Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Hershey Co., FCFF calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
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- Net Cash Provided by Operating Activities
- The net cash provided by operating activities demonstrates a consistent upward trend over the five-year period. Starting at approximately 1.60 billion US dollars in 2018, the figure increased steadily each year, reaching about 2.33 billion US dollars in 2022. This progression confirms the company's ability to generate increasing cash flows from its core business operations, reflecting operational efficiency and potentially stronger revenue or improved working capital management.
- Free Cash Flow to the Firm (FCFF)
- The Free Cash Flow to the Firm reflects a similar pattern of growth, though with some fluctuations. Beginning slightly above 1.39 billion US dollars in 2018, FCFF rose to around 1.56 billion in 2019 but dipped back near 1.39 billion in 2020. After 2020, the FCFF rebounded significantly, rising to approximately 1.71 billion in 2021 and further to nearly 1.92 billion in 2022. This indicates that after a temporary decline in 2020, the company's capacity to generate free cash flow improved markedly, suggesting effective capital expenditure management or improved operational cash conversion.
- Comparative Insights
- Overall, both metrics have shown positive growth trends, indicative of strengthening financial health. The steady increase in operating cash flow, coupled with the recovery and growth in FCFF, suggests improved liquidity and capital flexibility. The temporary decline in FCFF during 2020 may warrant further examination, potentially reflecting investment decisions or external factors affecting cash flow in that year. The data signals robust operating performance and an improving ability to convert cash flows into free cash flow, supporting sustainable growth and financial stability.
Interest Paid, Net of Tax
Hershey Co., interest paid, net of tax calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2018-12-31).
2 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 131,757 × 14.20% = 18,709
3 2022 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 8,131 × 14.20% = 1,155
- Effective income tax rate (EITR)
- The effective income tax rate exhibits moderate fluctuations over the five-year period. It decreased slightly from 17% in 2018 to 16.9% in 2019, followed by a more notable decline to 14.7% in 2020. In 2021, the rate increased to 17.5%, before dropping again to 14.2% in 2022. Overall, the trend indicates variability with a general tendency to remain within a range of approximately 14% to 17.5%, reflecting changes in the company’s tax environment or tax planning strategies during these years.
- Interest paid, net of tax (in thousands of US dollars)
- Interest paid, net of tax, demonstrates some variability with a general upward movement initially, rising from $109,963 thousand in 2018 to a peak of $128,743 thousand in 2020. Subsequently, the amount paid decreased to $105,374 thousand in 2021, followed by an increase to $113,048 thousand in 2022. This pattern suggests fluctuations in the company’s debt levels, interest rate environment, or refinancing activities through the period.
- Capitalized interest, net of tax (in thousands of US dollars)
- Capitalized interest shows a consistent upward trend from 2018 through 2021, increasing from $4,226 thousand to a peak of $7,681 thousand. However, in 2022, a slight decline to $6,976 thousand is observed. This general increase followed by a minor decrease may indicate rising investment in capital projects or assets over the initial years, with a slight reduction or completion of such capital projects in the last year reported.
Enterprise Value to FCFF Ratio, Current
Hershey Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 52,082,977) |
| Free cash flow to the firm (FCFF) | 1,918,763) |
| Valuation Ratio | |
| EV/FCFF | 27.14 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Coca-Cola Co. | 54.43 |
| Mondelēz International Inc. | 27.25 |
| PepsiCo Inc. | 24.39 |
| Philip Morris International Inc. | 27.21 |
| EV/FCFF, Sector | |
| Food, Beverage & Tobacco | 31.96 |
| EV/FCFF, Industry | |
| Consumer Staples | 40.78 |
Based on: 10-K (reporting date: 2022-12-31).
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
Hershey Co., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 53,436,870) | 46,279,575) | 34,804,244) | 37,362,005) | 26,861,195) | |
| Free cash flow to the firm (FCFF)2 | 1,918,763) | 1,706,486) | 1,388,526) | 1,558,307) | 1,385,582) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 27.85 | 27.12 | 25.07 | 23.98 | 19.39 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Coca-Cola Co. | 27.95 | 25.28 | 26.04 | — | — | |
| Mondelēz International Inc. | 34.05 | 31.98 | 30.11 | — | — | |
| PepsiCo Inc. | 40.39 | 33.08 | 30.09 | — | — | |
| Philip Morris International Inc. | 19.53 | 16.35 | 16.31 | — | — | |
| EV/FCFF, Sector | ||||||
| Food, Beverage & Tobacco | 28.47 | 24.71 | 24.26 | — | — | |
| EV/FCFF, Industry | ||||||
| Consumer Staples | 30.41 | 20.99 | 23.37 | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 53,436,870 ÷ 1,918,763 = 27.85
4 Click competitor name to see calculations.
The data reveals several significant trends over the five-year period ending in 2022. The enterprise value (EV) of the company demonstrated a consistent upward trajectory, increasing from approximately $26.9 billion in 2018 to about $53.4 billion in 2022. This nearly doubled value indicates a strong growth in the market's valuation or company expansion over the period.
Regarding free cash flow to the firm (FCFF), the figures show a more moderate but steady increase. Starting at roughly $1.39 billion in 2018, FCFF rose to approximately $1.92 billion by 2022. Despite small fluctuations in the intermediate years, the general trend suggests improved cash flow performance, which indicates better operational efficiency or increased profitability enabling more cash to be generated for the firm's stakeholders.
The EV/FCFF ratio, which provides insight into the valuation of the firm relative to its cash flow, has shown a consistent rising pattern, moving from 19.39 in 2018 to 27.85 in 2022. This increase suggests that the enterprise value has grown at a faster rate than the free cash flow, potentially reflecting heightened investor expectations or a premium placed on growth prospects or other qualitative factors. This rising ratio could also imply that the firm's stock may be becoming more expensive relative to its cash-generating ability.
In summary, the company has experienced substantial growth in enterprise value accompanied by steady improvements in free cash flow. However, the accelerating EV/FCFF ratio signals increasing valuation multiples, potentially indicative of optimism about future performance or an expansion of investor sentiment beyond current cash flow measures.