Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Time Warner Cable Inc., 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 financial data over the five-year period reveals several noteworthy trends in the company's cash flow metrics. The cash provided by operating activities showed a generally positive trajectory, starting at $5,688 million in 2011 and slightly decreasing to $5,525 million in 2012. This was followed by incremental growth over the subsequent years, reaching $6,539 million by the end of 2015. This upward trend suggests an improvement in the company’s core operational efficiency and cash-generating ability from operations.
In contrast, the free cash flow to the firm (FCFF) demonstrated a different pattern. FCFF started at $3,784 million in 2011 and experienced a decrease to $3,540 million in 2012. After a small recovery to $3,634 million in 2013, a consistent decline occurred in the following years, dropping to $3,191 million in 2014 and further down to $2,957 million by 2015. This downward trend in FCFF might indicate increased capital expenditures, reduced cash available after investments, or other changes impacting the cash flow beyond operating activities.
The divergence between the increasing cash provided by operating activities and the decreasing free cash flow to the firm suggests that while operational cash generation improved, capital or financing outflows likely increased, which squeezed the free cash flow. This pattern warrants further analysis into the components of capital expenditures, debt servicing, or other investment activities to identify the factors driving the reduction in FCFF despite operational cash flow gains.
- Cash Provided by Operating Activities:
- Overall increasing trend from 2011 to 2015, indicating enhanced operational cash generation.
- Free Cash Flow to the Firm (FCFF):
- Downward trend over the same period, decreasing by approximately 22% from 2011 to 2015, suggesting higher capital or financing outflows.
- Implications:
- Improved operational cash flow is tempered by reduced free cash flow, signaling that outflows related to investments or financing are impacting overall cash availability.
Interest Paid, Net of Tax
Time Warner Cable Inc., interest paid, net of tax calculation
US$ 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
Cash paid for interest, tax = Cash paid for interest × EITR
= 1,482 × 38.29% = 567
- Effective income tax rate (EITR)
- The effective income tax rate demonstrates a consistent upward trend over the five-year period. Starting at 32.29% in 2011, the rate gradually increased each year, reaching 38.29% by the end of 2015. This steady rise suggests an increasing tax burden on pre-tax income or changes in tax regulations or company-specific factors resulting in higher effective taxation.
- Cash paid for interest, net of tax
- The cash paid for interest, net of tax, shows a declining trend during the analyzed period, with some variability. The figure peaked at 1,147 million USD in 2012, then gradually decreased to 915 million USD by 2015. This downward movement could indicate a reduction in debt levels, lower interest rates, or improved tax shields, leading to less net cash outflow for interest expenses.
Enterprise Value to FCFF Ratio, Current
Time Warner Cable Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 81,348) |
| Free cash flow to the firm (FCFF) | 2,957) |
| Valuation Ratio | |
| EV/FCFF | 27.51 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Alphabet Inc. | 28.68 |
| Comcast Corp. | 14.34 |
| Meta Platforms Inc. | 32.57 |
| Netflix Inc. | 71.70 |
| Take-Two Interactive Software Inc. | — |
| Walt Disney Co. | 25.13 |
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
Time Warner Cable Inc., 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 | 73,738) | 65,077) | 64,756) | 48,931) | 45,664) | |
| Free cash flow to the firm (FCFF)2 | 2,957) | 3,191) | 3,634) | 3,540) | 3,784) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 24.94 | 20.40 | 17.82 | 13.82 | 12.07 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Alphabet Inc. | — | — | — | — | — | |
| Comcast Corp. | — | — | — | — | — | |
| Meta Platforms Inc. | — | — | — | — | — | |
| Netflix Inc. | — | — | — | — | — | |
| Take-Two Interactive Software Inc. | — | — | — | — | — | |
| Walt Disney Co. | — | — | — | — | — | |
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
= 73,738 ÷ 2,957 = 24.94
4 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period ending in 2015.
- Enterprise Value (EV)
- The enterprise value exhibited consistent growth throughout the observed years. Beginning at approximately 45.7 billion USD in 2011, it increased steadily each year, reaching around 73.7 billion USD by the end of 2015. This upward trajectory indicates an overall expansion in the company's market valuation and debt profile.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm showed a different pattern. Starting at approximately 3.8 billion USD in 2011, FCFF decreased gradually over the five years, ending just below 3.0 billion USD in 2015. The decline suggests a reduction in the amount of cash generated by operations after capital expenditures, which may affect the company's ability to invest or reduce debt.
- EV/FCFF Ratio
- The ratio of enterprise value to free cash flow to the firm increased significantly over the period, from about 12.07 in 2011 to nearly 25 in 2015. This doubling in the ratio reflects the combined effect of rising enterprise value alongside declining free cash flow. It could imply that the company became more highly valued relative to the cash it generates, potentially signaling market expectations of future growth or a decrease in operational efficiency.
In summary, while the overall enterprise value increased steadily, the free cash flow to the firm declined, resulting in a sharply higher EV/FCFF ratio. This trend might warrant further investigation into the sustainability of cash flows and the drivers behind the escalating valuation multiple.