Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
eBay Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The financial period from 2014 to 2018 is characterized by a significant initial contraction in cash generation followed by a period of relative stabilization. A sharp decline in both operating cash flow and free cash flow to the firm (FCFF) occurred between 2014 and 2015, with values remaining substantially lower for the remainder of the analyzed timeframe.
- Net Cash Provided by Operating Activities
- A steep reduction of approximately 49% is observed between 2014 and 2015, where cash flow fell from 5,677 million US$ to 2,877 million US$. Subsequent years showed limited volatility, with a modest recovery to 3,146 million US$ in 2017 before retreating to 2,661 million US$ in 2018.
- Free Cash Flow to the Firm (FCFF)
- FCFF closely mirrored the trajectory of operating cash flow, decreasing from 4,407 million US$ in 2014 to 2,351 million US$ in 2015. The metric remained relatively flat in 2016, experienced a slight increase to 2,665 million US$ in 2017, and concluded the period at 2,302 million US$ in 2018.
The close correlation between net operating cash and FCFF indicates a consistent relationship between cash generation and capital reinvestment. The variance between these two figures, which represents capital expenditures, was most pronounced in 2014 at 1,270 million US$. This variance decreased significantly to 526 million US$ in 2015 and continued to trend lower, reaching 359 million US$ by 2018, suggesting a strategic shift toward reduced capital intensity following 2014.
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Interest Paid, Net of Tax
eBay Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
2 2018 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= 314 × 6.99% = 22
An analysis of the financial data between 2014 and 2018 reveals a significant and consistent increase in cash outflows related to interest payments, occurring alongside substantial volatility in the effective income tax rate.
- Cash Paid for Interest, Net of Tax
- A steep upward trajectory is observed in the cash paid for interest. Starting from a nominal value of 1 million US dollars in 2014, the expenditure surged to 142 million US dollars in 2015. Following a period of relative stability in 2016, payments increased to 185 million US dollars in 2017 and peaked at 292 million US dollars by the end of 2018. This represents a substantial increase in the net cost of debt servicing over the five-year period.
- Effective Income Tax Rate (EITR) Volatility
- The effective income tax rate exhibited extreme fluctuations. An anomalous peak of 98.70% was recorded in 2014, followed by a sharp decline to 19.08% in 2015. The rate then stabilized at 35.00% for the 2016 and 2017 fiscal years before dropping to a period low of 6.99% in 2018.
- Correlation Between Tax Rates and Interest Outflows
- The most significant increase in net cash paid for interest occurred in 2018, reaching 292 million US dollars. This peak coincided with the lowest recorded effective income tax rate of 6.99%. Because interest payments are reported net of tax, the decrease in the tax rate in 2018 reduced the tax shield benefit typically associated with interest expenses, thereby increasing the actual net cash outflow compared to previous years.
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Enterprise Value to FCFF Ratio, Current
eBay Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 33,294) |
| Free cash flow to the firm (FCFF) | 2,302) |
| Valuation Ratio | |
| EV/FCFF | 14.46 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Amazon.com Inc. | 271.13 |
| Home Depot Inc. | 23.70 |
| Lowe’s Cos. Inc. | 15.93 |
| TJX Cos. Inc. | 28.65 |
Based on: 10-K (reporting date: 2018-12-31).
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
eBay Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 35,495) | 47,034) | 36,629) | 28,866) | 63,477) | |
| Free cash flow to the firm (FCFF)2 | 2,302) | 2,665) | 2,344) | 2,351) | 4,407) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 15.42 | 17.65 | 15.63 | 12.28 | 14.40 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
3 2018 Calculation
EV/FCFF = EV ÷ FCFF
= 35,495 ÷ 2,302 = 15.42
4 Click competitor name to see calculations.
The valuation metrics between 2014 and 2018 exhibit significant volatility in Enterprise Value paired with a notable stabilization in Free Cash Flow to the Firm (FCFF) following an initial decline.
- Enterprise Value (EV) Dynamics
- A sharp contraction in Enterprise Value is observed between 2014 and 2015, where the value decreased from 63,477 million to 28,866 million. This was followed by a period of recovery, with the value climbing to a peak of 47,034 million in 2017, before retreating to 35,495 million by the end of 2018.
- Free Cash Flow to the Firm (FCFF) Trends
- FCFF experienced a substantial reduction from 4,407 million in 2014 to 2,351 million in 2015. From 2015 through 2018, FCFF remained relatively stagnant, fluctuating within a narrow band between 2,302 million and 2,665 million, suggesting a consistent but flat cash generation profile during this four-year window.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio reflects shifts in market valuation relative to cash flow productivity. The ratio reached a minimum of 12.28 in 2015, coinciding with the sharp drop in Enterprise Value. A subsequent expansion in the multiple occurred through 2017, peaking at 17.65, which indicates that the increase in Enterprise Value during that period outpaced the growth in FCFF. The ratio subsequently moderated to 15.42 in 2018, signaling a contraction in the valuation multiple.
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