Enterprise Value to FCFF (EV/FCFF)
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Verizon Communications Inc. pages available for free this week:
- Income Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Free Cash Flow to The Firm (FCFF)
Verizon Communications Inc., FCFF calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1, 2 See details »
The analysis of the annual financial data reveals several noteworthy trends concerning cash flow metrics.
- Net Cash Provided by Operating Activities
- The net cash generated from operating activities experienced a gradual decline over the five-year period. Starting at $41,768 million in 2020, it decreased to $36,912 million in 2024. Despite this overall downward movement, the figures show relatively moderate fluctuations year-to-year, with a marginal recovery observed in 2023 compared to 2022. This trend suggests a slight weakening in the operational cash-generating ability of the entity over time, which could be influenced by changes in working capital, operating income, or other operational adjustments.
- Free Cash Flow to the Firm (FCFF)
- The FCFF exhibited more pronounced volatility during the period. In 2020, the FCFF was $24,699 million, but it drastically dropped to a negative $24,747 million in 2021. This negative turn indicates that the firm's free cash outflows exceeded inflows in that year, potentially due to increased capital expenditures, changes in working capital, or operational challenges. Subsequently, the FCFF recovered to positive values, reaching $13,680 million in 2022, increasing further to $16,360 million in 2023, and ultimately attaining $22,923 million in 2024. This recovery and upward trend in free cash flow after the sharp decline highlight improved financial management or operational efficiency, resulting in stronger cash availability for financing, investments, or debt servicing by the end of the period analyzed.
Overall, the data reflect a stable but slightly declining operational cash flow generation capability combined with a volatile, yet recovering, free cash flow performance. The sharp negative FCFF in 2021 stands out as an anomaly requiring further investigation to understand the underlying causes. Yet, the subsequent recovery to positive and growing free cash flows suggests the firm managed to restore its cash generation from operations and investments effectively by 2024.
Interest Paid, Net of Tax
Verizon Communications Inc., interest paid, net of tax calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2 2024 Calculation
Interest paid, net of amounts capitalized, tax = Interest paid, net of amounts capitalized × EITR
= × =
3 2024 Calculation
Capitalized interest costs, tax = Capitalized interest costs × EITR
= × =
The analysis of the annual financial data over the five-year period reveals distinct trends in effective income tax rate (EITR), net interest paid, and capitalized interest costs.
- Effective Income Tax Rate (EITR)
- The effective income tax rate remained relatively stable around 23% during the first three years, indicating a consistent tax expense relative to income. However, in the year ending December 31, 2023, there was a notable increase to 28.8%, suggesting a higher tax burden or reduced tax benefits that year. By the end of 2024, the EITR declined sharply to 21.9%, which is the lowest in the five-year span, possibly indicating improved tax efficiency or utilization of tax credits.
- Interest Paid, Net of Amounts Capitalized, Net of Tax
- Interest payments showed variability across the period. From 2020 to 2022, net interest paid decreased steadily from 3,386 million USD to 2,550 million USD, reflecting a reduction in interest expenses or changes in debt structure. However, this trend reversed in 2023 and 2024, with interest paid rising substantially to 3,121 million USD and further to 4,299 million USD, respectively. The sharp increase in 2024 may indicate increased borrowing costs or higher debt levels.
- Capitalized Interest Costs, Net of Tax
- Capitalized interest costs exhibited substantial fluctuation. Starting relatively low at 425 million USD in 2020, these costs surged dramatically to over 1,400 million USD in 2021 and remained elevated in 2022 at 1,561 million USD, demonstrating significant capitalization of interest during this period, possibly linked to large-scale investments or projects. Subsequently, these costs decreased in 2023 to 1,294 million USD and further declined in 2024 to 752 million USD, indicating a scaling back of capitalized interest consistent with possible project completions or reduced investment activity.
In summary, the data reflects a phase of heavy capital investment activity around 2021–2022 as seen in increased capitalized interest, alongside generally stable tax rates initially with a spike in 2023 followed by reduction in 2024. Net interest payments decreased initially but rose sharply in the last two years, suggesting evolving debt and financing conditions that could merit further analysis within the broader financial context.
Enterprise Value to FCFF Ratio, Current
Verizon Communications Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | |
| Free cash flow to the firm (FCFF) | |
| Valuation Ratio | |
| EV/FCFF | |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| AT&T Inc. | |
| T-Mobile US Inc. | |
| EV/FCFF, Sector | |
| Telecommunication Services | |
| EV/FCFF, Industry | |
| Communication Services | |
Based on: 10-K (reporting date: 2024-12-31).
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
Verizon Communications Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Enterprise value (EV)1 | ||||||
| Free cash flow to the firm (FCFF)2 | ||||||
| Valuation Ratio | ||||||
| EV/FCFF3 | ||||||
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| AT&T Inc. | ||||||
| T-Mobile US Inc. | ||||||
| EV/FCFF, Sector | ||||||
| Telecommunication Services | ||||||
| EV/FCFF, Industry | ||||||
| Communication Services | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
3 2024 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =
4 Click competitor name to see calculations.
- Enterprise Value (EV)
- The enterprise value exhibited some fluctuations over the analyzed period. Starting at approximately 342 billion US dollars at the end of 2020, it increased to about 373 billion US dollars by the end of 2021. However, following this peak, there was a gradual decline, with EV decreasing to around 317 billion US dollars by the end of 2022 and remaining relatively stable in 2023 and 2024, reaching approximately 312 billion US dollars by the end of 2024. This trend indicates a period of growth followed by a moderate contraction or stabilization in market valuation.
- Free Cash Flow to the Firm (FCFF)
- Free cash flow to the firm demonstrated significant volatility. At the end of 2020, the FCFF was strong, close to 24.7 billion US dollars. However, it sharply turned negative in 2021, showing a cash outflow of approximately 24.7 billion US dollars. The company then recovered substantially over the subsequent years, with FCFF rebounding to around 13.7 billion US dollars in 2022, increasing further to approximately 16.4 billion US dollars in 2023, and reaching nearly 22.9 billion US dollars by the end of 2024. This pattern suggests a period of financial stress or significant cash use in 2021, followed by a recovery and improving cash generation capacity.
- EV to FCFF Ratio
- The EV/FCFF ratio, which measures valuation relative to cash flow, displayed notable variation. Available data shows the ratio was 13.85 at the end of 2020, then was not provided for 2021, possibly reflecting the negative FCFF which makes the ratio non-meaningful in that period. The ratio peaked at 23.2 by the end of 2022, indicating a higher valuation multiple relative to free cash flow. Subsequently, the ratio declined to 19.38 in 2023 and further decreased to 13.6 in 2024, nearing the initial level observed in 2020. This trajectory suggests that after a period of elevated valuation metrics in relation to cash flow, the firm's valuation became more aligned with its cash generation capabilities by 2024.