Enterprise Value to FCFF (EV/FCFF)
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Free Cash Flow to The Firm (FCFF)
EMC Corp., 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).
The analysis of the annual financial data indicates distinctive trends in cash flow metrics over the five-year period.
- Net cash provided by operating activities
-
This metric experienced a general upward trend from 2011 to 2013, increasing steadily from 5,669 million USD to 6,923 million USD. However, a reversal occurred thereafter, with a decline to 6,523 million USD in 2014, followed by a further decrease to 5,386 million USD in 2015. This pattern suggests initial strengthening in operational cash generation, which softened in the latter two years.
- Free cash flow to the firm (FCFF)
-
The FCFF shows a similar pattern to operating cash flow but with consistently lower absolute values, reflecting cash available after capital expenditures. The figure rose from 4,481 million USD in 2011 to 5,592 million USD in 2013, indicating growing free cash generation. After 2013, FCFF declined to 5,138 million USD in 2014 and further to 4,021 million USD in 2015, demonstrating a weakening in cash flow available to the firm after investments.
Overall, both cash flow indicators revealed growth in the initial three years followed by a contraction in the final two years analyzed. This pattern points to stronger operational performance first, with potential challenges affecting cash generation and investment returns in the later period. The reasons behind the decline could warrant further inquiry, including possible changes in operating efficiency, increased capital expenditures, or external economic factors impacting cash flows.
Interest Paid, Net of Tax
EMC Corp., 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, tax = Interest paid × EITR
= × =
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibits a fluctuating trend over the five-year period. It starts at 19.7% in 2011, then increases significantly to 24.1% in 2012, followed by a decline to 20% in 2013. Subsequently, the rate rises again to 23.1% in 2014 and further ascends to 24.6% in 2015. This variability suggests changes in the company's tax planning or tax regulations impacting the effective tax burden inconsistently during these years.
- Interest Paid, Net of Tax
- Interest paid net of tax shows considerable volatility and an overall upward trend. Beginning at US$56 million in 2011, there is a marked decrease to US$25 million in 2012. However, this is followed by a sharp increase to US$77 million in 2013, continuing upward to US$103 million in 2014, and then marginally increasing to US$104 million in 2015. The spike after 2012 may indicate increased borrowing costs, higher debt levels, or shifts in capital structure that caused interest expenses to rise substantially in the latter part of the period.
- Summary
- Overall, the company's effective income tax rate does not follow a linear trend but fluctuates between approximately 20% and 25%, which may reflect varying tax strategies or changing tax environments. Interest expenses, after an initial drop, show a pronounced increase, nearly quadrupling from 2012 to 2015, which could impact profitability and cash flow. These patterns highlight potential areas for financial management focus, particularly in managing financing costs and tax planning efficacy.
Enterprise Value to FCFF Ratio, Current
EMC Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| 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. | |
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
EMC Corp., 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 | ||||||
| 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. | ||||||
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
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value exhibited notable fluctuations over the five-year period. Starting at 54,456 million USD at the end of 2011, it decreased significantly to 45,643 million USD in 2012. This was followed by a recovery phase in 2013 and 2014, with EV rising to 49,998 million USD and then to 56,338 million USD respectively. However, in 2015, the EV declined again to 49,565 million USD, reflecting a reduction from the previous year’s peak.
- Free Cash Flow to the Firm (FCFF)
- The free cash flow to the firm demonstrated an overall upward trend initially, increasing from 4,481 million USD in 2011 to a peak of 5,592 million USD in 2013. Subsequently, there was a decline starting in 2014, where FCFF decreased to 5,138 million USD, followed by a more pronounced drop in 2015 to 4,021 million USD. This suggests a turnaround in cash generation capacity after 2013.
- EV/FCFF Ratio
- The EV to FCFF ratio fluctuated quite markedly throughout the period. The ratio started relatively high at 12.15 in 2011, indicating a higher valuation multiple in relation to free cash flows. The ratio declined to 9.04 and 8.94 in 2012 and 2013 respectively, reflecting either an increase in free cash flow relative to enterprise value or a market reevaluation lowering EV multipliers. In 2014, the ratio increased again to 10.96, and further to 12.33 in 2015, suggesting that enterprise value was growing faster than free cash flows or that market conditions were driving a higher valuation multiple.
- Summary Insights
- The data reveals a dynamic scenario where the company's valuation in terms of enterprise value and its ability to generate free cash flow experienced significant shifts. The initial decrease in EV paired with increasing FCFF in the early years led to improved valuation multiples, indicating favorable operational performance or market conditions. However, the decline in free cash flow after 2013, coupled with volatile EV, suggests emerging challenges in maintaining cash flow growth. The increasing EV/FCFF ratio towards the end of the period may point to heightened market valuation levels relative to cash flow or potential concerns around cash flow sustainability. Monitoring these trends is vital to understand the firm's evolving financial health and valuation drivers.