Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
DexCom 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).
Between 2018 and 2022, a general upward trajectory in cash generation is observed, characterized by substantial growth in both operating cash flows and free cash flow to the firm, despite a notable period of volatility in 2021.
- Operating Cash Flow Trends
- Net cash provided by operating activities demonstrated consistent growth from US$ 123.2 million in 2018 to US$ 669.5 million in 2022. A marginal contraction occurred in 2021, where cash flow decreased to US$ 442.5 million from US$ 475.6 million in 2020, followed by a significant increase in the subsequent year.
- Free Cash Flow to the Firm (FCFF) Performance
- FCFF exhibited strong expansion from 2018 through 2020, rising from US$ 58.9 million to US$ 285.0 million. A sharp decline was recorded in 2021, with FCFF dropping to US$ 63.6 million, representing a substantial deviation from the prior growth trend. This decline was reversed in 2022, as FCFF recovered to US$ 315.4 million.
- Analysis of Cash Flow Divergence
- A significant divergence between operating cash flow and FCFF is evident in 2021. While operating cash flow remained relatively stable with only a slight dip, FCFF plummeted, suggesting a period of intensive capital expenditure or significant investment in firm assets during that year. The recovery observed in 2022 indicates a return to a more sustainable balance between operational cash generation and capital reinvestment.
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Interest Paid, Net of Tax
DexCom 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
Cash paid during the year for interest, tax = Cash paid during the year for interest × EITR
= 12,200 × 12.69% = 1,548
An analysis of the financial data reveals a significant increase in net interest outflows starting in 2019, coinciding with substantial volatility in the effective income tax rate (EITR) over the five-year period ending December 31, 2022.
- Net Interest Payment Trends
- Cash paid for interest, net of tax, experienced a sharp increase from 2,844 thousand US$ in 2018 to 10,090 thousand US$ in 2019. Despite a slight contraction to 8,374 thousand US$ in 2020, the trend resumed an upward trajectory, reaching 10,319 thousand US$ in 2021 and peaking at 10,652 thousand US$ in 2022.
- Effective Income Tax Rate Volatility
- The EITR exhibited significant fluctuations, beginning at 21.00% in 2018 before dropping sharply to 2.98% in 2019. A return to the 21.00% level was observed in 2020, followed by a period of moderation where the rate settled at 11.04% in 2021 and 12.69% in 2022.
- Interrelation Between Tax Rates and Interest Costs
- The net cost of interest is inherently linked to the EITR, as a lower tax rate reduces the value of the tax shield provided by interest expenses. The sharp rise in net interest payments in 2019 occurred simultaneously with the lowest observed EITR (2.98%), suggesting that the increase was driven primarily by an increase in gross interest obligations rather than tax-related adjustments. The stabilization of net interest payments above 10 million US$ from 2019 through 2022 indicates a sustained higher level of debt service costs relative to the 2018 baseline.
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Enterprise Value to FCFF Ratio, Current
DexCom Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in thousands) | |
| Enterprise value (EV) | 30,908,961) |
| Free cash flow to the firm (FCFF) | 315,352) |
| Valuation Ratio | |
| EV/FCFF | 98.01 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Abbott Laboratories | 25.75 |
| Elevance Health Inc. | 20.49 |
| Intuitive Surgical Inc. | 62.87 |
| Medtronic PLC | 25.42 |
| UnitedHealth Group Inc. | 20.98 |
| EV/FCFF, Sector | |
| Health Care Equipment & Services | 20.11 |
| EV/FCFF, Industry | |
| Health Care | 27.54 |
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
DexCom 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 | 41,016,904) | 38,537,513) | 38,474,254) | 22,641,443) | 12,793,858) | |
| Free cash flow to the firm (FCFF)2 | 315,352) | 63,619) | 284,974) | 144,590) | 58,944) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 130.07 | 605.75 | 135.01 | 156.59 | 217.05 | |
| 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
= 41,016,904 ÷ 315,352 = 130.07
4 Click competitor name to see calculations.
The financial data from 2018 to 2022 reveals a period of substantial growth in enterprise value coupled with significant volatility in free cash flow to the firm, resulting in a highly fluctuant valuation multiple.
- Enterprise Value Trend
- A consistent upward trajectory is observed in the enterprise value, which rose from approximately 12.8 billion US$ in 2018 to 41.0 billion US$ by 2022. The most aggressive expansion occurred between 2018 and 2020, where the value more than tripled, followed by a period of relative stabilization between 2020 and 2022.
- Free Cash Flow to the Firm (FCFF) Performance
- Cash flow generation exhibited non-linear growth. FCFF increased steadily from 58.9 million US$ in 2018 to a peak of 285 million US$ in 2020. However, a sharp contraction occurred in 2021, with FCFF dropping to 63.6 million US$. A strong recovery followed in 2022, reaching the highest point in the period at 315.4 million US$.
- EV/FCFF Ratio Interpretation
- The EV/FCFF ratio demonstrates extreme volatility, reflecting the disparity between market valuation and actual cash generation. The ratio declined from 217.05 in 2018 to 135.01 in 2020 as cash flow grew faster than the enterprise value. In 2021, the ratio spiked to 605.75, a direct result of the collapse in FCFF while the enterprise value remained stable. By 2022, the ratio normalized to 130.07, coinciding with the recovery of free cash flows.
Overall, the analysis indicates that while the market has consistently assigned a higher value to the entity, the underlying cash flow generation has been inconsistent. The high multiples observed throughout the period suggest that the enterprise value is driven by growth expectations rather than current cash flow yields.
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