The Cost Of Equity: Rethinking The Conventional Wisdom

Oct. 26, 2021 11:41 AM ET20 Comments


  • The cost of equity is one of the thorniest problems in analyzing stocks.
  • In this article, I outline the problem and present a novel solution based on industry yield and growth.
  • This is a very long article that deals with a large number of important issues, including cost of debt, cost of capital, equity risk premium, and DCF analysis.
  • I do much more than just articles at The Stock Evaluator: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Analysts and investors have long puzzled over the difficulties of calculating the cost of equity. The cost of equity is an essential component of the cost of capital, and the cost of capital is essential if

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This article was written by

Yuval Taylor profile picture
Weekly evaluation of thousands of stocks based on sound financial metrics.

I am the author of Zora and Langston: A Story of Friendship and Betrayal, as well as other books; I am also product manager at Portfolio123, a small financial technology firm. In my spare time I invest, primarily in microcaps; investigate investment conundrums; and write about my investigations on Seeking Alpha and on my blog, I am now offering a subscription service, The Stock Evaluator, which sends out weekly rankings for over 4,000 stocks; you can reach it here:

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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