Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Monsanto Co., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
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An analysis of the financial performance between 2012 and 2017 reveals a fluctuating but generally resilient cash flow position. Both net cash provided by operating activities and free cash flow to the firm (FCFF) exhibit a high degree of positive correlation, with FCFF closely mirroring the movements of operational cash generation.
- Operating Cash Flow Trends
- Net cash provided by operating activities experienced moderate volatility throughout the period. After an initial decline from US$ 3,051 million in 2012 to US$ 2,740 million in 2013, the metric recovered and peaked at US$ 3,226 million by August 31, 2017. A notable contraction occurred in 2016, where cash from operations dropped to US$ 2,588 million, representing the lowest operational cash yield in the observed six-year window.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF followed a similar trajectory to operating cash flows, characterized by periodic dips and recoveries. The firm saw a significant reduction in FCFF from US$ 2,531 million in 2012 to a low of US$ 1,938 million in 2016. A strong recovery was observed in the final year of the analysis, with FCFF rising to US$ 2,347 million in 2017. The consistent gap between operating cash and FCFF suggests ongoing capital reinvestment requirements.
- Cash Flow Conversion and Stability
- The relationship between operating activities and FCFF indicates that the firm maintained a consistent ability to convert operational earnings into free cash flow. While 2016 represented a period of diminished liquidity for both metrics, the subsequent rebound in 2017 suggests a restoration of cash generation efficiency and a recovery in the firm's overall cash position.
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Interest Paid, Net of Tax
Monsanto Co., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
2 2017 Calculation
Cash payments for interest, tax = Cash payments for interest × EITR
= 417 × 21.69% = 90
3 2017 Calculation
Interest capitalized on construction, tax = Interest capitalized on construction × EITR
= 44 × 21.69% = 10
An analysis of the interest expenditures from 2012 to 2017 reveals a significant escalation in the cost of debt servicing, characterized by a marked increase in both cash outflows and capitalized interest during the latter half of the period.
- Cash Payments for Interest, Net of Tax
- A period of relative stability was observed between 2012 and 2014, with annual payments fluctuating minimally between 103 million and 113 million US dollars. A substantial inflection point occurred in 2015, where payments more than doubled to 249 million US dollars. This upward trajectory continued through 2017, peaking at 327 million US dollars, indicating a significant increase in the company's net interest obligations.
- Interest Capitalized on Construction, Net of Tax
- Capitalized interest followed a consistent growth pattern, rising incrementally from 15 million US dollars in 2012 to 21 million US dollars in 2016. A more pronounced increase was recorded in 2017, with the figure reaching 34 million US dollars, suggesting an expansion in long-term construction projects or an increase in the cost of financing those specific assets.
- Effective Income Tax Rate (EITR) Correlation
- The effective income tax rate exhibited volatility throughout the six-year period, ranging from a high of 34.91% in 2016 to a low of 21.69% in 2017. Because the interest figures are reported net of tax, the decline in the EITR in 2017 likely contributed to the higher reported net cost of interest payments and capitalized interest for that fiscal year.
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Enterprise Value to FCFF Ratio, Current
Monsanto Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 58,374) |
| Free cash flow to the firm (FCFF) | 2,347) |
| Valuation Ratio | |
| EV/FCFF | 24.87 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| lululemon athletica inc. | 9.67 |
| Nike Inc. | 21.33 |
Based on: 10-K (reporting date: 2017-08-31).
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
Monsanto Co., historical EV/FCFF calculation, comparison to benchmarks
| Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | Aug 31, 2013 | Aug 31, 2012 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Enterprise value (EV)1 | 59,773) | 52,204) | 46,537) | 59,696) | 54,950) | 46,106) | |
| Free cash flow to the firm (FCFF)2 | 2,347) | 1,938) | 2,410) | 2,182) | 2,119) | 2,531) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | 25.47 | 26.94 | 19.31 | 27.36 | 25.93 | 18.22 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| lululemon athletica inc. | — | — | — | — | — | — | |
| Nike Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).
3 2017 Calculation
EV/FCFF = EV ÷ FCFF
= 59,773 ÷ 2,347 = 25.47
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibited significant volatility between 2012 and 2017, characterized by two distinct periods of elevation. The ratio increased from 18.22 in 2012 to a peak of 27.36 in 2014, underwent a sharp correction to 19.31 in 2015, and subsequently returned to a range between 25.47 and 26.94 during the 2016-2017 period.
- Enterprise Value Trends
- An upward trajectory is observed from 2012 to 2014, with the value rising from 46,106 million to 59,696 million. A significant contraction occurred in 2015, where the value dropped to 46,537 million, followed by a recovery phase that brought the value back to its highest point of 59,773 million by 2017.
- Free Cash Flow to the Firm (FCFF) Analysis
- FCFF demonstrated relative stability compared to the fluctuations seen in Enterprise Value, remaining within a corridor of 1,938 million to 2,531 million. The highest cash flow generation occurred in 2012, while the lowest point was reached in 2016.
- EV/FCFF Ratio Drivers
- The volatility of the ratio was primarily driven by changes in Enterprise Value rather than fluctuations in FCFF. The peak ratio in 2014 was a result of maximizing Enterprise Value while FCFF remained suppressed. The sharp decline in 2015 was caused by the simultaneous occurrence of a decrease in Enterprise Value and an increase in FCFF. By 2017, the ratio stabilized at a higher multiple, reflecting a valuation that remained high relative to the firm's cash flow generation.
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