Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Raytheon Co., 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).
- Net cash provided by operating activities
- The net cash generated from operating activities exhibited a consistent upward trend over the five-year period. Starting at $2,346 million in 2015, the figure increased to $2,852 million in 2016, followed by a slight decline to $2,747 million in 2017. However, it resumed growth in subsequent years, reaching $3,428 million in 2018 and culminating at $4,482 million in 2019. This overall growth indicates improving operational efficiency and stronger cash generation capabilities from core business activities.
- Free cash flow to the firm (FCFF)
- Similar to operating cash flow, free cash flow to the firm showed a generally positive trajectory from 2015 through 2019. FCFF started at $2,119 million in 2015, rising to $2,427 million in 2016. A slight contraction followed in 2017 to $2,319 million, but the metric recovered and increased substantially in the subsequent periods, reaching $2,787 million in 2018 and $3,661 million in 2019. The upward movement in FCFF suggests sustained growth in cash available after accounting for capital expenditures, reflecting the company’s ability to generate cash while investing in its operations.
- Overall analysis
- Both operating cash flow and FCFF demonstrated a solid growth trend with minor fluctuations in 2017. The recovery and significant increases in 2018 and 2019 highlight enhanced cash management and operational strength. The consistent expansion of these cash flow metrics points to a strengthening cash position and an improved capacity for financing activities or returning value to shareholders. There are no indications of liquidity stress or declining cash flows during this period.
Interest Paid, Net of Tax
Raytheon Co., interest paid, net of tax calculation
US$ 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 for interest on commercial paper and long-term debt, tax = Cash paid for interest on commercial paper and long-term debt × EITR
= 193 × 16.50% = 32
The analysis of the financial data over the period from 2015 to 2019 reveals notable trends in the effective income tax rate and cash paid for interest on commercial paper and long-term debt, net of tax.
- Effective Income Tax Rate (EITR)
- The effective income tax rate exhibits significant variability throughout the analyzed years. Starting at 26.3% in 2015, the rate increased moderately to 28.3% in 2016. In 2017, there was a sharper rise reaching 35.8%, representing the highest rate within the period. Subsequently, the rate experienced a substantial decline to 8.4% in 2018, the lowest value recorded. In 2019, the rate rose again to 16.5%, indicating some recovery but still considerably lower than the earlier peak. This fluctuation in the effective tax rate could reflect changes in corporate tax policies, tax planning strategies, or varying profitability and tax adjustments across these years.
- Cash Paid for Interest on Commercial Paper and Long-Term Debt, Net of Tax (US$ in millions)
- The cash outflow related to interest payments shows an observable downward trend with some variation. Beginning at $171 million in 2015, it slightly decreased to $166 million in 2016 and further declined to $137 million in 2017, marking the lowest point in the timeframe. The amount paid then increased to $178 million in 2018 before slightly decreasing again to $161 million in 2019. This pattern suggests fluctuating borrowing costs or changes in debt levels. The decrease in interest payments during the mid-period may correspond to debt reductions or refinancing at more favorable rates, while the increases in 2018 and 2019 could indicate new or higher cost debt issuance.
Overall, the effective income tax rate and interest payment patterns point to a dynamic financial environment over these years, with tax rates influenced by external factors and interest payments reflecting evolving debt management practices.
Enterprise Value to FCFF Ratio, Current
Raytheon Co., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 64,443) |
| Free cash flow to the firm (FCFF) | 3,661) |
| Valuation Ratio | |
| EV/FCFF | 17.60 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | — |
| Caterpillar Inc. | 19.45 |
| Eaton Corp. plc | 37.61 |
| GE Aerospace | 48.09 |
| Honeywell International Inc. | 29.83 |
| Lockheed Martin Corp. | 20.52 |
| RTX Corp. | 37.79 |
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
Raytheon Co., 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 | 64,443) | 52,515) | 62,981) | 46,438) | 40,176) | |
| Free cash flow to the firm (FCFF)2 | 3,661) | 2,787) | 2,319) | 2,427) | 2,119) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 17.60 | 18.84 | 27.15 | 19.14 | 18.96 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
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
= 64,443 ÷ 3,661 = 17.60
4 Click competitor name to see calculations.
- Enterprise Value (EV) Trends
- The enterprise value exhibited an overall increasing trend from 2015 to 2019. Starting at $40,176 million in 2015, it rose to a peak of $62,981 million in 2017. Subsequently, there was a decline to $52,515 million in 2018, followed by a recovery to $64,443 million in 2019. This pattern indicates some volatility but a general upward trajectory in the company's valuation over the observed period.
- Free Cash Flow to the Firm (FCFF) Trends
- Free cash flow to the firm showed consistent growth across the five years. It increased steadily from $2,119 million in 2015 to $3,661 million in 2019. The growth was moderate between 2015 and 2017, with FCFF remaining relatively stable between 2016 and 2017, but accelerated notably from 2017 onwards. This indicates improving cash generation capability of the firm during the period.
- EV to FCFF Ratio Analysis
- The EV/FCFF ratio began at 18.96 in 2015 and remained relatively stable through 2016 at 19.14. In 2017, the ratio peaked sharply at 27.15, indicating that the enterprise value increased disproportionately in relation to free cash flow that year. However, after this peak, the ratio fell to 18.84 in 2018 and further declined to 17.6 in 2019, suggesting a favorable shift where the firm's valuation became more aligned with its cash flow generation, possibly reflecting improved market perception or operational efficiency.
- Summary of Financial Performance
- Overall, the company demonstrated growth in its enterprise value and free cash flow generation from 2015 through 2019, despite some volatility in EV in 2018. The decline in the EV/FCFF ratio after 2017 indicates a better balance between valuation and cash flow, which may imply enhanced operational performance or market confidence. The steady increase in free cash flow underlines strengthening financial health and cash generation capability over the period.