Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Axon Enterprise 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).
An analysis of the cash flow trends from 2018 to 2022 reveals a period of initial stability, a significant contraction in 2020, and a subsequent phase of rapid expansion in both operational cash generation and free cash flow to the firm.
- Operating Cash Flow Trajectory
- Net cash provided by operating activities remained relatively consistent between 2018 and 2019 before experiencing a sharp decline in 2020 to 38.48 million USD. This downturn was followed by an aggressive recovery phase; operating cash flow increased to 124.49 million USD in 2021 and nearly doubled again to reach 235.36 million USD by December 31, 2022.
- Free Cash Flow to the Firm (FCFF) Volatility
- FCFF exhibited more pronounced volatility than operating cash flow. While 2018 and 2019 showed positive values, the figure plummeted to a deficit of 34.29 million USD in 2020. This negative transition indicates that capital expenditures or other firm-level investments exceeded the cash generated from operations during that fiscal year. A robust turnaround occurred in 2021, with FCFF returning to 74.26 million USD, followed by a substantial surge to 179.70 million USD in 2022.
- Comparative Analysis of Cash Generation
- The relationship between operating cash flow and FCFF highlights a significant investment peak in 2020, where the gap between the two metrics resulted in negative free cash flow despite positive operational inflows. By 2022, the convergence of these figures indicates a heightened capacity to generate surplus cash after meeting capital requirements, reflecting a strong upward trend in the firm's overall cash-generating efficiency.
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Interest Paid, Net of Tax
Axon Enterprise 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
Contractual interest expense, tax = Contractual interest expense × EITR
= 211 × 25.10% = 53
Analysis of the financial metrics indicates a period of significant volatility regarding tax obligations and a shift in the interest expense profile over the five-year period ending December 31, 2022.
- Effective Income Tax Rate (EITR)
- The EITR exhibited substantial instability, characterized by a sharp increase and subsequent decline. Starting at 21.00% in 2018, the rate climbed aggressively to a peak of 72.60% in 2020. Following this peak, the rate moderated to 57.50% in 2021 and further decreased to 25.10% by the end of 2022. This volatility suggests the presence of significant one-time tax adjustments or changes in the company's tax position during the 2019-2021 window.
- Contractual Interest Expense, Net of Tax
- There were no reported contractual interest expenses, net of tax, from 2018 through 2021. This metric first appeared in 2022 with a value of 158 thousand US dollars. The absence of data in prior years followed by a reported figure in 2022 indicates either the recent acquisition of interest-bearing debt or a transition in the financial reporting of these obligations.
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Enterprise Value to FCFF Ratio, Current
Axon Enterprise Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 16,462,372) |
| Free cash flow to the firm (FCFF) | 179,697) |
| Valuation Ratio | |
| EV/FCFF | 91.61 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Boeing Co. | 298.96 |
| Caterpillar Inc. | 41.97 |
| Eaton Corp. plc | 44.92 |
| GE Aerospace | 40.25 |
| Honeywell International Inc. | 14.34 |
| Lockheed Martin Corp. | 17.43 |
| RTX Corp. | 29.97 |
| EV/FCFF, Sector | |
| Capital Goods | 43.21 |
| EV/FCFF, Industry | |
| Industrials | 36.25 |
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
Axon Enterprise 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 | 14,294,307) | 9,071,780) | 9,993,624) | 4,254,913) | 2,914,981) | |
| Free cash flow to the firm (FCFF)2 | 179,697) | 74,259) | (34,294) | 49,330) | 52,178) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 79.55 | 122.16 | — | 86.25 | 55.87 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Boeing Co. | 37.53 | — | — | — | — | |
| Caterpillar Inc. | 23.54 | 20.50 | — | — | — | |
| Eaton Corp. plc | 33.44 | 38.16 | — | — | — | |
| GE Aerospace | 17.29 | 56.53 | — | — | — | |
| Honeywell International Inc. | 29.82 | 25.22 | — | — | — | |
| Lockheed Martin Corp. | 19.69 | 13.92 | — | — | — | |
| RTX Corp. | 28.45 | 27.29 | — | — | — | |
| EV/FCFF, Sector | ||||||
| Capital Goods | 25.87 | 32.16 | — | — | — | |
| EV/FCFF, Industry | ||||||
| Industrials | 24.33 | 28.81 | — | — | — | |
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
= 14,294,307 ÷ 179,697 = 79.55
4 Click competitor name to see calculations.
The enterprise value of the firm experienced substantial growth between 2018 and 2022, rising from $2.91 billion to $14.29 billion. This represents a significant expansion in market valuation, characterized by a particularly sharp increase between 2019 and 2020, where the value more than doubled.
- Enterprise Value to FCFF Ratio Trends
- The EV/FCFF ratio exhibited a general upward trend from 2018 through 2021, expanding from 55.87 to a peak of 122.16. This expansion indicates that the market valuation grew at a pace significantly exceeding the growth of free cash flow to the firm during this period.
- A notable anomaly occurred in 2020, where the ratio could not be calculated due to negative free cash flow to the firm of -$34.29 million, signaling a period of cash outflow that deviated from the surrounding years.
- By 2022, the ratio compressed to 79.55. This reduction suggests a normalization of the valuation relative to cash flow, driven by a significant surge in FCFF rather than a decline in enterprise value.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF displayed high volatility throughout the analyzed period. After remaining relatively stable between 2018 and 2019, the figure dropped into negative territory in 2020 before recovering in 2021.
- A sharp acceleration in cash generation is observed in 2022, with FCFF reaching $179.70 million. This represents a substantial increase compared to the 2021 value of $74.26 million, contributing to the aforementioned compression of the EV/FCFF ratio.
Overall, the data indicates a company in a high-growth phase where valuation preceded cash flow generation. While the valuation expanded rapidly, the significant increase in free cash flow by the end of 2022 suggests an improvement in the firm's ability to generate cash relative to its total enterprise value.
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