : 3559
Traded in Other Exchanges
Address
Peter-Muller-Strasse 12, Dusseldorf, DEU, 40468
GEA is an expert in food processing. It manufactures equipment for separation, fluid handling, dairy processing, and dairy farming, and designs and constructs process lines or entire plants for customers. Based in Germany, the company is a global market leader, with number-one or number-two positions in its markets. Its separators are used in hundreds of different, tailored applications. Every fourth litre of milk, third instant coffee line, third chicken nugget, and second litre of beer globally is processed using the company's specialised equipment.
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