Broadcom Inc. (AVGO)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Broadcom Inc., FCFF calculation

USD $ in millions

12 months ended	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014	Nov 3, 2013	Oct 28, 2012
Net income (loss) attributable to ordinary shares	1,692	(1,739)	1,364	263	552	563
Net (income) loss attributable to noncontrolling interest	92	(122)	–	–	–	–
Net noncash charges	5,753	4,789	990	661	214	204
Changes in assets and liabilities, net of acquisitions and disposals	(986)	483	(36)	251	(44)	(74)
Net cash provided by operating activities	6,551	3,411	2,318	1,175	722	693
Cash paid for interest, net of tax¹	304	708	163	71	1	1
Purchases of property, plant and equipment	(1,069)	(723)	(593)	(409)	(236)	(241)
Proceeds from disposals of property, plant and equipment	441	5	110	–	–	–
Free cash flow to the firm (FCFF)	6,227	3,401	1,998	837	487	453

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the Broadcom Inc.'s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	Broadcom Inc.'s FCFF increased from 2015 to 2016 and from 2016 to 2017.

Broadcom Inc., interest paid, net of tax calculation

USD $ in millions

12 months ended	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014	Nov 3, 2013	Oct 28, 2012
Effective Income Tax Rate (EITR)

EITR¹	1.90%	-58.00%	5.20%	9.60%	2.80%	3.80%
Interest Paid, Net of Tax
Cash paid for interest, before tax	310	448	172	78	1	1
Less: Cash paid for interest, tax²	6	(260)	9	7	0	0
Cash paid for interest, net of tax	304	708	163	71	1	1

2017 Calculations

² Cash paid for interest, tax = Cash paid for interest × EITR
= 310 × 1.90% = 6

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

Selected Financial Data (USD $ in millions)
Enterprise value (EV)	99,168
Free cash flow to the firm (FCFF)	6,227
Ratio
EV/FCFF	15.93
Benchmarks
EV/FCFF, Competitors
Apple Inc.	18.76
Applied Materials Inc.	13.31
Cisco Systems Inc.	11.92
HP Inc.	11.44
Intel Corp.	23.57
NVIDIA Corp.	50.89
Qualcomm Inc.	16.78
Texas Instruments Inc.	23.97
EV/FCFF, Sector
Technology Hardware & Equipment	19.13
EV/FCFF, Industry
Technology	22.15

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

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

	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014	Nov 3, 2013	Oct 28, 2012
Selected Financial Data (USD $ in millions)
Enterprise value (EV)¹	116,306	86,119	40,968	29,768	11,871	6,777
Free cash flow to the firm (FCFF)²	6,227	3,401	1,998	837	487	453
Ratio
EV/FCFF³	18.68	25.32	20.50	35.59	24.38	14.96
Benchmarks
EV/FCFF, Competitors
Apple Inc.	17.70	11.95	9.80	12.50	10.06	12.81
Applied Materials Inc.	15.58	15.02	20.88	17.35	40.09	7.52
Cisco Systems Inc.	8.85	9.16	8.20	8.07	7.62	6.26
HP Inc.	10.30	9.50	7.88	8.00	6.63	5.36
Intel Corp.	20.93	14.08	11.01	15.26	11.19	–
NVIDIA Corp.	37.90	13.08	11.73	11.29	6.92	–
Qualcomm Inc.	14.79	12.55	17.60	14.32	13.08	12.88
Texas Instruments Inc.	21.61	18.62	14.16	17.55	16.24	–
EV/FCFF, Sector
Technology Hardware & Equipment	16.96	12.70	10.51	12.42	10.19	–
EV/FCFF, Industry
Technology	18.98	15.00	13.81	14.39	12.66	–

2017 Calculations

³ EV/FCFF = EV ÷ FCFF
= 116,306 ÷ 6,227 = 18.68

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	Broadcom Inc.'s EV/FCFF ratio increased from 2015 to 2016 but then declined significantly from 2016 to 2017.