The cost of equity capital rose again last week according to Credit Trends comprehensive credit model. While free cash flow multiples are in the bottom half of its 40 year band, risk is in the top half.
Yield spreads, cash tax rate, adjusted operating cash flow and stability metrics rose by the greatest amounts while free cash flow caused a decrease. Additionally, the US 2-10 year Treasury yield curve spread, illustrated below, shows the risk of recession has increased.
Credit Trends reviews 70+ fundamental credit measures in computing its cost of equity capital.
For additional information on the model, you may pre-order “Security Valuation and Risk Analysis.” McGraw-Hill, available at all online book outlets. For the first time, the model will be released to the public.