Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
DuPont de Nemours Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 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).
The financial trajectory from 2015 to 2019 is characterized by significant volatility followed by a sharp decline in both operational cash generation and free cash flow to the firm. While the period between 2015 and 2017 showed relative strength and growth, the subsequent two years indicate a substantial erosion of cash-generating capacity.
- Cash Provided by Operating Activities
- Operating cash flow experienced a fluctuating trend, peaking in 2017 at 8,695 million US$. However, a steep decline followed, with values falling to 4,731 million US$ in 2018 and reaching a five-year low of 1,409 million US$ by December 31, 2019. This represents a significant contraction in the ability to generate cash from core business operations.
- Free Cash Flow to the Firm (FCFF)
- FCFF mirrored the volatility of operating cash flows, reaching a maximum of 5,431 million US$ in 2017. A rapid descent occurred thereafter, with the figure dropping to 2,294 million US$ in 2018 and ultimately transitioning to a negative value of -322 million US$ in 2019. The shift to a negative FCFF indicates that capital expenditures and other firm outflows exceeded operating cash inflows during the final year of the period.
- Cash Flow Divergence and Capital Allocation
- The gap between operating cash flow and FCFF became most critical in 2019. Despite the maintenance of a positive operating cash flow of 1,409 million US$, the resulting negative FCFF suggests an intensive period of capital expenditure or significant structural adjustments. The overarching trend demonstrates a systemic reduction in the firm's capacity to generate surplus cash for its providers of capital.
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Interest Paid, Net of Tax
DuPont de Nemours Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 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).
2 2019 Calculation
Cash paid during the year for interest, net of amounts capitalized, tax = Cash paid during the year for interest, net of amounts capitalized × EITR
= 969 × 21.00% = 203
The analysis of cash outflows for interest, net of tax, reveals a period of significant volatility between 2015 and 2019. The expenditures do not follow a consistent linear trend, instead characterized by sharp fluctuations that suggest changes in debt levels, financing costs, or substantial corporate restructuring activities.
- Cash Interest Payment Volatility
- Cash paid for interest, net of tax, exhibited erratic movement over the five-year period. After an initial increase from 891 million US$ in 2015 to 1,190 million US$ in 2016, a sharp decline to 614 million US$ occurred in 2017. This was followed by a peak in 2018, where payments reached their highest level at 1,540 million US$, before dropping significantly again to 766 million US$ in 2019.
- Effective Income Tax Rate (EITR) Fluctuations
- The effective income tax rate demonstrated extreme variance, which directly impacts the "net of tax" calculation of interest payments. A notable anomaly occurred in 2016, where the EITR dropped to 0.20%, followed by a sharp spike to 51.00% in 2017. By 2018 and 2019, the rate stabilized, settling at 27.20% and 21.00%, respectively.
- Correlation Between Tax Rates and Interest Outflows
- The inverse relationship between the EITR and the net interest paid is evident in 2017; the spike in the tax rate to 51.00% coincided with the lowest net cash outflow for interest (614 million US$), indicating a substantial tax shield effect. Conversely, the peak payment in 2018 suggests either a significant increase in gross interest obligations or a reduction in available tax offsets during that fiscal year.
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Enterprise Value to FCFF Ratio, Current
DuPont de Nemours Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 55,738) |
| Free cash flow to the firm (FCFF) | (322) |
| Valuation Ratio | |
| EV/FCFF | — |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Linde plc | 42.90 |
| Sherwin-Williams Co. | 29.87 |
Based on: 10-K (reporting date: 2019-12-31).
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
DuPont de Nemours Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | 55,738) | 67,539) | 77,054) | 40,369) | 30,575) | |
| Free cash flow to the firm (FCFF)2 | (322) | 2,294) | 5,431) | 2,751) | 4,658) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | — | 29.44 | 14.19 | 14.68 | 6.56 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 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).
3 2019 Calculation
EV/FCFF = EV ÷ FCFF
= 55,738 ÷ -322 = —
4 Click competitor name to see calculations.
The financial performance between 2015 and 2019 is characterized by significant volatility in enterprise valuation and a deteriorating trend in cash flow generation. While the enterprise value peaked in 2017, the ability of the firm to generate positive free cash flow declined sharply toward the end of the period, leading to a substantial expansion of the valuation multiple.
- Enterprise Value (EV) Trends
- Enterprise value experienced a rapid increase from 30,575 million US dollars in 2015 to a peak of 77,054 million US dollars in 2017. Following this peak, a consistent downward trend is observed, with the value contracting to 67,539 million US dollars in 2018 and further declining to 55,738 million US dollars by 2019.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF exhibited instability throughout the analyzed period. After a decline in 2016, cash flow recovered in 2017 to 5,431 million US dollars. However, a severe downward trajectory followed, with FCFF dropping to 2,294 million US dollars in 2018 and ultimately turning negative at -322 million US dollars in 2019. This transition to negative cash flow indicates that the firm's capital expenditures and working capital requirements exceeded its operating cash flow.
- EV/FCFF Ratio Analysis
- The EV/FCFF ratio demonstrates a significant expansion, indicating that the enterprise value grew at a pace that far exceeded the growth of free cash flows. The ratio rose from 6.56 in 2015 to 14.68 in 2016, remaining relatively stable in 2017 at 14.19, before spiking to 29.44 in 2018. This sharp increase suggests a diminishing return on the enterprise value relative to the cash generated for the firm. For the 2019 period, the ratio is non-calculable due to the negative FCFF, signaling a critical disconnect between the company's valuation and its cash-generating capacity.
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