Stock Analysis on Net

Adobe Inc. (NASDAQ:ADBE)

$24.99

Enterprise Value to FCFF (EV/FCFF)

Microsoft Excel

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Free Cash Flow to The Firm (FCFF)

Adobe Inc., FCFF calculation

US$ in millions

Microsoft Excel
12 months ended: Nov 29, 2024 Dec 1, 2023 Dec 2, 2022 Dec 3, 2021 Nov 27, 2020 Nov 29, 2019
Net income
Net noncash charges
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities
Net cash provided by operating activities
Cash paid for interest, net of tax1
Purchases of property and equipment
Free cash flow to the firm (FCFF)

Based on: 10-K (reporting date: 2024-11-29), 10-K (reporting date: 2023-12-01), 10-K (reporting date: 2022-12-02), 10-K (reporting date: 2021-12-03), 10-K (reporting date: 2020-11-27), 10-K (reporting date: 2019-11-29).


Operating Cash Flow
The net cash provided by operating activities demonstrates a consistent growth trend over the analyzed periods. Starting at $4,422 million in 2019, it increased to $5,727 million in 2020, followed by further rises to $7,230 million in 2021 and $7,838 million in 2022. Although a slight decline is observed in 2023, with cash flows reducing to $7,302 million, the figure rebounds in 2024 to reach a peak of $8,056 million. This overall upward trend indicates strong operational efficiency and cash-generating capabilities.
Free Cash Flow to the Firm (FCFF)
The free cash flow to the firm mirrors the positive trend of operating cash flow, increasing steadily from $4,167 million in 2019 to $5,378 million in 2020. It continues to grow, reaching $6,967 million in 2021 and $7,478 million in 2022. Similar to operating cash flow, there is a decrease in 2023 to $7,027 million, but a recovery occurs in 2024 with FCFF climbing to $7,988 million. This pattern suggests effective capital expenditure management and sustained free cash flow generation capability.
Comparative Analysis
Both financial metrics show a positive trajectory over the six-year period, with minor fluctuations in 2023. The temporary decline in 2023 may warrant further investigation but does not detract from the overall trend of growth. The rebound in 2024 highlights resilience and potential operational improvements. The parallel movement of operating cash flow and FCFF suggests consistent cash flow health and a stable financial position, reflecting sound business operations and investment strategies.

Interest Paid, Net of Tax

Adobe Inc., interest paid, net of tax calculation

US$ in millions

Microsoft Excel
12 months ended: Nov 29, 2024 Dec 1, 2023 Dec 2, 2022 Dec 3, 2021 Nov 27, 2020 Nov 29, 2019
Effective Income Tax Rate (EITR)
EITR1
Interest Paid, Net of Tax
Cash paid for interest, before tax
Less: Cash paid for interest, tax2
Cash paid for interest, net of tax

Based on: 10-K (reporting date: 2024-11-29), 10-K (reporting date: 2023-12-01), 10-K (reporting date: 2022-12-02), 10-K (reporting date: 2021-12-03), 10-K (reporting date: 2020-11-27), 10-K (reporting date: 2019-11-29).

1 See details »

2 2024 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= × =


The analysis of the annual financial data reveals several notable trends regarding the effective income tax rate and cash paid for interest, net of tax, over the six-year period.

Effective Income Tax Rate (EITR)
The effective income tax rate exhibits considerable fluctuations across the years. Starting relatively low at 7.9% in 2019, the rate rises sharply to 21% in 2020, indicating a substantial increase in tax obligations relative to income during that year. Following this peak, the rate decreases to 15.48% in 2021, before climbing again to approximately 20.8% in 2022. Subsequently, the rate remains relatively stable with a slight downward trend, finishing at 19.78% in 2024. This pattern suggests variability possibly influenced by changes in tax regulations, profitability, or tax planning strategies.
Cash Paid for Interest, Net of Tax
The cash outflow for interest payments shows variability but an overall upward trajectory in the latter years. Beginning at $140 million in 2019, this figure drops significantly to $70 million in 2020, likely reflecting reduced debt levels or lower interest rates during that period. It then experiences modest increases to $85 million in 2021 and remains relatively flat at $82 million in 2022. In 2023, the amount stays stable at $85 million, followed by a notable increase to $115 million in 2024. This increase toward the end of the period may indicate higher borrowing levels or rising interest expenses.

Enterprise Value to FCFF Ratio, Current

Adobe Inc., current EV/FCFF calculation, comparison to benchmarks

Microsoft Excel
Selected Financial Data (US$ in millions)
Enterprise value (EV)
Free cash flow to the firm (FCFF)
Valuation Ratio
EV/FCFF
Benchmarks
EV/FCFF, Competitors1
Accenture PLC
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.
EV/FCFF, Sector
Software & Services
EV/FCFF, Industry
Information Technology

Based on: 10-K (reporting date: 2024-11-29).

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

Adobe Inc., historical EV/FCFF calculation, comparison to benchmarks

Microsoft Excel
Nov 29, 2024 Dec 1, 2023 Dec 2, 2022 Dec 3, 2021 Nov 27, 2020 Nov 29, 2019
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
Accenture PLC
Cadence Design Systems Inc.
CrowdStrike Holdings Inc.
Fair Isaac Corp.
International Business Machines Corp.
Intuit Inc.
Microsoft Corp.
Oracle Corp.
Palantir Technologies Inc.
Palo Alto Networks Inc.
Salesforce Inc.
ServiceNow Inc.
Synopsys Inc.
Workday Inc.
EV/FCFF, Sector
Software & Services
EV/FCFF, Industry
Information Technology

Based on: 10-K (reporting date: 2024-11-29), 10-K (reporting date: 2023-12-01), 10-K (reporting date: 2022-12-02), 10-K (reporting date: 2021-12-03), 10-K (reporting date: 2020-11-27), 10-K (reporting date: 2019-11-29).

1 See details »

2 See details »

3 2024 Calculation
EV/FCFF = EV ÷ FCFF
= ÷ =

4 Click competitor name to see calculations.


Enterprise Value (EV) Trends
The enterprise value shows notable fluctuations over the six-year period. Starting at approximately $168.7 billion in 2019, it increased to a peak of about $265.2 billion in 2023, indicating significant market valuation growth during these years. However, there are considerable declines in 2022 and in 2024, with EV falling to approximately $155.7 billion and $175.6 billion, respectively, which suggests periods of market revaluation or changes in company capital structure.
Free Cash Flow to the Firm (FCFF) Analysis
Free cash flow demonstrates a consistent upward trend through the years, rising from approximately $4.2 billion in 2019 to around $8.0 billion in 2024. This steady increase reflects improved operational efficiency or enhanced cash-generating capability within the company, despite the volatility observed in enterprise value.
EV/FCFF Ratio Interpretation
The EV to FCFF ratio reveals significant variability, moving from above 40 in 2019 and 2020 down to around 33.6 in 2021, further dropping sharply to 20.8 in 2022. It rises again to nearly 37.8 in 2023 before falling back to about 22.0 in 2024. This ratio trend reflects changing market perceptions of valuation relative to cash flow, with lower ratios in 2022 and 2024 possibly indicating undervaluation or increased free cash flow relative to enterprise value, while higher ratios in 2019, 2020, and 2023 suggest a premium valuation phase.
Overall Insights
The data reflects a company experiencing significant changes in market valuation while steadily improving its cash flow generation. The disparity between enterprise value peaks and troughs compared to a generally upward FCFF suggests external market factors or strategic decisions impacting valuation independently from operating cash flows. The volatility in the EV/FCFF ratio further emphasizes shifts in investor sentiment or market conditions affecting the company’s valuation multiples over time.