Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Baxter International Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
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- Cash Flows from Operations
- The cash flows from operations showed an overall upward trend from 2011 through 2014, increasing from 2,817 million US dollars in 2011 to a peak of 3,215 million US dollars in 2014. However, in 2015, there was a significant decline to 1,129 million US dollars, representing a considerable drop compared to prior years.
- Free Cash Flow to the Firm (FCFF)
- The FCFF also generally increased from 1,938 million US dollars in 2011 to 2,095 million US dollars in 2012, before declining slightly to 1,886 million US dollars in 2013. A further decline occurred in 2014 to 1,539 million US dollars, followed by a substantial decrease to 428 million US dollars in 2015. This pattern mirrors the reduction seen in cash flows from operations during the same period, indicating diminishing liquidity available after capital expenditures.
- Overall Financial Insights
- The data indicates that while operational cash generation improved steadily for several years, both operational cash flow and free cash flow experienced sharp declines in 2015. This suggests a potential issue affecting cash conversion or increased capital spending that year, which materially impacted the company’s liquidity and free cash resources. Close attention should be given to understanding the factors behind these declines to address cash flow management effectively.
Interest Paid, Net of Tax
Baxter International Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
2 2015 Calculation
Interest paid, net of portion capitalized, tax = Interest paid, net of portion capitalized × EITR
= 178 × 8.20% = 15
3 2015 Calculation
Interest costs capitalized, tax = Interest costs capitalized × EITR
= 51 × 8.20% = 4
- Effective Income Tax Rate (EITR)
- The effective income tax rate remained relatively stable around 20% from 2011 through 2014, fluctuating slightly between 20% and 21%. However, in 2015, there was a marked decline to 8.2%, representing a significant reduction in the tax burden during that year. This drop may indicate changes in tax policy, tax planning strategies, or other one-time adjustments impacting the effective tax rate.
- Interest Paid, Net of Portion Capitalized, Net of Tax
- Interest paid, excluding capitalized amounts and adjusted for tax, showed a clear upward trend from 2011 to 2014. The figures increased substantially from $49 million in 2011 to $166 million in 2014, implying higher borrowing costs or increased debt levels. In 2015, this figure slightly decreased to $163 million, suggesting stabilization at a relatively high level.
- Interest Costs Capitalized, Net of Tax
- The capitalized interest costs, net of tax, also exhibited a rising trend from 2011 to 2014, increasing from $32 million to $56 million. This suggests more investment in capital projects or assets during this period, leading to higher capitalized interest. However, in 2015, capitalized interest declined to $47 million, indicating a potential reduction in investment activity or changes in capital expenditure policies.
Enterprise Value to FCFF Ratio, Current
Baxter International Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 25,328) |
| Free cash flow to the firm (FCFF) | 428) |
| Valuation Ratio | |
| EV/FCFF | 59.15 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 33.70 |
| Elevance Health Inc. | 13.70 |
| Intuitive Surgical Inc. | 119.66 |
| Medtronic PLC | 24.51 |
| UnitedHealth Group Inc. | 16.06 |
Based on: 10-K (reporting date: 2015-12-31).
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
Baxter International Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 20,781) | 43,675) | 44,093) | 38,961) | 34,243) | |
| Free cash flow to the firm (FCFF)2 | 428) | 1,539) | 1,886) | 2,095) | 1,938) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 48.53 | 28.38 | 23.38 | 18.60 | 17.67 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
3 2015 Calculation
EV/FCFF = EV ÷ FCFF
= 20,781 ÷ 428 = 48.53
4 Click competitor name to see calculations.
The analysis of the financial data reveals notable trends in valuation and cash flow performance over the five-year period ending December 31, 2015.
- Enterprise Value (EV)
- The enterprise value exhibited an increasing trend from 2011 to 2014, rising steadily from $34,243 million in 2011 to a peak of $44,093 million in 2013. This was followed by a slight decline to $43,675 million in 2014. However, there is a marked and sharp decrease in 2015 with the EV dropping to $20,781 million, representing a significant contraction compared to the previous year.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm followed a generally downward trajectory after reaching a high of $2,095 million in 2012. Subsequent years saw decreases to $1,886 million in 2013, $1,539 million in 2014, and a considerable reduction to $428 million in 2015. This trend indicates weakening cash generation capabilities over the period.
- EV to FCFF Ratio
- The EV/FCFF ratio increased substantially over the five-year span, signaling growing valuation multiples relative to cash flow. The ratio rose from 17.67 in 2011 to 28.38 in 2014, before surging to an elevated 48.53 in 2015. The sharp increase in 2015 is primarily driven by the significant drop in free cash flow coupled with the reduced enterprise value, amplifying the valuation multiple.
Overall, the data suggests a period of growth in enterprise value alongside robust cash flow until 2013-2014, followed by deterioration in financial performance and valuation metrics in 2015. The sharp decline in free cash flow and enterprise value in the final year points to potential operational difficulties or market revaluation, warranting further investigation into the underlying causes. The increasing EV/FCFF ratio over the years indicates rising market expectations or risk premiums relative to cash flow generation, highlighted dramatically in 2015.