Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Parker-Hannifin Corp., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).
Between June 30, 2017, and June 30, 2022, a consistent upward trajectory in both operating cash flow and free cash flow to the firm was observed, peaking in 2021 before experiencing a moderate decline in the final year of the analyzed period.
- Operating Cash Flow Trends
- Net cash provided by operating activities demonstrated steady growth, increasing from US$ 1,302,471 thousand in 2017 to a peak of US$ 2,575,001 thousand in 2021. This indicates a strong expansion in the company's capacity to generate liquidity from its core business operations over five years, although a slight contraction of approximately 5.2% occurred in 2022, bringing the figure to US$ 2,441,730 thousand.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF mirrored the growth of operating cash flow, rising from US$ 1,211,004 thousand in 2017 to a maximum of US$ 2,689,767 thousand in 2021. The most significant year-over-year increases occurred between 2020 and 2021, with a growth rate of approximately 27.4%. In 2022, FCFF decreased to US$ 2,446,894 thousand, representing a decline of roughly 9% from the previous year's peak.
- Comparative Analysis of OCF and FCFF
- From 2017 to 2020, FCFF remained consistently lower than net cash provided by operating activities, suggesting that capital expenditures outweighed the tax-shielded interest expenses during this period. However, a structural shift occurred in 2021 and 2022, where FCFF began to exceed operating cash flow. This divergence indicates that the impact of interest expenses on the firm's total cash flow became more significant than the cash outflows dedicated to capital investments.
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Interest Paid, Net of Tax
Parker-Hannifin Corp., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).
2 2022 Calculation
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 240,313 × 18.50% = 44,458
An analysis of the cash outflows for interest, net of tax, reveals a general upward trajectory over the six-year period from 2017 to 2022, characterized by a significant peak in 2020.
- Interest Payment Trends
- Cash paid for interest, net of tax, increased from 97,633 thousand USD in 2017 to 195,855 thousand USD in 2022, representing an overall increase of approximately 100.6%. A substantial escalation occurred in 2020, where payments reached a peak of 245,943 thousand USD. This was followed by a reduction to 184,133 thousand USD in 2021 and a slight subsequent increase in 2022.
- Effective Income Tax Rate (EITR) Volatility
- The EITR exhibited significant fluctuations throughout the period. After starting at 26.00% in 2017, the rate peaked at 37.70% in 2018. A consistent downward trend followed, with the rate declining to 21.70% in 2019 and reaching a period low of 18.50% by June 30, 2022.
- Impact of Tax Rates on Net Interest Outflows
- Because the interest payments are reported net of tax, the EITR directly influences the reported cash outflow. The reduction of the EITR from its 2018 peak of 37.70% to 18.50% in 2022 indicates a diminishing tax shield on interest expenses. Consequently, a larger portion of the gross interest paid is recognized as a cash outflow in the later years of the period compared to the higher tax environment of 2018.
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Enterprise Value to FCFF Ratio, Current
Parker-Hannifin Corp., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 55,695,791) |
| Free cash flow to the firm (FCFF) | 2,446,894) |
| Valuation Ratio | |
| EV/FCFF | 22.76 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | 309.34 |
| Caterpillar Inc. | 42.99 |
| Eaton Corp. plc | 45.95 |
| GE Aerospace | 42.66 |
| Honeywell International Inc. | 14.58 |
| Lockheed Martin Corp. | 17.73 |
| RTX Corp. | 30.46 |
| EV/FCFF, Sector | |
| Capital Goods | 44.52 |
| EV/FCFF, Industry | |
| Industrials | 36.95 |
Based on: 10-K (reporting date: 2022-06-30).
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
Parker-Hannifin Corp., historical EV/FCFF calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Enterprise value (EV)1 | 47,574,598) | 45,011,584) | 34,689,668) | 24,040,987) | 26,811,235) | 25,893,192) | |
| Free cash flow to the firm (FCFF)2 | 2,446,894) | 2,689,767) | 2,110,646) | 1,714,266) | 1,559,637) | 1,211,004) | |
| Valuation Ratio | |||||||
| EV/FCFF3 | 19.44 | 16.73 | 16.44 | 14.02 | 17.19 | 21.38 | |
| Benchmarks | |||||||
| EV/FCFF, Competitors4 | |||||||
| Boeing Co. | 37.53 | — | — | — | — | — | |
| Caterpillar Inc. | 23.54 | 20.50 | — | — | — | — | |
| Eaton Corp. plc | 33.44 | 38.16 | — | — | — | — | |
| GE Aerospace | 17.29 | 56.53 | — | — | — | — | |
| Honeywell International Inc. | 29.82 | 25.22 | — | — | — | — | |
| Lockheed Martin Corp. | 19.69 | 13.92 | — | — | — | — | |
| RTX Corp. | 28.45 | 27.29 | — | — | — | — | |
| EV/FCFF, Sector | |||||||
| Capital Goods | 25.87 | 32.16 | — | — | — | — | |
| EV/FCFF, Industry | |||||||
| Industrials | 24.33 | 28.81 | — | — | — | — | |
Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 47,574,598 ÷ 2,446,894 = 19.44
4 Click competitor name to see calculations.
The analysis of the Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio from 2017 to 2022 reveals a fluctuating valuation trend characterized by an initial compression followed by a sustained period of expansion.
- Enterprise Value (EV) Trends
- The Enterprise Value exhibited a general upward trajectory over the observed period. After a slight contraction in 2019 to 24.04 billion USD, a sharp increase occurred, with the value ascending to 47.57 billion USD by June 30, 2022. The most significant growth phase occurred between 2019 and 2021, where the EV nearly doubled.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated consistent year-over-year growth from 2017 through 2021, rising from 1.21 billion USD to a peak of 2.69 billion USD. A moderate decline was observed in 2022, with FCFF retreating to 2.45 billion USD, although the figure remained substantially higher than the baseline established in 2017.
- EV/FCFF Ratio Dynamics
- The EV/FCFF ratio underwent a notable decrease from 21.38 in 2017 to a minimum of 14.02 in 2019, indicating that cash flow growth outpaced the increase in enterprise value during this window. From 2020 onward, the trend reversed, with the ratio climbing to 19.44 by 2022. This suggests that the market valuation of the firm grew more rapidly than its ability to generate free cash flow in the final three years of the analysis.
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