Enterprise Value to FCFF (EV/FCFF)
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- Statement of Comprehensive Income
- Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
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Free Cash Flow to The Firm (FCFF)
Teradyne Inc., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
- Net Cash Provided by Operating Activities
- There is a notable upward trend in net cash provided by operating activities from 2019 through 2021, increasing from 578,750 thousand US dollars in 2019 to a peak of 1,098,366 thousand US dollars in 2021. However, in 2022, this figure declined sharply to 577,923 thousand US dollars and remained relatively stable in 2023 at 585,231 thousand US dollars. This pattern illustrates a significant improvement in operational cash generation capacity during the initial three years, followed by a considerable contraction and stabilization in the subsequent two years.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm exhibited a similar trajectory as operating cash flows. From 2019 to 2021, FCFF increased substantially from 449,438 thousand US dollars to a high of 969,596 thousand US dollars. This was followed by a marked decline to 415,949 thousand US dollars in 2022, with a slight increase to 425,842 thousand US dollars in 2023. The pattern indicates robust free cash generation capabilities in the earlier period, which diminished significantly in later years, pointing to changes either in capital expenditures, operational efficiency, or both.
- Overall Observations
- The concurrent rise and fall of both net operating cash flows and free cash flow to the firm suggest that the company experienced a phase of enhanced cash generation and firm value creation up to 2021. The subsequent decline in 2022 and 2023 may be indicative of operational challenges, increased capital investments, or other factors impacting cash flows. Stabilization of these figures in the final year signals a potential plateauing of cash generation after the decline.
Interest Paid, Net of Tax
Teradyne Inc., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2 2023 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= × =
- Effective Income Tax Rate (EITR)
-
The effective income tax rate exhibits a fluctuating pattern over the five-year period. Starting at 11.1% at the end of 2019, it increased to 13% in 2020, followed by a slight decrease to 12.6% in 2021. Subsequently, it rose again to 14.9% in 2022 and slightly decreased to 14.6% in 2023. The overall trend suggests a gradual increase in the effective tax burden over the analyzed years, with the rate in 2023 approximately 3.5 percentage points higher than in 2019.
- Cash Paid for Interest, Net of Tax
-
Cash paid for interest, net of tax, shows a consistent downward trend from 2019 to 2023. Initial outflows were at 5,330 thousand US dollars in 2019, modestly rising to 5,598 thousand in 2020. From there, a notable reduction occurred, with payments decreasing to 3,702 thousand in 2021. The downward trajectory continued, with a sharp decline to 1,275 thousand in 2022, and reaching its lowest point at 253 thousand in 2023. This pattern may indicate effective debt management or refinancing efforts leading to reduced interest expenses over time.
Enterprise Value to FCFF Ratio, Current
Teradyne Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Advanced Micro Devices Inc. | |
| Analog Devices Inc. | |
| Applied Materials Inc. | |
| Broadcom Inc. | |
| Intel Corp. | |
| KLA Corp. | |
| Lam Research Corp. | |
| Micron Technology Inc. | |
| NVIDIA Corp. | |
| Qualcomm Inc. | |
| Texas Instruments Inc. | |
| EV/FCFF, Sector | |
| Semiconductors & Semiconductor Equipment | |
| EV/FCFF, Industry | |
| Information Technology | |
Based on: 10-K (reporting date: 2023-12-31).
1 Click competitor name to see calculations.
If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.
Enterprise Value to FCFF Ratio, Historical
Teradyne Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
| EV/FCFF, Sector | ||||||
| Semiconductors & Semiconductor Equipment | ||||||
| EV/FCFF, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
3 2023 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value demonstrated a substantial increase from 9,572,254 thousand USD at the end of 2019 to a peak of 21,042,431 thousand USD by the end of 2020. After this peak, there was a consistent decline over the next three years, reaching 14,867,976 thousand USD by the end of 2023. Overall, EV remained significantly higher in the latter years compared to the initial figure in 2019, despite the downward trend after 2020.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm increased from 449,438 thousand USD in 2019 to 969,596 thousand USD in 2021, indicating strong cash generation capability. However, this was followed by a notable decline in 2022 to 415,949 thousand USD, with a marginal increase to 425,842 thousand USD in 2023. The data suggests volatility in cash flow generation after 2021.
- EV/FCFF Ratio
- The EV/FCFF ratio showed significant fluctuations over the observed period. Starting at 21.3 in 2019, it rose sharply to 30.52 in 2020, reflecting a faster growth in enterprise value relative to cash flow. Subsequently, the ratio decreased to 17.38 in 2021, suggesting improved valuation relative to cash flow. This was followed by an increase to 35.78 in 2022 and a slight decline to 34.91 in 2023, highlighting elevated valuation multiples again despite weaker free cash flow.
- Summary
- There is a pronounced volatility in both enterprise value and free cash flow to the firm during the analyzed period. The peak in enterprise value in 2020, followed by a gradual decline, contrasts with the peak in free cash flow in 2021 and its subsequent decrease. The fluctuating EV/FCFF ratio indicates variability in how the market values the company's cash flow generation, with periods of apparent overvaluation relative to cash flow in 2020, 2022, and 2023. Overall, the data points to a need for attention to the drivers behind cash flow volatility and valuation dynamics.