Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Align Technology Inc., FCFF calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of cash flow metrics from 2018 to 2022 reveals a period of significant volatility, characterized by a substantial growth phase peaking in 2021, followed by a sharp contraction in 2022.
- Net Cash Provided by Operating Activities
- Operating cash flows exhibited an overall upward trajectory from 2018 through 2021, increasing from 554,681 thousand USD to a peak of 1,172,544 thousand USD. Despite a moderate decline in 2020, the 2021 figure represented a significant surge in liquidity generation. However, this trend reversed sharply in 2022, with cash provided by operating activities falling to 568,732 thousand USD, effectively returning to levels observed in 2018.
- Free Cash Flow to the Firm (FCFF)
- FCFF followed a pattern closely aligned with operating cash flows, reaching a five-year high of 771,446 thousand USD in 2021. The most notable change occurred between 2021 and 2022, where FCFF plummeted to 276,832 thousand USD. This decline is particularly significant as it represents the lowest FCFF value within the analyzed timeframe, indicating a substantial reduction in the cash available to all capital providers.
- Cash Flow Conversion and Stability
- The divergence between operating cash flow and FCFF indicates consistent capital expenditures over the period. While the firm demonstrated strong cash generation capabilities in 2019 and 2021, the 2022 results highlight a marked decrease in cash efficiency. The simultaneous drop in both metrics suggests that the reduction in FCFF was driven primarily by a decline in core operating cash generation rather than a sudden spike in capital investment alone.
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Interest Paid, Net of Tax
Align Technology Inc., interest paid, net of tax calculation
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2 2022 Calculation
Interest paid, tax = Interest paid × EITR
= 0 × 39.60% = 0
An analysis of the financial metrics reveals that no values were reported for interest paid, net of tax, for the period spanning 2018 through 2022. Consequently, it is not possible to determine trends, patterns, or the impact of interest expenses on the company's net cash flows for this duration.
In contrast, the effective income tax rate (EITR) demonstrates a consistent and significant upward trajectory throughout the five-year period.
- Effective Income Tax Rate Trend
- The EITR rose steadily from 12.40% in 2018 to 23.70% in 2021. This progression indicates a gradual increase in the tax burden relative to pre-tax income over the initial four years of the analyzed period.
- Accelerated Tax Increase
- A sharp acceleration in the EITR is observed between 2021 and 2022, where the rate increased from 23.70% to 39.60%. This represents a significant expansion of the effective tax rate in the final year of the sequence.
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Enterprise Value to FCFF Ratio, Current
Align Technology Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 14,122,171) |
| Free cash flow to the firm (FCFF) | 276,832) |
| Valuation Ratio | |
| EV/FCFF | 51.01 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 22.97 |
| Elevance Health Inc. | 18.89 |
| Intuitive Surgical Inc. | 54.33 |
| Medtronic PLC | 21.96 |
| UnitedHealth Group Inc. | 20.06 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 18.28 |
| EV/FCFF, Industry | |
| Health Care | 25.59 |
Based on: 10-K (reporting date: 2022-12-31).
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
Align Technology Inc., historical EV/FCFF calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Enterprise value (EV)1 | 22,338,984) | 39,216,076) | 43,916,116) | 16,327,126) | 19,979,482) | |
| Free cash flow to the firm (FCFF)2 | 276,832) | 771,446) | 507,258) | 597,563) | 331,369) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 80.70 | 50.83 | 86.58 | 27.32 | 60.29 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Abbott Laboratories | 23.24 | 23.47 | — | — | — | |
| Elevance Health Inc. | 13.32 | 12.74 | — | — | — | |
| Intuitive Surgical Inc. | 85.45 | 56.01 | — | — | — | |
| Medtronic PLC | 20.32 | 33.84 | — | — | — | |
| UnitedHealth Group Inc. | 19.30 | 22.21 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Health Care Equipment & Services | 20.44 | 23.51 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Health Care | 18.66 | 17.80 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
3 2022 Calculation
EV/FCFF = EV ÷ FCFF
= 22,338,984 ÷ 276,832 = 80.70
4 Click competitor name to see calculations.
The analysis of the Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio reveals a period of high volatility between 2018 and 2022. The ratio exhibits non-linear movements, characterized by sharp fluctuations that correlate with significant shifts in both the total enterprise valuation and the operational capacity to generate free cash flow.
- Enterprise Value (EV) Trends
- Enterprise Value experienced substantial instability over the period. After a decrease to 16.33 billion in 2019, the value spiked to a peak of 43.92 billion in 2020. This was followed by a consistent downward trend, with the valuation receding to 22.34 billion by the end of 2022.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF demonstrated inconsistent growth patterns. The figure rose from 331.37 million in 2018 to a five-year peak of 771.45 million in 2021. However, a sharp contraction occurred in 2022, where FCFF dropped to 276.83 million, the lowest level recorded within the analyzed timeframe.
- EV/FCFF Ratio Interpretation
- The valuation multiple shifted dramatically, reaching a low of 27.32 in 2019 before surging to 86.58 in 2020, primarily driven by the rapid increase in Enterprise Value. While the ratio moderated to 50.83 in 2021 due to improved cash flow, it climbed again to 80.70 in 2022. This final increase indicates that the decline in free cash flow was more pronounced than the reduction in enterprise value during that period.
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